How to Create a Simple Business Plan for Your Real Estate Business
Starting a real estate business? You need a business plan. Already have a real estate business? You still need a business plan.
Your business plan will play an essential role in your future success. It maps out a realistic path to what you’d like to achieve within the first year of your business and beyond.
But creating a business plan can be daunting. How do you know what you don’t know? How do plan for the future of your business when you’re new to real estate and aren’t sure what to expect?
In this guide, we’ll help you create a simple but effective business plan for your real estate business. Let’s get started.
You may be wondering, What’s the point of having a business plan in the first place? Here’s why it’s important to develop your own business plan, preferably before you hang your shingle and start work as a real estate agent:
A business plan is a map that defines the future goals for your business and gives specific directions on how you’ll get there. Without a map, you’ll often stumble around on the longer route. You may reach your business goals, but then again, you may not, especially if you don’t have a clear understanding of what those goals are in the first place.
A business plan will help you map out a path towards specific goals for your business. “Making money by the end of the year” is not a well-defined goal, and there’s no way for you to create clear directions towards that hopelessly generic goal. However, making $50,000 by the end of the year is a specific goal to work towards. You can create a path to getting there. A well-developed business plan encourages you to be specific with your goal setting.
A business plan also keeps you on track with what you’ve set out to do. You can refer back to your business plan to stay on course with your objectives.
If you’re looking for funding, such as a bank loan, you’ll definitely need a business plan. Most lenders require a business plan. Not only does it show that you’ve considered the financial needs of your real estate business, but it also shows that you have a plan for how you’ll repay the loan in the future.
Let’s now discuss how to formulate a solid business plan for your real estate business. Keep in mind that your business plan doesn’t need to be fancy or filled with legalese. It can be a simple (but specific) document, just as long as it plots out a realistic path towards future success for your business.
And just when you thought we were done with acronyms, here comes another one.
When developing your real estate business plan, think in terms of S.M.A.R.T. goals. S.M.A.R.T. stands for Specific, Measurable, Attainable, Realistic, and Timed. Every goal that you outline in your business plan should meet the above requirements. Here’s how:
Specific - What is your exact goal? Be as definitive as possible. Measurable - How will you know that you’ve met your goal? How will you track your process? Attainable - Is your goal practical and within reach? Can you attain your goal with your strength, experience and budget? Realistic - Is your goal sensible? Given your resources, is it reasonable that you’ll meet this goal? Be honest with what’s possible. Timed - How long will it take for you to reach your goal? You need to have a time frame for meeting and completing your goal.
Every goal that you target should be defined with the above criteria. Remember that you can have short term as well as long term goals in your business plan.
How will people find out about your real estate business? Your business plan should describe how you’ll market yourself as a real estate agent and begin attracting new clients. Here are a few marketing ideas to include in your business plan’s marketing section:
Include a budget in your real estate business plan. Answer the following questions:
A lot of real estate agents go into the industry thinking that their first deal is right around the corner. As a result, they don’t have enough starting capital to sustain them. In reality, it could take months before you score your first real estate deal, and you need to be prepared with enough money to keep you warm in those lean times.
In your business plan, outline how you’ll financially support yourself when you first start out. Will you work a part time job to make ends meet? Or are you able to tap on your savings to fund yourself? Detail how much you’ll need for a specific amount of time (i.e. $40,000 for 12 months) as well as how you’ll spend each dollar.
We all need money to live, and your business plan shouldn’t ignore that fact. Your business plan needs to tackle the following:
What is your realistic financial goal for your business? Keep in mind that when you first start out in real estate, it’s unlikely that you’ll earn millions of dollars in commission. You should definitely adjust your expectations and choose a healthy goal for what you may be able to accomplish. Do your research to figure out the right answer. Here’s a good place to start: What is the average real estate agent salary?
Because goals should always be S.M.A.R.T., you need to have a way to reach the monetary goal that you’ve set. How will you make your earnings? How many clients do you need to have? How much in commission should each client represent?
Although it’s unlikely that you’ll find the perfect number of clients to represent the exact amount of commision you need to hit your goal, it’s still important to include these specifics in your business plan. By knowing your target numbers, you can identify when you’re not reaching your financial goals and act accordingly. Being prepared may require that you fall back on your contingency plan (for example, pick up more hours at your part time job).
Who is your target client? First Time Seller? Relocating Buyer? Commercial? Residential? Luxury?
As a licensed agent in Massachusetts, you could do business with a variety of prospective real estate clients, but which ones do you prefer? List your preferred client in your business plan. This will help you create a more targeted marketing plan for reaching them.
Because it’s based on a series of educated guesses, your business plan is never finished. Instead, your business plan is considered a living document. It’s supposed to grow and evolve with your business.
For this reason, you must continue to review and tweak your business plan. Check it at least once a year to make sure that it still reflects your mission, goals, and target clientele.
Before you go, check out these related resources: