Create Your Real Estate Business Plan for 2020 In Under 1 Hour
Today I share my Real Estate Business Plan for 2020 and the spreadsheet that I use to build it.
Why are you in real estate? Freedom, money, enjoyment? For most people, that answer may be a little different. Regardless though, having a plan as to what you wish to accomplish will help you be more successful and get more of WHY you are in this business.
I've been creating my real estate business plan for nearly a decade now and every year, the projections and results look a little different. Two things remain the same though, my business plan helps me FOCUS on what matters and helps me make DECISIONS on where to invest in my business.
There's a saying that goes like this, "What get's measured, improves." I'm a firm believer that real estate agents need to monitor and track certain KPI's (Key Performance Indicators). In today's video, I share what those KPI's are for me and how to calculate them.
Give this video a thumbs up if you get value out of it. Comment below if you have any questions or if you're bold enough to share your business plan for 2020. Finally, if you haven't already, consider subscribing to my channel as I release videos EVERY week related to real estate sales, business, and finances.
Other Blog Posts to check out after watching this one:
My Real Estate Sales Tracking Spreadsheet
Kyle Handy 0:01
All right, good Monday morning, everybody, Kyle here. And what we're going to be covering today is how to edit and look at your 2020 real estate business plan based on what you've done this year. And so I've created a spreadsheet that I use and I'm going to share it with all you guys here that you can use that tracks the KPIs, the key performance indicators, that you need to be kind of monitoring in your business. And, and then it allows you based on those KPIs to kind of see what you're going to do for the following year. And so for this particular video, we're going to be talking about 2020. You may be watching this later on next year, and maybe you'll you'll be looking into it for the following year. But for right now, we are at the end of 2019. We're right around November, what is it 25th. And so realistically, this is a perfect time to start really planning this Because in real estate, even if you sell a home, you're most likely looking 30 days out. So unless you guys close homes or get homes under contract in the next week or so, for the most part, you should know what you've done this year 2019 in your real estate business, and so, as kind of, you know, this was a great deep dive for me to look back and kind of see what I've done this year, how everything kind of shook out. And, and luckily, I've got stats going all the way back till 2013 when I got into the business, so I can kind of monitor how it's how it's gone over time. But what we're going to be focused on today is literally just for you guys to make sure that you're tracking the KPIs that that I'm going to go over today, for your business, even if you're new if you're seasoned. I think all of this can still apply. Come at this where you are right you might not be exactly where I'm at. Maybe you're just starting out maybe you only have six months worth of data. In 2019, that is okay. We'll kind of go through everything and you can modify this for your particular needs. And so I'm going to explain it, I'm gonna try and go through it as best as possible. Of course, if you've got any questions or anything like that, put them in the comments below. If you're watching this on YouTube, give it a thumbs up. And you know, really appreciate it, make sure that you'll subscribe to my channel. If you haven't already, I come out with videos every single week, related to real estate sales, training, and all sorts of other things. And so, but I'm glad you're here. Glad you're watching this. And we're going to go ahead and dive right in guys. I'm going to share my screen here. There you go. So you can see here, this is my real estate business plan, planning spreadsheet, a lot of plans in the title there. But what I've got over here on the left hand side are my actual numbers for 2019. And how they'll shake up I've got basically one closing left. That'll close in December. I've got that accounted for in the spreadsheet. So the only thing that would change is, is literally if I, I got a deal, I've got a listing right now or I've got a few listings. But if I got one of those listings under contract and they put a, you know, end of the year closing, then it could change it a little bit, or if that deal, knock on wood busted out and didn't close in December. But for the most part, this is how it should be as far as sales, volume transactions, all that good stuff. So here's what I recommend for you guys to do is make sure that as I'm going through these, you know, you have something that is tracking these numbers for you. I've talked on one of my past Monday calls where I've got an actual spreadsheet that kind of tracks all of my transactions. And so it's very easy for me to take the data from that spreadsheet and pop it into this business planning spreadsheet. And so literally, I mean, I created this in probably about 20 to 25 minutes. And so even if you don't have all of this stuff ready to go, you could still do everything. in about an hour, I would imagine if you've got to kind of go back through all of your HUD statements, if you've got to, you know, kind of get all that stuff organized, might take a little bit longer. But for the most part, at least, this gives you the numbers, you need to make sure that you're tracking for your business. So, alright, cool. So let's start at the top. So this year, you know, these are my numbers. Again, I try to be as realistic as possible. So I think it makes sense. Now, when you're editing the spreadsheet, you'll notice that there's some cells that are green. And then there's some cells that are just regular white, the ones that are green are the ones that you can edit that you modify, the ones that are white, are there already formulas, and so they're calculated for you. So you don't need to change them. Unless there's some specific reason why. And I'll kind of show you why that might be in the in the, you know, as we get to it, but for the most part, all you should have to change is these light green cells here. So if you see on the first part here where it talks about transactions I've marked They're 33 transactions 10 million, just over 10 million and closed volume for the year. And gross commission income on those transactions is $232,174. Let's see average commission percentage. So what this is, is basically saying that, you know, not all deals are you going to get 3%? Right, maybe you're above 3%, maybe you'll find out that you get 3.16%. For me, my average by the end of the year, all the deals that I've done is 2.32%. And again, that's calculated automatically, you don't have to, to figure that out. It's done for you. It's just based off of your sales volume divided by your gross commission income, will actually vice versa. It's your gross commission income divided by your sales volume. So that's how you can determine what your average commission percentage is, it's a super helpful number. This is you know, going to tell you are you discounting your services too much, are you you don't maybe Leaving, you know, charging too, too. If you're, you're charging too much, I guess I don't know if that's a possibility but you know, maybe you you're you're leaving deals on the table because you're you know, fixed on only this, you know, Set number. And in the future you may change that will at least need to know where you're starting from, to be able to make those adjustments. So I can see here 2.32 is my number. That's actually a little bit lower than my average over years past, but I know why that is. You know, normally that number hovers at about two and a half percent. This year though, as we'll start to see down below, I've done more listings, and then I have buyers and so what that means is I've become kind of a move up agent where essentially people call me for, hey, you know, I bought a home already, but I'm ready to sell it and buy another one. And because of that, I do give those clients a discount on the listing side. So because I'm going to make it up on the buy side, you know Make the full 3% on the buy side, I typically will discount on the list side 1%. So they all will get 2% on the listing side for me. So it's a 5% listing total 3% of the buyer agent 2% to me, and then, but on the buy side, I take the full 3%. And so you can actually see that here when you look and this calculates it all for you as well. Now moving down to buyers, I've done 13 buyer deals, the volume on that was 4.3 million gross commission income was 108,000 from buyer sides, my average buyer home price, so the price of the homes that I'm selling to buyers are $333,495, which is actually a higher much higher than the average sales price in San Antonio. So that makes me feel good. The buyer percentage is 2.5%. And if you noticed, we'll skip down to the bottom and come back up but down here at the listing side it's 2.17. So obviously I'm making more on the buyer side than on the listing side. And really the The only discrepancy why that would be less than 3% on the buy side is mostly because you know, either it's like a referred deal where somebody sent me a referral and other agent or something like that and I kicked them a percentage, that's all factored into this as well. And so that's kind of what we're seeing here. But then of course down here, we know why that is. The average is 2.17. That's because again, if it's a move up deal, where I'm going to be working two sides of it on, you know, a listing and a buy side, I typically will will offer that incentive there. And so but moving on up, but you can see my average buyer commission is at $300. Again, all of this stuff is calculated for you automatically listings I've got 20 listings that I've sold and closed this year. My listing volume is 5.6 million, listing GCI is 123,000 and the average listing home dollar. So here's again, where it kind of goes with that story. People call me up They want to sell their house, they want to buy a more expensive house, my average listing home price is $283,000. So people are selling those homes, they're going up and typically buying something a little bit more expensive. Alright, moving down to the average listing commission dollars, again, it's a little less than what I would make on the buy side, just because typically, you know, the sales price, the average listing home price is less and the listing percentage is less. So that makes sense. All right now moving down to lead sources. This is another way that you need to get some insight into your business and see where this these deals are coming from. Right. Like I know my business very well at this point. Basically, I'm referral sphere of influence and referral only. I've got a few deals that have kind of just come in randomly. It's nothing that I've focused on. But because I do have a big database from years past that I built through Facebook, and a couple other things. I've had a random deal come through from Zillow, where even though I don't, you know, advertise on the platform They called me just from my profile. And so you can see those here. But you know, the bulk of my, my deals are from referral and sphere of influence. It's all, you know, kind of shown here. So I can see that that's going to help me when I go to forecast for 2020. You'll see where all this stuff starts to make sense. And then lastly, you got to know what your expenses are, what have you spent on your business this year, and hopefully, you've kind of kept good account of that. I always say do not mix personal and business finances, make sure you have some kind of a separate credit card, a separate bank account, I have both. So I've got a personal bank account, personal credit card, business, bank account, business credit card, and pretty much I buy everything on credit card that I can and then I just paid off at the end of the month through my bank account. And so that's kind of how my finances roll. And then I've got my QuickBooks hooked up to to my business bank account and my business credit card. So that way, again, I don't have to sort through and filter through things And misc categorize expenses, they all go into the right places. So, again, if I'm buying
Unknown Speaker 11:08
meals or lunch or something like that for people, and it's a business one I put on the business credit card, if it's for my family, I put on my personal one. So that way, again, when you look at stuff, I only look at my finances once every two weeks, sometimes once every month. And I kind of classify and do all that. There's no way you're going to remember, as you're buying a bunch of stuff, what was what so make sure that you have two separate accounts set up from the very beginning, even if you're just starting, I wished that I would have started like that my first two years of real estate, my expenses were immense, like the classification of them. I ended up doing it, I went back and I did it as much as I could remember, and to try and get that good data. But it was just again, it would have been much easier if I would have started like that from the very, very beginning. So
Unknown Speaker 11:53
Unknown Speaker 11:54
cool. So we've got expenses there. And you can see here that I know my brokerage fees this year. cost me about $20,000. My cap is 16,000, we have a cap transaction fee. So that accounts for a little bit why it went over the cap of 16,000. Plus we have an $85 a month fee. So that accounts for everything that I've spent into my brokerage this year. Education dues and travel. So this is like being a member of my San Antonio Board of realtors. This is being a member of the National Association of Realtors. This is for continuing education to make sure that my license stays active. So that's what that stuff comes into. And for travel, I didn't travel for real estate this year. You know, I didn't go to any real estate conferences. I went to a bunch for XP, and but I classify that under agent attraction and so I've got a whole separate p&l for that and a whole separate business plan for that. But as far as my real estate business, I didn't travel or do anything like that for real estate, marketing and advertising. I've got about $17,000 invested into marketing and advertising this year and The bulk of it is all direct mail. I've done a previous video talking about send out cards, and how I use that to mail to my past client database and my referrals and sphere of influence. And that's a big part of it. That basically is what sends out birthday gifts. And, you know, it's basically like cookies and brownies and stuff like that. The anniversaries for whenever they closed on their deal, you know, send something out for that. But then also throughout the year, it also just sends, you know, like cards that say, Hey, you know, what's thinking of you hope everything is well, if you need anything, give me a phone call. And so that's the bulk of it. I also do reaching neighbors, which is a service here in San Antonio, where it's direct mail postcards, and that goes out every month. And it's just I do one evidence of success postcard and one letter of the heart which basically says like, what my family's up to what I'm up to, and it goes out to my entire client database my entire met client database. And that's what we're going to get into the bottom, kind of breaking it up into Mets and haven't met. And so, but anyways, so that's the bulk of my marketing advertising, I kind of know what I spend there. Now there's a few other odds and ends that are in there. But for the most part, that's what I'm doing office supplies and operations. So this one is pretty significant. This is because I've got still, you know, my other office, but my brick and mortar that even though it's subleased out, I still have to pay the difference, because what the subleases doesn't cover the full amount of rent, and I've had that for this entire year. I'll have it until October of next year, which is kind of nice. I'll get a little bit of a break next year because that lease will end and I won't have to pay that difference anymore. But that also accounts for things like you know, tools and things that I'm purchasing for my business. You know, we moved to a new house this year and so I redid this entire office that you see behind me. So you know buying desks, buying a new computer, buying a camera, all that type of stuff, also goes into office supplies and operations. And so that category is a pretty significant part of my business. It's probably a little too high as you probably get that down a bit. But but I do like to buy things, right, like I buy a lot of different technology and things that I use for my business. So anyways, payroll expenses, this is for things like transaction management. So every one of my deals, I don't have a paid like staff person, I'm you know, as far as my team goes, I've got somebody that does transaction management for me, but she also does it for other agents. And so I just pay her on a per transaction basis. It's like 350 a deal. And I've had her do every single deal that I've closed here at XP and so that's the bulk of it would be transaction management of that 5400 bucks. But I also have a couple of virtual assistants that I pay that are in the Philippines, and other places like that, that do anything from data entry to now that I've got, like positive casts and, you know, YouTube videos and editing and all that kind of stuff, they do that I don't have that put into this p&l because again, if it's content related that goes into a whole separate business plan that I've got, but this is just my real estate business plan right here. So, technology expenses, these are this is for the technology that I've spent, or that I use to run my real estate business. So these are things like, you know, add ons for cavey core or for, you know, just things like if I was, you know, doing bom, bom videos, or any technology that's specific to my business, it's all their total expenses. That's what it is added up. You don't actually have to add that one because it already sums up what you put here. Now, again, if these aren't the categories you use for your business, feel free to change them around, right, like you can change, you can come over here, right click and say, you know, insert one above and add a new row.
Unknown Speaker 16:52
Just make sure though, that when it adds up that it adds up to the same because sometimes when you mess around with adding rows and stuff, it breaks these formulas here. But for the most part, though, that's should be, you know, give you a good idea. Then it tells you here what my net profit is, you know, based on it just takes the gross commission income from the top subtracts out the expenses here and gives you net profit tells you what your net margin is. And so I'm running it about 70% just under 70%, which is it is good. It's not as good as it could be. I know what I need to do to get that a little bit higher as an individual agent without a team. I've seen you know, 85 80% To be honest, those 70% isn't too far off the mark. I'll tell you I mean, coming from being a big team leader just last year, me my profit margin at that point was like 15 to 20%. So 70% is pretty good. I'll take it for now. And then we get down here into the Met database met deals, met conversion percentage. And so for me, this is the most helpful for other people, especially if you're just starting your business, your real estate business, you might be getting more of this kind of stuff that haven't met. And I'll kind of tell you what the difference is in my eyes. So my met database are all the people that, you know, I know, they know me, I think that they like and trust me, right. And so these are the people that I send out my postcards to monthly. These are people that have bought homes from me, their current clients, all that kind of stuff. That is what I started the year with. Right. So I started, I went back and I looked at what I started 2019 with as far as my met database, and it was 426 people. And the reason I know that is because when I set up my Send Out Cards, kind of you know mailings for the entire year, which is something that I did way back in November of 2018. When I set that up, I haven't touched it since then. And I had 426 people in there so I knew exactly how many were in my database. And then so now that's going to be something I'll be doing over the holidays this year, thanksgiving to Christmas is going back to send out cards, adding all of The people that I've helped this year, and making sure and all the people that I've met this year, and adding them to my met database, and making sure they're on my mailings and all that kind of stuff. So out of my met database of 426 people, Now keep in mind that some of these are husband wife, right? Like, they're one couple. So really, I mean, out of couples, it might be something like 270 to 300, you know, couples that I know, but each one of those people I consider a potential lead referral source, right. Like the wife might know somebody that she works with the husband might know somebody he works with. And so they're each individual people I treated as such. And so I know how many met deals that I've had. So again, out of all my entire business, which you know, 33 deals, I think it's actually a mess that was before they're out of my entire 33 deals. 29 of them were to met people. And when I consider a met person, here's the here's the one thing to keep in mind on that is that includes referral sources. So I might not have known that person beforehand. But they were referred to me by somebody that I met. Right. That's kind of how I account for that. And so that means that about 6.8% of all the people in my database, I was able to get a deal from or two, right. And so that just is a good kind of metric for me to know, especially for planning into the future. So I've got that. Now, we look down here at the haven't met database. This is literally my entire database of people that I've got, and I know that I could do a much better job of managing it, maintaining it, but you know, I kind of pick and choose my battles. And right now, you know, I've had other things that I'm focused on and growing. And so I've just really focused on my, my met people might, you know, might the people that know me, and I kind of have let this go to where, you know, not as focused on it. But that being said, I still did close, I would say for deals from people that I haven't met, I didn't really you know, put any focus on it out of 8800 people that are in that database So again, very small percentage point 05 percent conversion ratio on that. And so anyways, why you have those two different sources, it's going to help you for forecasting. So here's kind of the power of this entire spreadsheet. And I'll show you right now what you do so. So once you've put all the numbers into here for 2019, you have all the data in there. Now what you're going to do is come over here to this 2009 2020 Auto, which just means that this is all auto generated from you. And you just put in what it is that you want to profit next year because it all starts from profit, guys. I mean, you know, there's so many people that they just want to know oh, I did 15 million I did 20 million. I did 100 million in volume. I sold, you know, 70 homes this year. Well, I want to sell 80 next year.
Unknown Speaker 21:47
None of that matters. Unless you have profit. It took me many, many years to figure that out. I wished that I would have figured that out a lot sooner. But I finally did figure it out. At least and so now that's where I start. That's where my business plan starts at. And so if you look here, you'll notice that's where you fill in whatever it's going to be in, it is going to change all of the numbers in this column here when you change it. So I'll just give you an example. Like let's say, so I did 159 770, and profit this year. And let's say that next year, I want to do 180,000. You're going to type that in here. And now you're going to see all of these numbers changed. So I can see exactly how many transactions that I need to do for that, what my gross commission income is going to be, what my sales volume will be. So everything is changed based on that. It uses again, all of the numbers that you did this year, so everything stayed the same as far as percentages, like my split here, 13 to you know, 20 deals, buyers, two listings, you know, it gives you that same kind of split for the 2020 year, and so all you got to do is kind of adjust that. So for me, I'd like to You hit 200,000 net profit next year. So it's going to go ahead and automatically adjust all my numbers to kind of give me a starting point of what I want my business plan to be. All right. And then if I come over here, you'll notice that this is my 2020 adjusted number and all of these numbers I put as green because this is where you're basically going to take what the automatic you know, kind of numbers are here and see, does this make sense? You know, is there anything that maybe is a little different that the formula isn't picking up? And if so, and I do see I see some questions coming in guys. Let me I'll get to the questions here and make sure I don't forget anything. Go to it go on and go over to quick here. So let's see here. We've got all right let's see what these questions are guys. Are we've got How do you manage what income gets moved from your business account to your personal account? Do you have a set percentage that you transfer and consider personal income and leave the remain in your business? expenses. Good question, Adam. So I actually pay myself a salary, I pay myself $4,000 per month, I use QuickBooks to manage payroll. And so it automatically knows based off of what it salary, I'm paying myself how much to take out for taxes. And then it also allows me to automatically pay my taxes through QuickBooks. And so that's what I use, I pay myself a $4,000 salary per month. And then whenever I need it, which you know, usually about every couple months or so, if my bank accounts getting lower than what I feel like I like it to be at for my personal account. I can pay myself owner draws. And so it might be like, I'm just gonna write myself a check from the business to my personal for 5000 bucks for 10,000 bucks, right? Like I can do that type of stuff. And so but then, of course, you know, once I go to find my taxes by the end of the year, my accountant my CPA can see okay, he paid himself a salary of $48,000 this year, and he took you know, this much in owners draw, which I guess they use is like a different percentage that you get taxed on. So that's how I've handled it. I hope that helps Adam once he also how does your current end of year projection compared to your business plan from last year? Does that impact how you plan for the following year? Also another great question. You know, it's funny, I haven't went back to my business plan from the start of this year to see, I know round about how it went. It went, you know, pretty close to what I thought maybe a little less than what I did. It doesn't necessarily impact how I plan for the following year, because a lot changes in 12 months. And so I'm just very aware kind of of my numbers. And you know, I guess it can when I'm just kind of mentally doing this, on the right hand side, this 2020 adjusted, I'll kind of show you what I mean by that. But it does kind of go through my mind, I'm sure but, but really what I'm focused on is what did I do this year? What I will, what does the numbers say I would need to do based off of what I did this year, for next year. And then Just kind of thinking of what I'm going to be focused on and what I'm going to be doing, I kind of tweak these a little bit more. So what you'll see here though, is for me to do 200,000 in net profit next year, it's telling me that I've got to do 41 transactions. And it'll be about 12 and a half million in volume. My gross commission income is going to be about $290,000 in all of this stuff, basically, I just copied over
Unknown Speaker 26:27
and but you know,
Unknown Speaker 26:29
but it sounded reasonable to me so I didn't change it, although I could have if I if I thought that I wanted to, not going to change my commission percentage, I'm sure that I'm going to probably have about the same split this year. See, because like, that's where, over time, I can tell you I went from being a complete buyer's agent, where I hardly had any listings to now and you know, kind of at that, that number where even in the last, you know, 2018 I did kind of the same split where I had you know about a third buyers and two thirds listings. Kind of I feel like that's where I'm going to settle on, not going proactive on trying to find new buyers necessarily, but the buyers come because of the listings. And so, so I kind of feel like that's going to stay the same. And I'm sure that the Commission percentage is probably going to be right where it's at. So I didn't adjust any of this, this is as best as I can forecast out what it's going to be. My average commission dollar might go up a little bit, but I'm not going to mess with that, because I'm kind of going to be conservative. Hey, if it goes up, you know, because the average sales price in San Antonio went up then great, but you know, even still, it's not like they've they've gone up a ton, maybe 234 percent most. So I'm not going to really adjust that. I'm just going to assume that's the same. I think the year before 2018 was somewhere like 68 6900. So it did go up but but I can't for sure say that that's going to happen again next year. There's a lot of different opinions on where the markets going heading and all that kind of stuff. Just gonna leave it at what it is. I think that's probably the most accurate
Unknown Speaker 27:57
Unknown Speaker 28:00
Right going into the buyers, it's telling me I'm gonna have to close 16 buyer deals 25 listings, all right, it's telling me you know, buyer volume buyer GCI, my average price which none of that is going to change as far as the the
Unknown Speaker 28:15
Unknown Speaker 28:16
the average commission, unless you think that you want to come in here and manually change it again, if you are doing something where you realize, oh, man, you know what, I've been just rebaiting way too much, right? I'm not, you know, as profitable as I should be. Maybe you're in like the 1% something, you know, that's way too low to run a real estate business. So maybe, you know, the numbers tell you that based on what you did last year, like say you were at one and a half percent, you know, for your average numbers here and you know, that you need to get at higher. Well, you can change this around, right, like 2.51. I feel like that is what it's going to be for me, but if it wasn't, I would change that. And I would say okay, well maybe it's going to be you know, if it was one and a half, maybe it's going to be 2.3% well come in here, but 2.3% Alright, let's for me, I'm going to say it goes down right? So now my my buyer commissions 2.3%. Well, I got to adjust that manually. This isn't going to all this stuff is manual on this right hand side, this adjusted side. And so for instance, now what I got to do is I know that if my average commission percentage is 2.3%, then I'm going to look up here and I'm going to say, all right, well, my, my volume is going to stay the same. I'm still committing to selling 16 homes, but if I can get my my percentage up, then the amount that I'll make on that those 16 homes, which is going to be 5.4 million in volumes, I'm going to just change the GCI amount so I'm going to take that I'm gonna say equals this number, times the percentage, that number that's all it is. So 224,000 so you can see here for me, I dropped it right so that's what the calculator told me 2.5 I dropped it to 2.3 which basically says that it's going to drop my, my volume and my GCI from 136 to 124. And so you can kind of see how that works there. Now, if you do something like that, anytime you're going to change gross commission income that you're making for the year, like for me, I kept it all the same, but anytime you're going to change gross commission income, you need to come up here. And then you need to readjust your gross commission income for total, right? Because if you added, like for me, in this case, I did less, I'm going to say equals this number
Unknown Speaker 30:36
equals that number. Plus
Unknown Speaker 30:40
this number here, which is the listing side GCI to get me a full gross commission income adjustment up here. And the reason why that's so important is because down here, what you're going to look for net profit wise is automatically a formula. It's taking into account your gross commission income for the year and it's subtracting out the total expenses to give you this number here. So, again, that's why that's important that you make sure that if you change any of the gross commission income numbers from buyers or from listings that you go up here and you adjust it for total. All right, but again, just kind of know what your story is figure out everybody's scenario is a little bit different. Everybody's business is a little bit different. But I think that that's important to kind of get right make sure that your gross commission income is right, make sure that the story makes sense as far as what your commission percentages is it going higher is going to stay the same as you can probably get less like you know what is going to happen there. Again, I don't change you know, I just keep the averages as far as my average listing home price, it's going to be what it is. If it goes higher, great. If it goes you know, less, not so great, but most of the time, it's probably gonna stay about the same, maybe go a little bit higher. If you're getting if you're starting out in the business, your average sales price probably rises a little bit more rapidly in the beginning. You know, when your first year of real estate, your Probably selling a lot less expensive homes, once you've gotten kind of established, you know, you're probably going to, you know, level out and not grow quite as quickly as fast doesn't mean you're not going to grow. But it just means that you're not going to grow. Changing that number as quickly as when you're first getting started. lead sources. This is where it can be a very manual thing. For me, I just know that I'm going to probably still sell sell the same amount of referral and sphere of influence. I'm going to ramp it up on the percentage that I plan to ramp up my net profit, right and it has already accounted for that. You noticed here it was 116 and 90. Now whoops, it's 145 and 113. So that's already a good ramp up. I feel like that's probably where it's going to be. And then I'm still going to have my random deals that probably come through one way or the other down here. Right. And I have it listed out as Facebook ads, Zillow, Trulia, because that's what they were this year. They probably won't be that exact same numbers next year, but I would imagine I'll get that same proportion of random deals. Next year. So I've got that listed out there. expenses. Same thing I basically took over what I, what I had here as projected, the only difference is that I know. So like, for instance, here, it took this proportionate for brokerage fees. Well, I know that once i cap my deals that I have to do, the cap transaction fee is much less. And so for instance here, right? If you take an exact proportion, because this is factoring in as if the cap was going to expand, it doesn't in my particular scenario in yours, if you're just you know, no cap, if it's just the same percentage all the way throughout, you know, then I would just keep it as whatever the proportion tells you. But for me, I know that this factored in the capping and then having transactions beyond that cap. Well, the same thing will happen next year, except that I'm doing eight more deals. And so what I'm basically doing is taking what I was this year, and then if my cap transaction fee is $250 I multiply that out by eight. That's a Another $2,000, that puts me at 22,003 85, not 25,005 18. So I just manually adjusted that. So I see what the formula gave me. But I know what it's realistically going to be like next year, education dues. I just took whatever that adjustment up was, I figured that's probably going to be pretty proportional marketing and advertising, again, probably stay pre proportional. So I didn't modify that. office supplies and operations, it's a little less it took about $1,000 off. And that's because I know that my lease ends in October for that for that sublease. And so I'll probably save about $1,000, maybe a little bit more, just from that. Now, if I can save more, because maybe I'm not buying so much stuff or whatever, that would be great. But I know myself, even though I think that way, I'm not going to modify that because I probably will do exactly what I did this year. All right. payroll expenses, same things, more deals equals more trends. transaction fees. And you know, I continue to plan to use the same Transaction Manager. So that's that's where you just have to kind of take into account your business.
Unknown Speaker 35:06
Like if you were using a transaction manager this year, and you're going to do it all yourself next year, you could, you know, cut that out, I wouldn't recommend that I love using a transaction manager love having leverage. If you're not using a transaction manager this year, and you plan to use a transaction manager next year, you might need to increase that number, right. So just whatever your scenario is put that all here, technology expenses, same thing, I just kept that at whatever it was proportionally, and then total, this is going to sum up your expenses automatically. So you don't need to do anything there. But just manually change around these figures for your expenses. And you'll get your total expenses there. And then it's going to tell you what your net profit is based on those numbers. Now, obviously, I changed these numbers here for just the sake of kind of giving an example I'm going to go back and show you what I realistically expected it to be. See there we go. So there we go. So this is what It was when we first started. So you know, the calculator was told me 200,000. When I adjust, I get 204,000. Just because I've got in here the adjustment for brokerage fees being a little bit less than what the automatic scenario tells me. And I've got a little bit more from the office supplies not having that least for those last few months, but then everything else being kind of thing. So again, 204,000 kind of word puts me 70% profit margin. That sounds good to me, right? Like that's at least a good place to start numbers wise, I at least know my numbers for what I think it'll be next year. Now I go down here, and this is the most important part, I think of this entire thing. So what you're going to see here is that for me to do that at the same conversion percentage for my met numbers, which to me, this is going to be the most important thing for me, for you. If you're just getting started, maybe you don't have a big net database. Maybe you're planning you know, to do more kind of lead generation type of stuff. You know, the haven't met might be important, you know, knowing what you're doing. Version ratio is there. But for me, here's what I'm looking at, right? I started the year 2019 with 426 people in my met database, and my conversion ratio is 6.8%. So assuming that my 6.8% doesn't even change, like, you know, that all stays the same, then for me to do 36, met deals, which is what I would need to do is again, to increase to the 200,000, it's automatically proportional. And it's telling me that I need to do 36 met deals and five haven't met deals for me to do those 36 deals at the same conversion percentage, I need to have 533 people in my met database. And so ideally, as sooner you know, as soon to the beginning of the year as possible. And so I do have people I'm going to be adding in because I helped all these people this year. I met a lot of people this year. And so you know, even though it's telling me I need to add 107 met leads to my database. I've probably got 60 7080 of those people already in my mind or on some kind of a spreadsheet of people that I've helped them in Adding to that met database. And so that's going to help me out there. But then throughout the year, I'm also going to be adding people to that net database, as I close deals as I get to, you know, meet people throughout the year that I didn't know before. And so by the end of the year, though, I definitely want to have the minimum of this number here, hopefully a little bit higher, but at least you can kind of see, okay, you know, this is what I need to add to that met database based on this conversion percentage to get there. And then what you do for your met clients or for your not met clients or haven't met, is up to you. I mean, you know, I recommend, there's all sorts of different marketing programs that you can do. And of course, you can increase this percentage, the more that you touch those people in your database, if you're not connected, like none of this matters, if you've got 500 people in your met database, but you're not doing anything with them. They just sit there in a database, it's not gonna not gonna do anything. You know, for me, I've talked about what my marketing plan had been in previous videos. I'm not gonna go through all that. But I know that if I just kind of keep doing what I'm doing for my marketing plan, you kind of what I talked A little earlier my mail out my live events, you know, I've got a Christmas party coming up here for my clients, I'm just doing that type of stuff, I'll probably get the same results. And so I can just expect that I need to add that many more people to get those results. If there's something that you're going to change, maybe you haven't been focused on your met database, and doing anything with them, and that percentage is very low. Well, then, you know, you can do all sorts of thing, right, you can do mail outs, you can be on the phone with them more often,
Unknown Speaker 39:27
you know, calling them once a month, at least, taking people to lunch, just doing things like that to try and get that number to increase. And so what you'll see over here on this right hand side is all of the adjustability that you can do and so like this is where you would manually go in and if something was going to change, that's where you would change it. Right. So like for me, what I manually changed is this is telling me that for me to close those five deals, I've got to add I've got a 33 11,000 people in the database compared to 1800 this year, so I'd have to add to 20 219 people to my haven't met database, I'm going to tell you right now, I'm not going to do that, right, I'm not going out and doing more, you know, Facebook lead ads and trying to get random leads, I'm focused on this right here. That's where I'm at in my business. So what I've done is I've manually come over here, right, the only thing that I need to change is I need to put five here. And so what you're going to see then is that with the same amount of leads, assuming I don't get any, which I'm sure I'm going to get a few, you know, just random leads that come through without even doing you know, Facebook, lead ads, or Google ads or anything like that, when I have some random ones that come in, so it'll probably increase that but just assuming I didn't, and I need five deals. It's just saying that okay, if I want to do that, I've got to increase my conversion on those leads in the database, which I could very easily do that if I spent any more effort trying to do anything with those leads, just emailing them once a month or you know, just trying to reach out some form or fashion, even just automatic, automated. You know, there's all sorts of programs that you can get I'll text people, email people and just kind of check in once a month or something like that regularly with these leads, I'm sure that I could close five deals based off of that. And so that's basically all that I plan to do. And from that, that gives me my 41 deals. 36 there five here, kind of gives me in my mind what I need to do, it also sets my budgets for these different categories for next year. So I know what I can spend, you know, per month. So basically, right there is what you need to know, these are your key performance indicators, these you know, as far as what to be tracking in your business, and this tells you exactly what you need to be shooting for for that following year. So, again, I think that this is a great starting point. If nobody if you haven't done this yet, it's a great exercise. Again, doesn't matter if you're just starting or you know, if you've been in the business a while, hopefully, if you've been in the business while you have something like this, and you kind of know your numbers because you'd be surprised. I mean, there's a lot of agents I do talk to that you asked me even just how many deals they've done this year. And they couldn't tell you, you know, they don't know how much volume they don't know how much GCI they don't know what their average commission percentages, they don't know what you know, their average commission dollar is right they don't know they're split between buyers and sellers. There's so many things that why this is important, because again, it helps you plan helps you decide where you're going to put your focus on for the following year. So, Alright guys, well cool. I'm going to jump into some questions. Let's see if I missed anything here. from you guys. If you've got questions, go ahead and add them into the chat. Put them in the comments if you're watching on YouTube. I'm looking at at all this right now. So let's see here. Got Adam in your active on here. I love it. Thanks for all the good questions. Let's see so maybe I missed it but gross commission income is the 3% right? Meaning that it is not split already for the 8020 split between the brokerage right that is correct Adam so because everybody's brokerage is different. So the gross commission this number here, I'll share it again. The extra don't need to share it's just that number that for me it was like two points. 3% that is going to be different for everybody that doesn't factor in your brokered split at all. That just factors in what your volume is. Right? How much do you 5 million to 10 million, you 7 million? And then what did you make from that as far as gross commission income, so just take your gross commission income, so you made 100,000, you're gonna take 100,000 and you're going to divide it by your, by your volume, right? Like, did you do 2,000,003 million 5,000,010 million, and you just divide that and that's going to give you that average commission percentage, so you'll know, you know, it should be 3%. If you asked 3% on every single deal, then it would say 3% right. But if you discount or if you you know, somehow get more than it'll reflect that right. It'll either be 2% 4% whatever it's going to come out at but that does not it doesn't factor in the brokerage split. The brokerage split comes out in expenses
Unknown Speaker 43:52
later on down the road. And that's a whole whole different thing there. So all right, let's see. I apologize for all the questions was the she provided You with all the formulas built in? Or did you build this yourself, I built it myself, Adam. This is again, it just I mean, it's a pretty basic spreadsheet. There's, it's not, you know, the end all be all, I think it's a great starting point, it gives you at least some ideas for where you need to be. And then the adjusted column on the right, it's a little bit more manual, but anybody that has a basic understanding of spreadsheets, they should be able to manipulate it to kind of make sense for them. If you guys have questions about it, feel free you know, when you're filling this out, if something just doesn't sound right, or doesn't look right. You know, put it in the comments. I check the comments all the time, send me a message. I'm happy to help out if something doesn't work out just right for you. So, see here. I guess what I'm really asking is how did you come up with the assumptions behind the formulas for the year over year business growth? Good, good. Good question. Adam. The way that that worked, is basically it just says you know if you did $160,000 in net profit this year, and you want to do 200,000 in net Profit next year, right? In that scenario, let's just say that's 120%. It's going to multiply all of the columns that you can adjust by 120%. Right? So it's just going to take it's pretty basic, right? Not too, too, too complex. There's just taking what your percentage of growth is for what you expect next year for profit, and then multiplying up the columns by that. And then it kind of, you know, make sure to keep your commission percentages the same and make sure to keep your average commission dollar the same. And then it just goes back and manipulates the sales volume, the gross commission income in the transactions. So cool. Let's see here. What other questions do we have guys? I'm looking here. Let's check YouTube. snapshot transactions. This is great. Any way you can send us a blank when absolutely that's the whole point of this. I will once I'm done, I'll put a link in the description for how to get a copy of this might take about a 24 hours or so, to get this all up and in and posted correctly, but I'll make sure guys if you check back here that will have a link that you can go to my blog, Kyle Handy calm and you'll be able to download a blank copy of this with just the formulas in there. So all you'll have to do is edit the the light green cells. So Alright, well I hope that's helpful guys. If you got any questions again, don't hesitate to reach out if you made it all the way to the end of this video. Kudos to you. That is awesome. Give it a like if you got some value out of this video, whether you're watching on Facebook, whether you're watching it on YouTube, and make sure if you're watching on YouTube that you subscribe to my channel and so that way you can get notified of my future videos. Thanks again guys. I really appreciate it. I hope everybody has an amazing Thanksgiving week. It's going to be a crazy next couple months. I know for myself, I'm sure it will be for you guys with holidays and whatnot plan but make it some make it a make it a good one. And again, this is The time where you got to start planning for not only just the next year in your business, literally the next decade of your business, we are starting 2020. It is a whole new decade. So where do you want to be next year? Where do you want to be in the next 10 years. And really, that success will start today with the planning with kind of the thinking of what you want from your business in life, all that good stuff. So, hope that that helps out. We'll talk to you guys soon.
Unknown Speaker 47:26
Y'all have a great day.