Teach Your Team About Business Profitability
Smart Management of Revenue and Expenses Will Improve Agents’ Income and Performance
You and your team have likely already set new goals for 2021. If you are like most real estate agents, those goals will include sales goals such as closed volume, closed units and gross commissions.
An often-overlooked part of real estate goals, however, is the net profit that your agents will earn after expenses. Even as members of a team, the vast majority of agents are, after all, small business owners themselves. Maximizing their income through skillful management of both revenue and expenses is pivotal to creating the most net profit—in other words, actual income—from their hard work.
You can help them with that by providing annual profitability training. Consider scheduling that—either as a group session or one-on-one—by the end of February, and address the following valuable information:
1. Net Profit: Review a basic individual profit and loss (P&L) statement that each agent can use for their business. This will include revenue (gross commissions), as well as expenses (personal marketing expenses, automobile expense, dues and subscriptions, etc.). Show them how this statement works, what general ranges might be expected for certain expenses either as a dollar amount or as a percentage of sales, and why the net income figure is an important goal for their success.
2. Your Team’s Value: Be sure to highlight how your team is contributing to their financial success. This is likely happening by increasing their revenue (e.g. more leads resulting in more sales or paying better splits versus alternatives) or by absorbing certain expenses (marketing, administrative services, rent, etc.). While these items wo
n’t specifically be listed on each agent’s personal profit and loss statement, their impact is there in the form of higher revenue and reduced expenses. Reaffirming that with your agents is important for each of your successes.
3. Expert Advice: It is often helpful to have some or all of this presented by a third-party expert. Consider inviting your CPA or financial planner to review a profit and loss statement and discuss your agents’ revenues and expenses, as well as introduce other helpful topics like tax or retirement planning—this works best in a group setting. And besides introducing the expert and wrapping up the session, you should cover the information about your team’s value yourself.
Profitability training provides multiple benefits for you and your team members. First, it creates understanding about the financial structure of their overall real estate activities, often leading to recognition of disproportionate or overlooked expenses. Second, it can serve as inspiration, refocusing agents on achieving a higher net income figure instead of being misled by a gross commission total before expenses. And third, it demonstrates your valuable leadership and consideration of their financial well-being; showing that you care about their incomes is important and will contribute to improved loyalty and retention.
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