Fall in love with your business plan. It is that important. It is key regardless of how long you have been in the business. Whether your first day is tomorrow or you are a 30 year veteran, having a business plan will keep you focused, motivated and consistent. Most importantly, it will give you predictability. Predictability in your actions and your income.
Today I want to discuss two parts of a business plan: projected outcome and performance tracking stats. Without knowing your personal performance numbers it is not possible to put together a realistic business plan. When you are starting out, the personal performance information is not available. You need to build it up. Let’s talk about how you can do this first.
Below is the information you need to collect daily:
- Number of meaningful contacts. Contacts means conversations that you have with people. Even if they are short and your lead hangs up on you. You need to have at least 20 conversations per day to be productive.
- Hours prospected. This is self explanatory.
- Contact per hour. Take your daily number of contacts and divide it by the number of hours you prospected.
- Appointments booked. Whether listing appointments or buyer appointments. This is important. Your objective every day is to book at least one appointment.
- Contacts per appointment booked. After the first 30 days of recording your stats, this will give you an idea of where you are. How many contacts does it take you to book an appointment? This field will give you the answer.
- Next is appointments per listing taken. This might take anywhere between 3 to 6 months to accumulate. Depending on how many appointments you book and go to. When you have information to calculate this ratio, you have everything you need for the first part of the formula that will allow you to get to your listings taken goal. You can translate this into the number of contacts, leads that you need to work with, number of hours or days that you need to prospect, etc. Now you can make end-to-end predictions at least to the point of you taking the listing.
Part two starts with you taking the listing. Now you need to market it, generate more leads from it and sell it. Let’s see what numbers you want to track when working with a listing that you have already taken.
- Listing to selling ratio - i.e how many of your listings sell.
- Expired and terminated listings - this is related to the previous point, but here though you take a different angle. Listings that expire are usually overpriced and this is something you must strive to correct early on. Listings that terminate are often those, where the sellers are unhappy with your work. Also, something you must strive to improve.
- Price reductions. This number will show you the number of times you had to go back to a seller to reduce the price on their listing. Your ideal is to list the property at a price that will cause it to sell, instead of having to go back for price reductions.
- Now that you are selling the listings you take, there is another important ratio you must track. Number of contacts per listing sold. You will now know how many leads you need to have conversations with to sell a listing.
- At this point you are ready to tie it all together and see how many leads you need to have conversations with daily to reach your financial goal for the year.
Now, the business plan. I suggest you make it simple and elaborate as you progress in your business.
- Come up with the number you want to make in GCI (Gross Commission Income) in one year.
- Divide this number into what you need to make on a quarterly and monthly basis. You will not have a lot of transactions at first, so dividing it into weeks and days will not make sense yet.
- Now go through your personal performance assumptions and add an additional ingredient - effort. With you current assumed performance level and the number of productive hours available to you in a month, how much effort do you need to put in, to achieve your monthly numbers? Let’s break it down. These are the questions you need to write your answers down for. It is your business plan:
- What is your total planned annual income?
- What is your total planned annual expense?
- What is the number of listings and buyer sales you plan to have in the next 12 months?
- How many days per year do you plan to work? Once you know the number, come up with the number of days per week and per month that you need to work.
- How many hours per day do you plan to prospect?
- How many contacts do you plan to average on an hourly basis?
- How many meaningful conversations do you plan to have daily, weekly, monthly?
- How many listing appointments do you plan to book per week?
- How many appointments do you plan to convert to listings signed?
- How many listings do you plan to sell over the next 12 months?
- How many buyers do you plan to help buy over the next 12 months?
- What is your average commission check for sellers and for buyers?
- What is your current number for inventory?
- What is your current number of pending transactions?
- What is your daily work schedule?
When you are starting to work on a business plan for your second year, you have your first year numbers with all of your original assumptions. You also have your actual results at the end of the first year and you will have all the numbers tracked from the first section of this article that took you to the results you got. For the second year you can make adjustments to have a plan that is tied to your past performance. From now on you can start accurately predicting your income.