How much do you make in your business? How much should you be making? Do you know how much you are making? For simplicity, we will define your net profit as your salary equivalent. This is the amount of money you earn after expenses and before taxes. It is similar to what you would earn in a job.
After reviewing over 100 financial statements of Billion Dollar Agents, we created the Billion Dollar Agent Profit Model. There are three levels of business and profits. A brokerage is usually a very poor business model with net profits of zero to 20 percent. Many top teams think they are a team operating a small brokerage business model. A team has a net profit of 15 to 40 percent. A Billion Dollar Agent business has a net profit of 40 to 60 percent.
Great News – The Secret to Increasing Your Business Profits
Despite their success, almost every single top team we have spoken to wants to increase their net profit. Imagine that. We are going to answer the following questions in determining how:
What net profit goal should I have based on my business size?
How can I easily delegate monthly accounting and financials?
How do I implement and achieve the Billion Dollar Agent Profit Model for my growing team?
Broker or Team or Billion Dollar Agent Business
Would you rather own a brokerage, a real estate team or a Billion Dollar Agent Business? If you are a Broker, do not get mad at me. If you are a top team, aspire to be a Billion Dollar Agent Business. If you are a combination of a broker and a team, then realize that you are running two businesses. Let’s walk through some of these options.
Owning a real estate brokerage is often terrible. If you asked 100 new franchise owners whether they would do it again, the vast majority would say NO, it was a bad business decision. The ones who claim it was a good decision would be lying. Let us review their financials before and after they purchased the franchise.
A brokerage is run by a broker who is usually going broke. They just do not know it. Often, they are muddying their financial waters by combining their brokerage business with their individual team. Their team production is being used to fund the losses of the brokerage. For example, we have seen many brokerages which have the team making $250,000 and the brokerage losing $100,000. The owner THINKS they are making $150,000 because they do not want to face reality. If you are running an independent brokerage, your reality depends on whether it is a brokerage of independent agents, a team within a brokerage, or some combination.
The key is to focus on net profit margins, before owner compensation or draw so you can compare apples and apples. The net profit number is close to a salary equivalent. Assume we are examining a business with $1,000,000 in GCI. Here are some basic numbers:
Broker Average - 5 Percent - The average broker makes a net profit below five percent. In recent years, the average is even lower than five percent. That would be a $50,000 profit on $1,000,000 in GCI.
Broker Good - 10 Percent - A good brokerage that is running profitably may make a ten percent net profit or $100,000.
Broker-Team Combination - 20 Percent - A business that combines a brokerage with a team may end up with a 20 percent profit margin or $200,000.
Team Low Profits - A team with poor profit management will have a 20 percent net profit. There are Billion Dollar Agents out there with $1,000,000 in GCI and only $200,000 in net profit.
Team Average - 30 Percent - The average top team is making a net profit of about 30 percent or $300,000 on $1,000,000.
Billion Dollar Agent Business - 50 Percent - Our target goal is 50 percent net profit for a Billion Dollar Agent Business. That means $500,000 net profit on $1,000,000 in GCI. This number is adjusted lower or higher based on the average sales price in your market area. This target number assumes full implementation of our Billion Dollar Agent systems either by you, Best Agent Business, or a combination.
Sound crazy? Stayed tuned. My next blog will go into detail on how it’s not crazy at all.
Like this blog? Do us a favor and “like” us on Facebook. Would you like help identifying ways you can improve your Net Profit Strategies? Reply to this blog and we can get started. For more information on how Best Agent Business can help you streamline your marketing, time management and many other aspects of your Real Estate Business, subscribe to our videos, visit us at www.bestagentbusiness.com, call (202) 297-2393, or e-mail us at: firstname.lastname@example.org.
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