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You hear it on the news. You hear it from your clients. You likely see it in your own bank account. Things are tough out there. The National Association of REALTORS® (NAR) 2009 Member Profile showed median income down about 14% ($36,700 in 2008 compared to $42,600 in 2007) with the median number of transaction sides at seven, down from eight. Sure, some REALTORS® are surviving, and even thriving, in today’s market. But many are finding themselves working harder on difficult, time-consuming transactions that yield smaller paychecks in the end.
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If you’ve been hanging on to old habits and hoping for a quick recovery, it’s time to get proactive. Below are steps you can take now to establish a firm business foundation and be positioned for success when this cycle ends. On AAR’s Facebook page, we asked members what they had done to improve their bottom line in the past year. Throughout this article, we share their feedback from the trenches.
CUT COSTS
To achieve a better bottom line, you’ve got two options: increase income or decrease costs.
Scrutinize your budgets. Review each expense in your personal and business budgets and evaluate the return on that investment. If you don’t have these two budgets set up, log on to your bank’s website and review your accounts line by line. What can be cut? Watch for services—the gym you never go to, a subscription to a magazine or website you never read—that automatically renew. Add up the monthly cost of those afternoon lattes. Consider whether your marketing dollars are delivering value, need more time to work or should be reassigned.
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Start with a plan, have a good tracking system and eliminate low ROI expenses. If you haven't done this yet, you will be surprised at how much is there. Oh yeah, and do more of what works. – Evan Fuchs (Bullhead Laughlin Realty, Bullhead City) |
Talk with vendors. Many budget expenses that can’t be avoided can be reduced. If you haven’t shopped costs lately, now is the time to do so. Businesses are hungry and willing to work prices to pull you in. But if someone offers you a better deal, look before you leap. Are there penalties for cancelling the current service? Set-up fees that weren’t included in the new vendor’s quote? Also, be sure to talk with your current providers to see if they’ll match the new offers before making any switch.
Go green, save green. Look at ways to cut your current consumption. Perform a do-it-yourself energy audit of your home and block air leaks. Unplug “energy vampires,” electronic devices such as computers, flat-screen TVs and CD/DVD players that draw energy even when turned off. (An easy way to do this is to put such items on one power strip, then turn off the strip.) Re-use paper by printing on the back of it. (Be sure that it does not contain personal or client information. Those papers should be shredded.) Turn off lights.
 | I have done more networking. Also have been watching costs on needless advertising. Know the areas of town better to cut down on gas cost. Kept up-to-date on new laws, rules and regulations. – Bonnie Cissell (Selman & Associates, Lake Havasu City) |
TAKE ADVANTAGE OF FREE
There are a surprising number of free resources available to you. Spend time, not money.
Zip through ZipForms. If you get the sense you are not taking full advantage of ZipForms, consider a complimentary two-hour, hands-on tutorial in AAR’s computer lab in Phoenix. Register online. (Can’t make it to the office? Watch the how-to videos.)
Find wisdom in webinars. For the month of November 2009, AAR is offering members complimentary access to these two-part webinars: Foreclosures/REOs, Short Sales and Upside Down Listings. In addition, NAR offers a selection of timely and free webinars on its website, covering topics such as lease-to-own deals, affordable homeownership programs and social media.
Expand your MLS skills. Most MLS services offer free classes to help you make the most of the system’s capabilities. Call or visit your provider’s website for more information.
WORK THE WEB
According to NAR’s 2008 Profile of Home Buyers and Sellers, 87% of home buyers used the Internet to search for homes. For those aged 25-44, the rate rose to 94%.
Review your website. If users can’t search the MLS on your website, you’re missing a great opportunity. If they can, examine your process for responding to their queries quickly. Investigate ways to make your listings shine online. Read the article “Ten Website Commandments for Making Money” in this issue for more details.
Build a blog. Blogs can establish you as a trusted resource in your area and improve your search engine placement. They don’t have to cost you a dime but do require a considerable investment of time. Get advice on websites like RealEstateTomato.typepad.com or ActiveRain.com.
Network like it’s 2009. If you don’t have a profile on Linked In, the social network for business professionals, set one up today. Use your contact database to find connections, then write up a few recommendations (testimonials). Next, create an account on Facebook (or add to an anemic profile). If you feel ambitious, try out Twitter. (You may want to follow some smart folks on Twitter before actively participating.) Visit AgentGenius.com to see what well-networked, social media-savvy REALTORS® look like.
 | Got rid of the costs that didn't produce results. Had a business plan! Social media’d it! – Joeann Fossland (Advantage Solutions Group, Tucson) |
REFINE YOUR BUSINESS
Make the changes you’ve envisioned for your business now before an up cycle makes you too busy to adjust.
Plan to grow. A business plan is a living document that changes as your business changes. If you haven’t reviewed your plan recently, dig it out. If you’ve never done one, get ready to learn about your business and yourself. There is a lot of business plan advice online (search “business plan” on BusinessWeek.com, for example). For advice tailored to real estate agents, the first class in the Graduate REALTOR® Institute (GRI) designation is GRI 100: Business Planning (class available in person or online).
Speaking of GRI… If you can spare the dollars, investing in your education is a great way to gain confidence as the market changes. Rather than avoiding certain transactions, learn as much as you can about them so you can manage your risk. Rather than being overwhelmed by technological changes, take a class to improve your comfort level.
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I have taken classes on negotiation skills, short sales and REOs. Now bring it on, I'm ready! – Lisa Kraft (US Preferred Realty, Mesa) |
Develop a niche. Identify your passions and build on them. Enjoy hiking? Become an expert on neighborhoods near trails. Or evaluate your current customer base and look for ways to expand specific segments. Have you worked with a few buyers from Minnesota? Write an article for your website that targets Minnesota buyers, post testimonials from the buyers you worked with and reach out to an agent there for referrals. (Learn more with REALTOR® Magazine’s "Own Your Niche" cover story.)
Make connections. Whether you reach out by phone to a friend who has been a source of referrals, send flowers to the office of a happy new homebuyer or connect with a faraway agent via Twitter, you can strengthen your sphere of influence and plant seeds for future growth.
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Love and adoring all my past clients in my database and out-of-state real estate agents. They keep the referrals coming. – Karen Kay (Realty Executives, Tempe) |
HAVE A LONG MEMORY
It’s no good telling people to save for a rainy day when it’s raining. But someday you will look back at this market from the heights of another boom. Make a commitment today to remember that booms go bust and plan accordingly.
Build cash reserves. Financial advisors recommend that you keep three to six months’ worth of expenses “liquid.” That means that the money should be easily accessible in a savings account, money market mutual fund or other instrument so that you don’t need to sell stocks or other investments at a low point in their value, pay penalties for accessing a retirement account and so on. A substantial cash reserve is critical for weathering downturns in income.
Prepare for retirement. Self-employed professionals need to evaluate how best to save for their retirement needs. Options that allow you to invest pre-tax dollars include IRAs, SEPs and Keogh plans. Consult with a financial advisor to determine the best choice for you.
Diversify your investments. Many REALTORS® invest their dollars in what they know—real estate. Just remember that real estate is not a liquid investment. Diversify where you put your dollars so that a downturn in one area does not spell disaster for your overall portfolio.
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