Harvey MacKay, the best selling author of Swim With the Sharks Without Being Eaten Alive, made the following statement: “Failures don’t plan to fail; they fail to plan.” Sadly, many an agent has thrown in the towel after investing months or even years at learning the business of real estate when they might have been successful had they only prepared properly.
Antoine de Saint, a French writer once said, “A goal without a plan is just a wish.” I’ve met hundreds of agents who had a broad goal of business success, but were absolutely without a clue as to how they would get there. Again, very sad. The fact is that every single agent should have a business plan — after all, they are running a business. And making just such a business plan is exactly what this step is all about.
Not only can you know where your next deal is coming from, you should know. You should not be a passenger, but rather you should be the driver. What if I told you that you could actually know the step-by-step series of actions that are required to meet your business goals. What if I told you that you could actually control your real estate destiny instead of real estate controlling your destiny?
Well, that’s precisely what I am telling you. If you build and follow your plan, you will be successful. Wildly successful! It’s really that simple. No kidding. Now I’m not talking about a business plan like you would prepare to get a business loan. Rather, I’m talking about an action plan that will tell you exactly, step-by-step, what you need to do every single day in order to achieve your goals. No anxiety. No endless wondering if you are doing the right thing. Just the simple recipe for your success.
First Comes Vision. Before you can begin any journey, it’s important to know where you’re going. Simple as that. Someone once said that, if you don’t know where you’re going, any direction will do. Well, I prefer to choose my destination. And having chosen where I’m going, I can then set out to build a systematic, step-by-step plan of how to get there. Without a destination, how will you know when you arrive? You won’t. If you don’t have a plan, any result will do. If you don’t have an objective, any outcome will do. You must have a destination — a finish line — a finite, measurable, clearly defined objective. Why? Because, without one, you’re only cheating yourself.
I believe in the principle of vision. In order to achieve something, you have to see it first — not in the sense of seeing a physical reality, but of seeing the end result in your mind’s eye. And I’m not talking about some mind-over-matter scheme of somehow psyching yourself into super-achievement. What I’m referring to is the simple principle that anything you create (in this case, your business) will be given life once you can see it clearly in your mind. The more clearly you see it, the likelier you are to achieve it.
In the 1950s Roger Bannister, a former Olympic runner and medical student at Oxford University, had a very specific goal: to break the 4-minute mile barrier. For years, the 4-minute mile was considered to be both unachievable and dangerous to the human anatomy by the physiologists of that day. But Roger was not convinced by the doubters. In fact, he was determined to achieve it– to break the 4-minute mile!
In the weeks leading up to his attempt, Roger approached his mission scientifically and deliberately, setting an intense workout program for himself with specific training scheduled for every single day. As he trained, he achieved several intermediate goals, including seven successive half-miles at an average of 2:03; 10 straight quarter-miles at an average of 58.9; three-quarters of a mile in 2:59.8; and a single half-mile in 1:54.
And then it finally happened. Roger ran the one-mile with a time of 3 minutes, 59.4 seconds. Not only did he break the 4-minute barrier, but he broke through a psychological barrier as well. John Landy, considered one of the great milers of that era, had never gotten closer than within 1.5 seconds of the 4-minute barrier before. Yet within 46 days of Roger’s breakthrough, Landy surpassed the record with a 3:57.9, and by the end of 1957, 16 other runners had broken the 4-minute miles barrier.
Why could everyone run faster all of a sudden? Because after it could be seen, it could be achieved. What set Roger Bannister apart from the rest was his ability to see his goal clearly, even though it had never been accomplished before. He focused on his own vision and not on what he was told by those around him. He was able to accomplish the seemingly impossible because he allowed himself to see it very clearly, and then he methodically and scientifically took the steps required to achieve it.
It’s important to have as much detail as possible in your vision. Take the time to imagine the your perfect real estate practice. Picture those working with you. Picture the perfect office environment. Picture all the details. Dream until you see it all in your mind’s eye. You’re writing and starring in your own movie. Now watch that movie again and again until you’ve memorized it. The more clearly you can picture your vision, the more likely you are to achieve it.
Let me give you some practical examples of vision-driven performance. When I began in real estate, I set several objectives for my first year. I decided that I would list a property a week, and I told the agents in my office what I intended to do. Initially I was struggling, but soon I was ahead of my plan, so I adjusted it to list 100 properties during my first twelve months. You know what? I failed at that new goal. I listed only 74. But in my first calendar year I listed 119 properties. Could I have done it without “seeing” it first? I don’t know. I doubt it. Vision drove me to succeed.
Here’s another example. I was determined to become the top listing agent in our market during my first year. I first saw this vision clearly in my mind, and I used it to drive me until I accomplished my objective in less than six months. Could I have become the top listing agent in our market without having that vision? Maybe, but I doubt it. I do know one thing for sure: I did accomplish my objective, but only after I’d first seen it in my mind’s eye.
I could go on and on, but what’s important is that, if you can see it, you can achieve it. So take the time to get a clear picture of where you’d like to see your business in a year. Two years. Five years. Dream big! Imagine those goals as already a reality. And take the time to see the details. When you see everything clearly, write it all down so you can refer back to it and use it to refresh your mind. I promise you that, if you do this, you’re on your way to becoming a success.
Next Comes Reverse Engineering. All right, by now I trust that you’ve done your homework and taken the time to get a clear picture of your dream practice. I’m also confident that you have all the details clearly in your mind’s eye and have written them all down to refer to later. Good. Now we’re going to get into the practical steps toward making it all happen. But first let’s discuss reverse engineering.
Reverse engineering is the process of discovering the technological principles of a system through analysis of its structure, function and operation. In other words, you can back into the individual component parts by disassembling the finished product. For our purposes, we’ll look at the end result, and then calculate the individual components that go into arriving at that result. The reason I want to start here is that it’s the single best way to build a business plan for your real estate practice.
Now, because this process will be highly personal, you’ll have to supply your own finished model (i.e. your perfect real estate practice). In order for us to work on this together, however, I’ll show you the steps in an example. Remember — this isn’t meant to be a substitute for your own vision. It’s just an example so that you’ll be able to follow along and know what to do when you do build your own business plan.
Now click this link to go to my business planning calculator. If you notice, it asks you to answer five questions and then to make three assumptions. The calculator does all the math, behind the scenes and then gives you a step-by-step plan of action. Let’s do one together.
What is your desired annual income? Let’s use $100,000. Next time through you can choose whatever is in your vision. What’s the average sale price in your market? Your local association should be able to tell you that number if you haven’t already calculated it after completing Step One. For this illustration, we’ll use $200,000 for our average sale price because it is close to the national average.
Next, we need the average transaction side commission percentage. Every market is different, and mine is 3%. But nationally it is 2.5% of the sale price, so we’ll use that for this example. Now we need your agent split, or the amount of the commission you keep after paying your company. The national average agent split is 62%, but our company pays 85% on average. Let’s use 70% for purposes of this example.
Finally, we need to decide what percentage of your business will be “buyer-side” business. As a very successful listing agent, you would expect me to recommend that you focus on listing, but I won’t. I think every agent ought to focus on whatever business he wants to do, whether that means listing or not. I recommend all new agents that they work 100% on the buyer-side because it produces more immediate income. Listings are like a savings account where working buyers is more like a checking account. For this illustration, let’s use 100% buyer-side business.
Now all we need to do is answer the three assumptions. The national average number of leads needed per closing is 24. My own number was closer to 16. Yours might be higher or lower, and only time will tell. As you get better, your number will get lower. For our purposes, we’ll use the national average of 24. Let’s also agree to take two weeks off and work 50 weeks, and let’s assume we will work at an efficiency rate of 75%. The more interruptions you get, and the less disciplined you are, the lower that number will be.
Now let’s look at the results from our Business Planning Calculator:
- Meaningful prospecting calls: 26 hours a week (or 54% of our work week);
Wasted prospecting calls (no answer, bogus, etc.): 3 hours a week (or 6% of our work week);
Listing activities: none (or 0% of our work week);
Buyer side activities: 9 hours per week (or 19% of our work week);
Escrow activities: 3 hours every week (or 6% of our work week);
Administrative activities: 7 hours a week (or 15% of our work week);
Estimated average work week: 48 hours a week (or 100% of our work week).
This is what business planning is all about! Believe me, doing it the hard way with pen, paper, and calculator is very time consuming. And trying different scenarios takes forever! But, whether you use a calculator like this one, or whether you figure it out long-hand, you must plan your work, then you must work your plan.
Notice anything that stands out? Real estate has changed. The age of going out all over town to hustle up business is over. Lead generation should be on auto-pilot, allowing you to spend your time actually working those leads you produce. According to this sample plan, you will need 960 leads throughout the year to accomplish your goal. Doing real estate the old way would make that number an impossibility, but using current lead generation strategies, it is not only possible, but it is pretty easy to accomplish.
When I was a brand new agent, I built this same kind of business plan. That was before I built the Business Planning Calculator, so it took forever. But, because of the focus it gave me, I was able to spend a lot of time in my office with my door closed, talking on the phone. Well, many of my fellow agents spoke disparagingly about how I couldn’t (and shouldn’t) do real estate in my office. I told them that I couldn’t do real estate away from my office. I told them that, if I weren’t with a client, showing or listing a home, I would be in the office and on the phone. There’s too much to do!
Now let me ask you a question: wasn’t that easy? Building your own business plan should be easy! First you need to take the time to build your dream — your vision. Then you need to begin to share that vision with those around you. Realize that many of your fellow agents will pooh-pooh your plan, but that’s because it’s easier to find fault with your plan than it is to build plans of their own. But don’t let those around you tell you what to do. Follow your own business plan, and you’ll be very successful.