For most of us, writing a business plan can be compared to getting your annual teeth cleaning. It is something you don’t want to do yearly, but need to. I have always been a fan of the concept that “you can’t know where you are going until you know where you have been.” You must analyze your successes and your failures. Creating a business plan allows you the opportunity to analyze and evaluate the procedures and goals you put in place.
Having a formal business plan is also a required step in order to secure financing by most reputable lenders, so it is especially important to have a plan in place when launching your real estate brokerage. However, creating this document doesn’t have to be a complicated process. To help, we have created a template you can use to create your own plan for your real estate business in seven steps: Download the free real estate business plan template.
Let’s get started.
1. Write Your Mission Statement
Every kind of business plan begins with a mission statement, which is sometimes called an executive summary. Your mission statement needs to clearly define your business’ purpose and your goals. It also serves as the foundation for the rest of your plan, so when writing, please consider the following steps:
- Keep it short and to the point
- Write only a few sentences
- Use a specific time frame (e.g., one year) to stay on track
- Step out of your comfort zone (don’t make it too easy)
- Ask a peer or mentor review it for constructive criticism
2. Complete a SWOT Analysis for Your Business Strategy
SWOT stands for strengths, weaknesses, opportunities, and threats. Analyzing these components before starting any business helps you define the factors that will influence how you go about executing supporting strategies. To do this step, first examine your internal strengths and weaknesses, as this will help you see if what you are doing is working or is lacking. These elements should all be within your power to change.
List qualities that set you apart from other competitors, such as having neighborhood knowledgeable and dedicated employees
Identify what the company lacks; e.g., you may have only limited capital or an unproven leadership team
Specify skills that you excel in like being able to navigate complex commercial real estate deals
Ask yourself what other agents are doing better than you
Next, consider the external factors that could affect your business. While these elements are outside of your control, it is still important to take the time to write them down as part of your plan so you have a better understanding of your business’ potential.
Identify markets not being serviced by your competitors
List your direct competitors; a long list may show your intended market is either too broad or saturated and that your business would benefit from a more defined niche
List any hot markets or demand increases you don’t presently serve but are well-positioned to jump on
Detail significant changes in your present market
Consider how you might better leverage word of mouth and your company’s excellent reputation
Define other world or natural events outside of your control like negative reviews on social media
3. Set Specific Goals for Your Real Estate Business
Once you have defined your strategy, it is time to consider the goals and tactics that will help you reach success. When goal setting, you need to make sure you set specific goals, which are measurable and realistic. There must be an action plan that outlines how you will accomplish the execution of these goals. It is important to have both short-term and long-term goals. These two types of goals should support each other.
Specific goal setting comes with some rules:
- Determine a specific time frame
- Use words like I will, I can, I am, I feel
- Avoid words like I can’t, I won’t
- Only you can define what success means to you
Examples of specific goals:
- “I can close five more escrows by the end of the third quarter.”
- “I will increase the contacts in my database by 20% by the end of 2020.”
Consider what you want to accomplish and when you will accomplish it. Goals can be small or large. They also don’t need to be safe and within your comfort zone. Think outside the box and challenge yourself. That said, they also need to be realistic and achievable.
If asked if they are successful, many real estate agents will quickly answer and say, “Yes, absolutely.” However, in reality, the agent may be lying to themselves, as one of the qualities of a real estate agent is to have an ego. Again, if you ask an agent if they have an ego, they may deny it.
Please don’t think an ego is bad. It truly could be one of the survival tools you need to stay in this business through disappointment and rejection. Additionally, an ego makes you want to succeed and be the best agent in real estate. However, it also increases the risk that you or your team will set goals too high, which can demotivate. On the flip side, they shouldn’t be too easy to achieve either, as they may be forgotten and ignored.
Prepare to revisit this section of your business plan on a regular basis. This is because once a goal is reached, you need to be ready to set additional goals so that you don’t become stagnant.
4. Plan Your Marketing Strategy
Now that you have an idea of what goals you want to achieve, you need to create a road map or strategy to attain them. I have always been a fan of physically writing checklists. There is a connection between using a pen to paper to solidify your thoughts. Through this process, you can tap into a different part of your brain that promotes the success to accomplish this task.
There are a several things to consider when planning your marketing strategy:
What Makes You Unique?
Knowing there is only one YOU. Tap into what makes you unique in real estate. What truly sets you apart as a real estate broker? Build on your strengths, whether it be with buyers or sellers, residential real estate or commercial real estate, or first-time homebuyers or investors. This is also known as your unique selling proposition (USP), or unique selling advantage.
Who Is Your Audience?
Identify the ideal client you want to attract and make sure you know their needs. Do you want to attract a certain age range, such as millennials who are more social media-based or silver and golden seniors (70 or 80 years of age) needing more of a hands-on approach? You can market to both of these generations as long as you have a clear process of communication.
While you can get a sense of the demographics of your intended farm area simply by networking in the area, identifying the people most likely to be in immediate need of your services isn’t as easy. This is why you may want to also consider using a prospecting tool like SmartZip to help you better target your audience, as it is able to predict where the next hot selling market should be based on 35 data points. You can learn more by visiting their website.
Where Can You Find Your Audience?
It is important to answer this question in terms of locating your audience online as well as in real life. For example, if you work in an affluent area, you will need to make sure you have a globally accessible digital presence so as to attract overseas buyers as well as local clients interested in luxury homes. If you market more rural and farmland properties, you still could use social media along with print materials that would focus more on a local presence.
However, in either of these cases, it will be just as important to have a professional website you can redirect potential clients to for more information about yourself and your business. That said, don’t feel as if you have to build your site from scratch. InCom Real Estate, for example, gives you a website, which can help establish your credibility, while also offering marketing tools that allow you to feature listings across blogs, social media, and other syndicated sites.
What Strategies Have Proven to Work?
A great way to get to know your competition is to attend meetings and events, as well as network. In the real estate business, there are so many different types of personalities and how each real estate agent conducts their business. What strategies do you see working for these agents? Do you want to use these strategies? There is an adage that says, “If you want to be more successful, be around successful people.”
That said, just because something has worked for one person does not mean it will work for everyone. Don’t be afraid to try something new. The things we do differently from our competition is what keep clients referring more leads our way, provided we execute those things well. If you would like to learn more about specific strategies by top performers, our article on real estate marketing ideas is a good resource to get started.
How Much Are You Willing to Spend?
Setting a budget to make sure you have the funds to underwrite your marketing strategy is crucial. This process is no different than a buyer knowing what sales price range they need to stay in to make sure their mortgage payment is affordable. Flying by the seat of your pants will cost you more in the long run and could lead to failure.
Pro tip: No matter what strategy you pick, you must be able to adapt and adjust. “Go with the flow.” In the business of real estate, we must all agree that we don’t work in a vacuum. One of my mantras is, “You cannot control the outcome. You can only influence the outcome.”
5. Establish Metrics to Measure Success
Many real estate agents, when setting goals, want to accomplish two main things: making more money by closing more deals and growing their database of clients to increase revenue. However, while these are definitely metrics to watch, they only tell part of the story. If you truly want to get a good sense of the overall health of your business, you will need to also identify more proactive metrics that will indicate future success.
For example, if your marketing strategy is based around repeat clients, you may want to also measure things like the number of referrals. Another metric you might want to measure is your cost per lead or lead quality score, since a massive contact database doesn’t do you any good if it is more expensive to maintain than it is worth or filled with people who have no interest in doing business with you.
6. Create a Plan for Generating & Nurturing Leads
Once you know what you want to measure, you can then create processes that will assist in accomplishing your business goals. For the most part, you will need to define how you intend to make use of inbound and outbound lead generation strategies and specify tools and processes for nurturing existing leads. However, over time, you may find you need additional processes to help manage transactions or stay on top of back-office functions as your business grows.
For now, let’s review these processes and see how they work “hand in hand” with each other.
Inbound Lead Generation
When becoming a real estate agent, you knew you were going to need to advertise, make cold calls, and send out emails, which is referred to as inbound lead generation. You also knew that you needed to be proactive to get business. You generated leads through a process called aggressive marketing, which has a direct correlation between putting in the work to get leads and making money.
Outbound Lead Generation
Whether you are a new or seasoned agent, your sphere of influence is your best source of leads. These are people who know, love, and trust you. The more you reach out or “stay in the flow” with these clients, the more you will remain “top of mind” as their real estate agent. One way to do this is to have a social media presence, which drives potential business to your website through passive outbound marketing. That said, newer agents needing to build their database may also opt to pay for leads using a reputable real estate lead generation company.
Pro tip: Outbound lead generation may be a form of passive marketing, but to do it well, you need to take a “hands-on” approach. This means updating your website and keeping it current, posting items of value and relevance to your social media sites, and working swiftly on paid leads to turn them into potential clients. Also be aware that the financial return, or “pay out,” may not be readily assessed due to a potential lag in time from obtaining the lead to completing a sale.
Being that buyers and sellers come from all walks of life, socioeconomic status, and a multitude of needs and wants, a combination of inbound and outbound lead generation will give you the best results. There are also a number of tools out there that can help you, like Zurple, which allows you to send mass personalized emails to potential clients, and features a ranking system to help you identify the best leads to focus on.
So now that you know how to generate leads, once you receive leads, what do you do with them? How do you convert the leads into sales? With everything we do in real estate, there must be a plan or system. A lead nurturing plan is put in place to make sure you have a well-thought-out process. This process should address all of the following:
- Establish recommended contact frequency: There is a fine line between pestering someone and not contacting a potential client enough. Unfortunately, there is no hard rule that works for every business. This is why it is a good idea to specify how often, and at what frequency, agents should follow up, from initial contact to sale, based on the preference of your target audience
- Set specific activity goals: These should be daily or weekly tasks that will be performed by your agents in support of your larger business goals, and are intended to convert leads to sales
- List available tools and how they are to be used: The best tool for managing the lead nurturing process is a customer relationship management (CRM) tool, as it can help you stay on top of contact records. However, the best also integrate with several lead generation software tools, which can automate a number of other business processes. Our article on the best CRM for real estate features a number of quality providers.
- Define a qualified lead: This will help your agents categorize leads so that they are spending their time on the leads most likely to convert into sales.
- Explain how successes and failures will be tracked and measured: This will ensure you don’t continue doing what doesn’t work in a way that prevents hard feelings.
If you aren’t sure what is going to work best for your business right away, that’s OK. The best processes are ones that are flexible so that you have the freedom to either stick with it when a system turns a profit or change it when a system offers no results.
7. Schedule Times to Revisit Your Plan
As a real estate agent, you know that the survival of a deal is weighted heavily when specific benchmarks are reached. The success of your business plan is to evaluate each step or benchmark and make sure you’re on the right path.
Corrections need to be made if you are not getting the outcome anticipated. Desired outcomes would include increased business, making more money, and significantly growing your database. Evaluating the elements of your business plan quarterly is a long enough time to see results and a short enough time to make changes or updates.
In my opinion, writing and implementing a business plan is no different than attempting to try a new recipe. When attempting to make a new recipe, you have directions to follow, timelines to abide by, and multiple components to include. If any of these steps in a recipe are missed or completed incorrectly, the desired outcome will not be achieved.
Ask yourself this question, “Do you want to run a business, or do you want the business to run you?” Taking the time to write a business plan each year will help you get focused on systems that you need to continue using or those that you need to possibly tweak or discontinue. This exercise will also allow you to chart what system is giving you the largest financial return and what you possibly need to stop spending your money on. It is time to stop running your business by luck and chance, and run it like a well-oiled machine.