Q. What should an agent include in their first-year business plan?
Prior to starting your career in real estate, you should have a general plan in mind for how you expect to make money in your first year. This not only means deciding if you will focus on sales or rentals, but also how you plan on tracking down leads, assembling a client base, and ultimately closing deals. Whenever new agents ask me for advice, the first thing I always inquire is whether or not they have come up with a plan to build their business and achieve success. Unfortunately, this often leads to hesitant answers along the lines of, “Well, we expect our broker to tell us what to do.”
The reality of real estate is that if you are fortunate enough to work with a good brokerage, they will give you great advice and provide you with the necessary tools needed to succeed at a high level. If you have not given a lot of thought as to what you want your strategy to be, however, you will not be providing your broker with sufficient information to receive proper guidance. Personally, I know an agent is going to be successful when he or she has a game plan and is forthcoming about desiring help in implementation.
The statement could be as simple as, “I have a large network of friends and colleagues from my last job and I know some of them will buy, sell, or rent in the next couple of years. How do I make sure I become the real estate agent of choice for all of them?” Others might say, “I have been living in Chelsea for a number of years now. Sure, I go out to lots of restaurants and meet a lot of people, but how do I convert all the casual contacts I have encountered into clients?” While I have heard agents swear by hundreds of different strategies over the years, I have found that if aspiring agents have not thought about the possible avenues they want to explore, its presumably going to be an uphill battle.
Here are some questions you should ask yourself when coming up with a business plan:
1.What are my income objectives?
A) It is vitally important to know the minimum income you will need to earn to maintain a quality of life that you are comfortable with. Most agents wind up not being successful in real estate because they run out of funds and momentum before their businesses take off.
B) With your minimum baseline established, what is the yearly figure you wish to be making? Be realistic. It goes without saying that we all would like to make more, but this should be a number that you will be pleased if you reach, but not unbearably upset if you don’t.
2.How much do I have in savings? How much do I need to maintain it?
Considering it may take an extended period of time to comfortably support your expenses, it’s critical that you understand your financial situation before diving into real estate. Furthermore, you will need to break down both your occupational and private expenses, which will allow you to determine a rough date for when you will completely run out of funds if you are making no income. Keep in mind that this will serve as just a rough estimate until you receive advice from your broker regarding a more accurate assessment of real estate expenses. While the goal is to make money right off the bat, your estimate should be conservative to prevent any surprises from throwing you off course. True, starting out strong and filled with enthusiasm will certainly have a positive effect, but keep in mind that even some of the best newcomers don’t make a penny during the first 60 days in the business, if not longer.
This is especially true if your focus is in Manhattan residential sales, where the process includes acquiring a client, having them sign a contract of sale, and then waiting for the 60 to 90 day average that it takes to close a deal. Successful agents working in rentals will benefit from the increased turn-around rate that may lead to income within just a few weeks, but the added time and effort must certainly be noted.
3.How many transactions do I need to complete in order to meet my income objectives?
When starting off, it is advisable to base your expectations around averages. Income is based on an assortment of factors, including whether you are dealing in rentals or sales, what the price of the unit is, and what the commission is, so individual results can vary wildly. This average figure will serve as your barometer until you are experienced enough to make your own assessment.
4.What services do I want to provide? Where do I want to provide them?
Real estate is all about specialization and intensely focusing on the market and your strengths. The narrower your focus is regarding location and transaction type, the more successful your business will be from the beginning. Unsurprisingly, this is one of the most challenging lessons to learn, and serves as a serious pitfall for many. Most newcomers try to focus on everything, and while this is a well-intentioned effort to remain diversified, the fact is that highly-trained specialists will be waiting at every corner. Thus, choose whether you want to focus on rentals or sales, and then decide upon a specific neighborhood and perhaps even a price range. Many agents begin their careers working with buyers and renters, and gradually shift over to sellers and landlords.
5.Who will I be marketing myself to?
It’s important to think about how you will be focusing your marketing strategy before you put in time and effort. Primarily, you should focus on marketing towards those who need the services you can provide. If you have decided that you want to focus on selling penthouses in the West Village, then you will want to seek out owners or buyers of these properties. That said, however, you should be committed to marketing yourself to your existing network of personal and professional relationships in hopes that your services will be required by them or individuals they know. Sure, these referrals might not be looking for penthouses in the West Village, but just because you have a focus does not mean you should be turning down potential clients that exist on the fringe. It is simply not enough to passively tell those you know about your involvement in the business; be pro-active and constantly remind them. When you are starting off, you will want to compose a database of all of your contacts and use it to help answer this question.
6.What is my marketing plan?
By now you have decided on what services you wish to provide and whom you want to focus your attention towards. As such, it’s time to concentrate on the daunting task of gaining exposure and making yourself known to potential clients. For example, a new agent’s plan might be to start in rentals, build a database of relationships and past clients, and become the broker of choice for when these individuals are looking to buy. When Manhattan agents approach me with a plan similar to this, I sometimes recommend they focus on the Financial District, since many in the world of finance experience radical income increases at the beginning. Or perhaps they might choose to focus on working with buyers and acquiring them through online sources. In this case, they need to understand the costs and the number of available leads, and create a specific plan on how they will convert these leads into buyers. But be aware that this all amounts to merely the tip of the iceberg.
Your marketing plan needs to be highly detailed and specific, thus when you sit down with your broker, adviser, or mentor, you will have a rough idea of what you want your marketing plan to accomplish and how much money you can afford to devote to it. This information will enable your broker to more accurately guide you and assist in building a solid foundation for your business. Depending on your broker, he or she may take care of 100% of the costs for some of your marketing, but not others. Similarly, your broker might be willing to spend marketing dollars on certain advertising venues, but avoid others entirely. Here at Meier Real Estate, I first determine what talents I believe an agent has and then craft the marketing plan’s focus around the agent’s personal strengths and interests. Since each agent is unique and possesses different skills and talents, I do not believe they should all be doing the same activities, nor base success on a single, uniform plan. Quite simply, I am willing to invest in activities that I know work and incorporate these core ideas in each agent’s original marketing plan. The agent and I will revisit the plan on a weekly basis and tweak it over time based on personal results and the market as a whole.
Although not part of your original business plan, you should ask yourself, “What am I willing to give up or invest in order to reach my goals?” Nothing is free in this world, and if you want to establish great relationships, make a respectable income, and become a successful professional, you will have to work very hard for it. The benefit of this oftentimes grueling effort is that, over time, you will build more and more relationships and earn more referrals. Starting agents, who don’t possess a large sphere of wealthy friends who will hire them right away, take few vacations and are focused on their work 24/7. While many perceive real estate agents to have relaxed, flexible schedules, most successful agents work much harder than anyone else they know. It’s tough work, no question, but it absolutely gets easier as time progresses.