Business Planning 101 for Realtors®
Turn Your Dreams and Goals for 2006 into a Road Map for Success

By Stefan Swanepoel

Introduction

As the modern axiom goes … “If you fail to plan, you plan to fail.”  Planning is the essence of winning and a good business plan, well conceived and well executed, can guide your real estate business to success.  Below business planning guidelines has been provided by CreateAPlan, Inc. the largest online real estate business planning service.

Business planning is often the last thing Realtors® want to do, because it is a complicated, lengthy and often painful process. However, there is little value attached to your dreams if they only stay in your head. For a good real estate business plan to be successful, daily actions need to echo the written word, which in turn echoes the dream or vision underpinning the plan. In the daily competition for sales and market share, the race belongs to the agent who knows his or her goals and exactly how to achieve them.

Success is attainable if your plan has been well thought out, written down, researched, debated and shared with your team. Whether you’re a one-person operation, a midsize company or a mega-company, your real estate business plan requires continuity, dedication, focus and follow-through.

Here’s a road map that Realtors® can refer to from time to time to help guide them on the road to success. It won’t eliminate the headaches, but it can make them easier to bear.

Overall Objectives

To initiate a business plan for your real estate business, you need to map out your objectives. You must determine where you’re going, where you’re playing, who you’re up against and what your role is within the bigger picture. This will help you maintain a clear focus.  When you begin to write your real estate business plan you can refer back to this document to see whether it still satisfies your objectives. Ask yourself the following six questions:


1. In which real estate market do I want to specialize?

Where is your specialty going to reside; residential, commercial, resale, new construction, single family homes or apartments? These choices may overlap because you can participate in more than one market type.


2. Which region, county or area is considered my turf?

Now that you know what market you’re in, what is your territory … the whole state, the county, a city, town or neighborhood? Specifically identifying an area will help you later to establish your goals and objectives.


3. What is the state of the market?

Now that you’ve pinpointed your market, you need to obtain the specific market details.  You need to determine market size, recent growth, number of annual sales, home prices, and average home prices. You must know every detail of your market.

4. Who is the competition?

It is a good strategy to know your competitors. Are they national real estate franchise brands or well-established regional or local real estate firms? How long have they been in your market? Is their market share growing, stabilized or declining? How aggressive or progressive are they? What are the strengths and weaknesses of their management?

5. What are my company’s strengths and weaknesses?

Some business planning courses like referring to this exercise as the SWOT analysis (Strengths, Weaknesses, Opportunities and Threats). It’s important to examine your real estate firm’s structure in order to determine how to use your strengths to your advantage. This requires an objective assessment from you, your partners and the brokerage (team or individual practice) as a whole. Anything less than total honesty will hinder future success.

6. What must your real estate business do to prepare for change?

If you’re happy with what you and where you are, then internal change may not be necessary. But if you think that the changing economy or the introduction of e-commerce may change the real estate paradigm, you should realize that without change and adjustments, you might be looking at a completely different business cycle in the coming years. Try to imagine what the future of the real estate industry will be like. Read as much real estate news services, real estate trend reports, research and whitepapers, magazines, etc. that you can. The important thing is not to try to determine whether the predictions are right or wrong but rather to widen your own thought processes and perspectives.

If you believe your current real estate plan won’t withstand the forces of change, then creating a new plan to prepare for the future is critical. Now you can call on the research you did in answering the questions above to create your corporate objectives and structure them into a plan.
 
Here are the basic steps in creating a workable and successful plan for your real estate company.

CREATING A REAL ESTATE BUSINESS PLAN

1. Analyze your business / service

Ask yourself what is your business / service. Is it real estate sales? Is it homes and homeownership? Is it making dreams come true? You must know what business you’re in before you can create a mission statement. The mission statement addresses the company’s reason for existence; the reason it’s different and unique.


2. Study the environment

Take your answers from the questions above regarding your real estate market, your operating area and your competitors. This is where you incorporate that data into your plan. You can also expand that initial research to external factors that you may have little or no control over, which may influence or even threaten your business. They include political, technological and economic factors. Can your business survive if mortgage rates rise to 15% (fifteen percent) again or if your sales volume drops 80% (eighty percent)? Think ahead.


3. Look for opportunities

From the first part of the SWOT analysis, go down another level and evaluate the opportunities you have today. Is the current market one that you can capitalize on? Are the socioeconomic structure, age and income of your area in flux? Will a new development in the area change the buying patterns of the consumers, or is there an opportunity you can benefit from because of the recent closing of a long-standing dominant player in your market?


4. Be mindful of the threats

On to the last letter in the SWOT analysis …Threats. What could take your company in a different direction? Evaluate what could happen that might severely impact your company.  What would your plan of action be if, say, salaried salespeople became a reality, commissions were discounted to 1.5% (one and a half percent) or homebuyers’ use of the Internet accelerated? Don’t have blinders on and ignore the obvious or even the improbable. Remember, it’s not important to agree or disagree with the trends you see; the point is to be open-minded about possible threats to your company that may be the result of those trends.


5. Set your goals

Time to decide what you wish to achieve. There are, of course, many types of goals and you should try to include as many of them as possible.  Just remember to make sure they’re all quantifiable and set to specific timelines. As in our recent presidential election, business planning is also a place where “fuzzy math” doesn’t apply. Set specific goals for items such as sales volume, gross commission income, net profit, number of offices and number of salespeople.


6. Map out action steps

This is the most critical part of your real estate business strategy. All the theorizing beforehand is of little value if you don’t map out the necessary action steps to achieve your goals. This is where the rubber meets the road. When putting the action steps together, you’ll see whether your goals are realistic and feasible. Can they, with the resources at your disposal, be achieved within the time frame you establish?

Be fair, logical and reasonable. Budget every action; determine how many resources you have available and how many you need to obtain externally. If achieving your goals now seems impossible, go back to the beginning and revisit your research and earlier decisions. Maybe you should reduce the size of the market you intended focusing on or change the speed at which you want to grow. That’s not failing--it’s adjusting your plan to a more realistic level. You should be doing this frequently, even after you’ve approved the plan. If you need help completing all these calculations, get yourself the online step-by-step, real estate specific, business planning system.

7. Make it measurable

Last, but not least, you must hold yourself, your team or your firm accountable. You wrote the plan and set the goals with the intent of achieving them. So now break each target into smaller, more measurable pieces and monitor the results regularly. A plan that can’t be measured or isn’t measured almost always fails. Create small steps and measurable wins--celebrate them with the team and recharge for your next goal. Decide beforehand what measure of loss is acceptable and what isn’t. If you find in the future that goals are unrealistic, adjust them, but keep this practice infrequent and logical. Rewards must always be hard yet achievable.


Parting thoughts

You should now have a plan. Know it, understand it and make it a living part of you. Make sure your key team members feel the same way. Build on it continuously, work on it together and you’ll see the beginnings of a successful real estate business.