Business Planning

The National Association of REALTORS produces a fantastic Field Guide to Opening a Real Estate Brokerage Firm and business planning is a major component. They have compiled resources and information for your assistance. Below is one article reprinted from REALTOR® Magazine Online with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2005 . All rights reserved.

Business Planning 101

Turn your dreams into a road map for real estate success.

BY STEFAN SWANEPOEL

Planning is the essence of winning, and a good business plan, well conceived and well executed, can guide your company to great success.

There’s fun and excitement in seeing a successful plan unfold, as dreams come true, goals are achieved, and your company takes its place among the real estate leaders.

Often, though, business planning is the last thing we want to do, because it’s sometimes a painful process. But there’s little value to your dreams if they stay only in your head. Daily actions need to echo the written word of the business plan, which in turn echoes the dream. In the daily competition for sales and markets, the race is to the company that knows what its goals are and how to achieve them. As the modern axiom goes, If you fail to plan, you plan to fail.

Success is attainable if your plan has been well thought out, written down, researched, debated, and shared with your team. Whether you’re a one-person operation, a midsize company, or a megacompany, your business plan requires continuity, dedication, focus, and follow-through.

Here’s a road map that you can refer to time and again to help guide you on the road to success. It won’t eliminate the headaches, but it can make them easier to bear. Corporate Objectives

To begin a business plan for your company, you need to map out your objectives. You need to determine where you’re going, where you’re playing, whom you’re up against, and what your role is within the bigger picture. That helps you focus more clearly, and when you begin to write your business plan, you can refer back to this document to see whether it still satisfies your objectives. Ask yourself the following six questions:

1. What type of real estate market do I want to be in?

      Residential or commercial, resale or new construction, single homes or apartments? These choices may overlap because you can participate in more than one type of market.

2. Which region, county, or area is considered my turf?

      Now that you know what market you’re in, is it the whole state? The county? A city, town, or neighborhood? Specifically identifying an area will help you later determine what you should aim for.

3. What’s the state of the market? 

      Now that you’ve pinpointed your market, you can obtain the specific details of your market: size, recent growth, number of annual sales, home prices, and average home prices. You must know your market very well.

4. Who’s the competition?

      It’s good strategy to know your competitors. Are they national brands or well-established independents? How long have they been there? Is their market share growing, constant, or declining? How aggressive or progressive are they? What are the strengths of their management?

5. What are my company’s strengths and weaknesses?

      Some business schools like referring to this exercise as the SWOT analysis (strengths, weaknesses, opportunities, and threats). It’s important to examine your company’s structure so that you can later determine how to use your strengths to your advantage. This requires an objective assessment from you, your partners, and the company as a whole. Anything less than honesty will hinder future success.

6. What must my company do to prepare for change? And is that satisfactory? 

      If you’re happy with what your company is or will remain, then internal change may not be necessary. But if you think that the changing economy or the introduction of e-commerce may change the real estate paradigm, you start to realize that without change and adjustments, you might be looking at a completely different business cycle in less than a decade. Try to imagine what the future of real estate will be like. Read as many of the industry publications as you can to glean trends and predictions. The important thing is not to try to determine whether the predictions are right or wrong but rather to widen your own thought process and perspective
    If you believe your current plan won’t withstand the forces of change, then creating a new plan to prepare your company and the future is critical. Now you can call on the research you did in answering the questions above to create your corporate objectives and structure them into a plan.

Creating the Business Plan

Here are the basic steps in creating a workable and successful plan for your real estate company.

1. Analyze your business

      Ask yourself what business you’re in. Is it sales? Is it homes and home-ownership? Or is it making dreams come true? You must know what business you’re in before you can create a mission statement. The mission statement addresses the company’s reason for existence, the reason it’s different and unique.

2. Study the environment

      Take your answers from the questions above about your market, your operating area, and your competitors. This is where you incorporate that data into your plan. You can also expand that initial research to external factors that you may have little or no control over but which may influence, or even threaten, your business. They include political, technological, and economic factors. Can your business survive if mortgage rates rise to 15 percent again or if your sales volume drops 80 percent? Think ahead.

3. Look for opportunities 

      From the first part of the SWOT analysis, go down another level and evaluate the opportunities you have today. Is the current market one that you can capitalize on? Are the socioeconomic structure, age, and income of your area in flux? Will a new development in the area change the buying patterns of the consumers, or is there an opportunity you can benefit from because of the recent closing of a long-standing dominant player in your market?

4. Be mindful of the threats 

      On to the last letter in the SWOT analysis. What could take your company in a different direction? Evaluate what could happen to severely impact your company and what your plan of action would be if, say, salaried salespeople became a reality, commissions were discounted to 1.5 percent, or homebuyers’ use of the Internet accelerated? Don’t have blinders on or ignore the obvious or even the improbable. Remember, it’s not important to agree or disagree with the trends you see; the point is to be open-minded about possible threats to your company.

5. Set your goals

      Time to decide what you wish to achieve. There are, of course, many types of goals, and you should try to include as many of them as possible, as long as you make sure they’re all quantifiable and set to specific timelines. As in our recent presidential election, this, too, is a place where “fuzzy math” doesn’t apply. Set specific goals for items such as sales volume, gross commission income, net profit, number of offices, and number of salespeople.

6. Map out action steps

      This is the most critical part of your plan. All the theorizing beforehand is of little value if you don’t map out the necessary action steps to achieve your goals. This is where the rubber meets the road. When putting the action steps together, you’ll see whether your goals are realistic and feasible. Can they, with the resources at your disposal, be achieved within the time frame you set?
      Be fair, logical, and reasonable. Budget every action; determine how many resources you have available and how many you need to obtain externally. If achieving your goals now seems impossible, go back to the beginning and revisit your research and earlier decisions. Maybe you should reduce the size of the market you intended focusing on or change the speed at which you wanted to grow. That’s not failing–it’s adjusting your plan to more realistic points. You’ll be doing this frequently, even after you’ve approved the plan.

7. Make it measurable 

    Last, you must hold yourself and your team accountable. You wrote the plan and set the goals with the intent of achieving them. So now break them into smaller, more measurable pieces and monitor the results regularly. A plan that can’t be measured is almost always destined for failure. Create small steps and measurable wins–celebrate them with the team and recharge for your next goal. Decide beforehand what measure of loss is acceptable and what isn’t. If you find in the future that goals are unrealistic, adjust them, but keep this practice infrequent and logical. Rewards must always be hard yet achievable.

Parting Thoughts

You should now have a plan. Know it, understand it, and make it a part of you. Make sure your key team members feel the same way. Build on it continuously, work on it together, and you’ll see the beginnings of a successful company. 

There’s an emotional content, too, to a successful plan. It includes the wisdom of leaving politics at the door; keeping egos in check; channeling aggressiveness outward, not inward; sharing thoughts and ideas openly with criticism; supporting your team members enthusiastically; and always remaining focused.

Stefan Swanepoel is chairman of 9keys.com and of iProperty. He has served as senior vice president of strategy for Cendant Corp. and is author of six books on real estate, the most recent being Real Estate Confronts the e-Consumer.

Reprinted from REALTOR® Magazine Online with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2005 . All rights reserved.