As 2008 winds down it is time to review the past year and look forward to the year ahead. Some of you will be setting New Year’s resolutions. Instead, I turn to my business plan to design what my 2009 will look like. I learned a number of years ago not to leave anything to chance – to create a business by design rather than hope. Regardless of what stage you are at in your career, if you don’t set goals, put a plan in place to achieve them, and review your progress often to make adjustments along the way, you are doomed to repeat the same mistakes over and over again. Unfortunately, many sales professionals sway in whatever direction the market moves them instead of building a business by design. Even if they see the value in writing out a plan, most professionals are overwhelmed by the process because they don’t know the proper steps. As a result, they never achieve their full potential.
A business plan will help you determine how much you need to earn in 2009, it will help you focus on the expenses it will take to sustain and grow your business, and it will help you determine which activities you need to focus on each and every day to achieve your desired income. Because our business works on a 60-90 day closing cycle, business planning give us the opportunity to compare results with forecasted expectations, allowing us enough time to adjust production activities or expense items to ensure we stay profitable – in essence, creating a business by design.
There are three essential steps to business planning:
1. Create Your Budget:
Look forward to 2009 and itemize all of your expected expenses for business, personal, retirement and investments. Calculate your expenses separately for each month because just as our revenue is cyclical, so are our expenses. You won’t know your exact expenses, but take your best guess and always overestimate – it is better to think you have to earn a little more each month to cover your expenses and you’ll never be caught short. Once you know exactly what you plan to spend in the upcoming year, you’ll know exactly how much you need to earn so you are no longer picking an income goal out of the sky.
2. Create Your Business Plan:
Begin with your yearly income goal from your budget and add 15% as a cushion for emergencies – it is better to aim too high than too low.
Divide your goal by your average commission to figure out how many transactions you need to close this year.
Determine how many listings (buyer & seller) you will need to sign to close that many transactions. No-one is perfect, so if you close 3 out of every 4 listings you sign then divide the transactions you need by .75 to determine how many listings you will need to sign this year to achieve your goal.
Next, you need to look at how many client appointments it will take you to get that many listings signed. Again, no-one is perfect, so if you get 2 listings for every 4 appointments you go on then divide the listings you require by .50 to know how many appointments you need to go on.
Last, you need to figure out how many new prospecting contacts you need to make in order to get a listing appointment. Depending on the quality of prospecting you are doing, this could vary from 25:1 to 3:1. The higher quality prospecting you do, the fewer new people you need to contact to get an appointment. Use an average figure based on your past experience and multiply the number of appointments you need to go on by the number of contacts you need to make for each appointment. This will let you know how many prospecting contacts you will need to make this year. Divide that by the number of work days in the year and you will know how many new contacts you need to make every day to achieve your income goal.
3. Monitor Your Performance:
Every month you need to review your actual revenue and expenses to see if they are higher or lower than expected. If your actual income is higher than expected, that’s great, don’t slow down, and put money away to get you through the slower cycles in your business. If your revenues are lower than expected, review your business plan to make sure you are making the number of daily contacts you committed to. Next you need to look at your expenses. If they are higher than expected, find out exactly where you are overspending and if the increase is temporary or permanent. What affect will the increase have on your annual expenses? Do you need to adjust your budget? If expenses are lower than expected, that’s great, just make sure you are not under-spending in critical areas like marketing which will hurt your business in the long run.
The goals you set for 2009 should be an inspiration and a challenge to keep you motivated, but if you set your goals unrealistically high they will overwhelm you and be a de-motivator. Your plan needs to be specific and clear to give you enough direction, and it should be computerized to allow you to make changes quickly. Once you know the number of contacts you need to make each day to meet your goal, put an action plan in place for how you are going to make those contacts (office duty, open house follow-up, FSBO, sending “just listing/sold” notices, sending letters to your target market, door knocking, phone prospecting, hosting seminars, handing out business cards, forming strategic alliances, joining networking groups). The opportunities are endless to find new business. Build reminders of these activities into your daily calendar to hold yourself accountable.
If you are interested in purchasing an easy-to-use, computerized Business Plan that you can customize year after year, please visit our product store.
Happy New Year,
President, Leader’s Edge Training