Step 1: Figure out Your Personal and Financial Goals for the Year
How much money do you need to make to pay your current living expenses? How much money would you like to make this year? While your answer to the second question would probably be a millions, try and be somewhat realistic here. If you made #1,000,000 last year before becoming a realtor, how much would make you happy this year?
Writing down your personal goals can also be a big help. Do you want to improve your public speaking skills? Learn how to negotiate?
Step 2: Write an Executive Summary That Outlines Your Vision for Success
The first section of a business plan is the executive summary. While you are probably not going to present your plan to anyone but yourself, it is still a useful exercise to help you get started. The executive summary briefly outlines the opportunities available, as well as how you plan to use your unique skill set to take advantage of them.
Your executive summary should include details about;
- The area you plan to work in (e.g. home price range, neighborhoods, etc.)
- What type of real estate or clients you plan to focus on
- A general overview of your marketing plan
- What skills you bring to the table (marketing, sales, business development, etc.)
Basically what would you tell a friend over dinner if they asked you how you planned to make money as a real estate agent?
Step 3: Assess the Market You Plan to Work in
The second step in writing a real estate business plan is to assess the market you plan to work in. In the real estate industry, this is known as your “farm area.” It may sound a little bit silly at first, but it is an excellent analogy for real estate. By advertising and generating leads, you will be sowing seeds. By converting those leads to clients and closing deals, you will be harvesting your crops.
Like any farmer, you need to know as much as possible about your farm area before you begin. Since you are new to the industry, you may want to get an experienced agent or your broker to help you with your research. Here are some things that you should know about your farm area:
- The average sales and rental prices in the area
- How long a typical home takes to rent or sell on the market
- Average months of supply– Months of supply is a measure of how long it will take for the number of homes currently on the market to be sold. To calculate months of supply, you just need to divide the current number of homes on the market in a particular area by the average number of homes sold in that area each month.
- Local demographics – Is the area mostly retired people? Business Executives? Tech workers? Blue collar workers? Each requires different approaches to lead generation.
- The competition– How many other agents or brokerages are there in the area? How does your brokerage measure up?
Step 4: Outline Your Lead Generation and Nurturing Strategy
Once you have written your executive summary and researched your farm area, the next step in writing a real estate business plan is to outline your lead generation and nurturing strategy.
While there are hundreds of ways to generate and nurture real estate leads, new agents should generally start out by marketing to their sphere of influence. Your spheres of influence are the people that you know who you have some kind of influence over. Your friends, family, former coworkers, and business associates are all in your sphere of influence. Your goal is simply to inform them you are working as an agent, and to offer your services to them. Calling is generally the best way to reach out to your sphere as it is the most personal, but you can also use LinkedIn, email, or Facebook.
Your next step after reaching out to your sphere of influence is going to depend on the demographics of your farm area and your skills. For example, if your farm area is largely retirees, you may decide to generate leads with cold calling FSBOs (for sale by owner) and a postcard or a door hanger campaign. Or, if your farm area is largely young tech workers, you might have better luck with Facebook advertising.
Once you have a lead generation strategy in place, the next step is to figure out how you are going to nurture your leads until they are ready to buy or sell property with you. Social media marketing is one of the best ways to nurture and engage leads with minimal expense.
Step 5: Develop a Realistic Financial Plan to Reach Your Goals
Now that you have researched your farm area, and outlined your lead generation and nurturing strategy, the next step is to work on a realistic financial plan to reach your goals. Though this may sound intimidating, it is actually very simple. Here is what you need to do.
- Outline Your Expenses
Let face it, when you decided to become a real estate agent, you may not have factored in all the various expenses you are going to have. To get started, think of the fixed costs and other expenses that will arise based your lead generation and nurturing strategy. Depending on what lead generation and nurturing strategy you use, this list will vary. Here are some fairly common expenses to include:
- Desk fees
- Commission splits and transaction fees
- Association of Estate Agents (AEAN) and Real Estate Developers Association of Nigeria (REDAN) dues
- Gas, insurance, and car maintenance
- Email marketing software
- Real estate courses and licensing fees
- FSBO lists
- Printing costs
- Facebook advertising
- Website and landing pages
- Determine How Many Deals You Need to Close to Reach Your Goal
Since you already know the average rental or selling price in your farm area, this one is pretty easy. Just take the average transaction side (one half of a real estate commission earned representing either the buyer or the seller), generally 3%, and determine how many deals you will need to close to break even, and how many deals you need to close to reach your goal.
- Determine How Many Leads You Need to Generate
Admittedly the math can get a bit fuzzy here, but you should plan on closing roughly 1 in every 30 or so leads that you generate. When I say leads here, I mean warm leads (i.e. people who are actively looking to purchase or sell a home). You will probably need to generate more cold leads, people who are a few months away from purchasing or selling a home, in order to generate 30 warm leads.
Writing a solid real estate business plan is the best way for new agents figure out how they plan to succeed in their first year and beyond. In order to write an effective plan, you need to assess your farm area, develop a lead generation and nurturing strategy, and come up with a solid financial plan to reach your goals.