3 Ways to Think Like a CEO
3 Ways to Think Like a CEO
The market is back. Your business is growing. You’ve added staff. Things seem to be going great. Everything is perfect, right?
Think again. While a booming business is wonderful, profits and growth bring with them a whole new set of problems totally separate from the day-to-day running of your real estate business, and if you want to maximize profits and keep overhead down, there’s still plenty of work to be done.
If you’ve read any of my articles, you know I’m a huge advocate of running your business from the top down like a CEO. Well, here are three simple examples you need to know to control your growing empire.
1. Understand P&L
This is the most crucial element to running a successful business, and it’s scary how many real estate professionals are totally clueless about it.
First things first: Do you know how much money you retain for every dollar that you earn? How about marketing costs per listing? Or money spent per agent on your team?
If you can’t answer these simple questions, you don’t really understand what’s happening with your business.
That needs to change. Now.
Without data, you can’t formulate a plan. Without a plan, you won’t have anything to guide you. That is a surefire recipe for unnecessary expenses to eat away at your profit margins.
Know what it takes to run your business, and review those figures at least once a month to make sure every expense is justified and you’re saving enough for a rainy day.
2. Implement Budgets
How many real estate practitioners have a marketing plan or set budget for their team or office? Again, the answer is very few.
At the beginning of the year — with reviews at least quarterly — the key people in your organization need to sit down and review what you’ve spent and what you expected to spend.
It is crucial to track the metrics that allow you to assess the effectiveness of things like marketing dollars so you can make the best decisions with your money. For example, if you’ve invested in a billboard for the last six months, and it’s costing you $1,500 a month, and you’ve closed only one deal off of it for $5,000, it may be time to reassess your approach.
The bottom line: If you don’t have a budget, and you don’t have set times to review what you wanted to spend and actually are spending, it’s just too easy for unjustified money to fly out the door.
3. Check the Checkers
As CEO, you know by now that you’re going to need help. Hopefully, you’ve been able to delegate nonessential functions to other people. However, if all you did was delegate without creating the systems that hold those people accountable, you may be throwing money and business out the window.
I’ve made a point of keeping on top of this over the past year. So far, I’ve had great results. By staying on top of the people and companies we do business with, we are able to immediately remove unnecessary expenses, services, and personnel without wasting money for months figuring out we could have done differently. Everyone is held accountable, and we maximize the impact of our dollars spent.
It’s not enough to just sell. The best real estate pros run their businesses like CEOs, and part of being a good owner is knowing what’s going on with your company. Is it more work? Absolutely. Is it fun? No. But when your expenses are low, your profits are high, and all the details are under control, think about how many more people you can meet and how many more houses you can sell with all that extra money and insight.