Creating A Business Plan (Part Five)

Like a Reunion—The Plan is coming together

If you have read the last four blogs on this topic, you are getting tired of digging for information so you could follow the instructions. I know it can be difficult but if we truly manage our business the way we should, we track all this information on a weekly basis. If we don’t keep track of all our expenses and incomes, we could easily go broke before we realize what has happened. Now that you have produced all the figures, let’s put them to use in putting together a personal income plan for the next year. If you are just getting started in real estate, you can still build a income plan by basing all production strictly on your desired income goal for the coming year. Follow the instructions below for each number without jumping ahead. Throughout this process you will use answer for one action to produce an answer for another action. Take your time and don’t advance steps until you thoroughly know how and why for each step.

  1. List your desired income for the next year. That’s easy; huh?   _________
  2. Write down the percentage of you income for last year that came from your listings.  If you had no listing income, your percentage from listings should be 50% but could be more or less. _____
  3. List the dollar amount of income from last year listings. For example if 50% of you income came from listings, and your total income was $100,000, your dollar amount would be $50,000. _____
  4. Write down the current average listing price of properties you list. For example let’s say houses in your area are currently being listed for $150,000; an average. ________
  5. Now write down what those listings are actually sold for. We know that homes seldom sell for full price. When property is listed at current market value, most homes will sell for 90-95% of the listed price. If listings are overpriced they may sell for 75-80% of listed price. Let’s say you listed a home for $150,000 and it sold for 85% of the listed price, the amount you write down would be $127,500. ________
  6. This one will vary from person to person and from one geographical area to another. In most areas the commission split between brokerage firms is 50-50 which is what we will assume in this plan. Even though commissions charged by a firm to represent a buyer or seller varies between brokerages, we will use 6% commission rate. Each brokerage establishes the percentage of income produced, they will pay to the agent for closing a transaction. This percentage ranges from 50-95% but let’s use a common percentage of 70%. To arrive at the percentage you will write down take that 70% and multiply by .03 (one side of a 6% commission) which should give you.021. You will use this percentage later. ________
  7. Next write down the results you get by multiplying the dollar amount you listed for number 5 with the percentage in number 6. __________
  8. Now we will determine the number of closed listings we need for next year by taking the dollar amount we used in number three and dividing it by the dollar amount we arrived in number 7. __________
  9. Next let’s figure how many total listings we need during the year to meet our desired goal. To arrive at this number, take the number of listings in number 8 and multiply it by 75% because not all listing will sell; for whatever reason. The nearer the current market price a property is listed, the chances of it selling increases giving a higher percentage. Your answer to this step should be a two digit number; on an average. _________
  10. List the number of listing presentations you will have to make to get one listing. National statistics show about 33% but that depends on your personal communication skills. Let’s use the 33% which will give us 3 presentations will equal 1 listing. ________
  11. Here we will determine how many presentations you will need to make during the entire year. Multiply your answer from number 9 by your answer on number 10. _________
  12. There are 52 weeks in a year but you will probably take a vacation or two so write down the number of weeks you plan to work next year. Allow for the unexpected. Normally your answer would be 48-50 weeks. __________
  13. Next we want to write down the number of listing presentations we need to make by dividing your answer on number 11 by your answer on number 12. Don’t round off. Your answer might like something like 1.38 but will vary based on how you answered previous questions.________
  14. Here we will determine how many new contacts we need to make each week in order to make the necessary presentations. This varies between agent’s skills but a good number would be to make 20 contacts to get 2-3 presentations. Multiply number 13 by 20=__________.
  15. Find the number of new contacts you need daily by dividing your answer to number 14 by 5 days. ___________ Surely you plan to work 5 days a week.
  16. You may think this one is ridiculous but it is very important. Determine how many minutes you need to spend each day contacting new prospects. Multiply your answer to number 15 by 10 minutes. The time you spend in conversations will decrease with practice. ___________
  17. Multiply your answer to number 16 by 60 (minutes in an hour) to determine how many hours you need to spend each day prospecting. ___________ Personally I believe in the 80/20 rules which means you should spend 80% of you day in lead generation.
  18. Now we need to determine the annual dollar volume of listings needed to meet your goal. Divide your answer on number 4 by your answer on number 9. $_______________ Note: your answer should be in Millions.
  19. You never want to have less than 20 listings at all time (if you want to be real successful) but about 3% will sell and need to be replaced by new listings, or they’ll expire or be taken off the market so let’s use a 3% turnover rate. To determine the dollar value of listing inventory you need to maintain at all times, divide you answer on number 18 by .03%.___________ This will also be a large dollar amount.
  20. Now let’s determine the total number of listings you need to maintain at all times. Divide your answer on number 19 by your answer on number 4. Your answer will probably be much less than the 20 I stated in number 19. __________
  21. Now that we have determined the work needed for listings, we now need to determine the dollar volume of sales (from buyers) that we need to produce annually. Using the same income volume of $100,000 (as stated in number 3 above) and considering 50% your income will come from listings and 50% will come sales to buyers, this answer should be the same as your answer to number 3, or subtract number 3 from number 1 to get your answer. ___________
  22. To determine your average income from sales, multiply your answer for number 5 by your answer on number 6. $____________
  23. To determine your annual number of sales (buyers) needed divide your answer on number 21 by your answer for number 22.
  24. To determine the total number of new listings you need each month, divide your answer to number 9 by 12 (months in a year). ______________
  25. To determine the total number of sales (from buyers) you need each month, divide your answer to number 8 by 12. ____________
  26. To determine the dollar volume of income you need to produce each month, in order to meet your goal, divide your answer to number one by 12.

 This seems like a very long process but it is important for you to know exactly what you need to accomplish every hour of every day. When daily accomplishments are missed they are gone forever unless you move required actions to the next day and then there aren’t enough hours in a day to accomplish necessary activities that are important to reaching your goal.

Next week we will finalize the business plan by discussing “Time Management.” Should you have specific questions concerning various issues, please let me know and I’ll research the answer for you. I also want to encourage you to subscribe to our “News & Updates” weekly report so you can stay abreast of issues that might affect you when buying or selling real estate. If you haven’t visited my website, please go to  and view previous articles.