Business LeadershipElite Agent

Strategies to reduce your break even point: John Knight

Simply knowing your business’ breakeven point doesn’t guarantee success. John Knight explains how to turn knowing the numbers into tangible gains.

In the last month’s article, we talked about the one number every business owner needs to know – their breakeven point.

Once you know your breakeven point, what do you do about it?

Irrespective of how your specific market is travelling, the lower your breakeven point, the lower the risk in your business. The lower the risk in your business, the stronger your business and, in tough times, the strong get stronger.

Focusing on reducing your breakeven point is a great way to increase the strength of your business. Here are some strategies to reduce your breakeven point.

1 Cut costs
Let’s begin with the obvious; reviewing your costs and cutting where you can is a great place to start. I encourage everyone to approach any cost-cutting with questioning value rather than cost. Yes, sometimes you need to aggressively reduce commitments, but let’s not over-react. Here’s a list of some of the costs I see principals focus their attention on:

  • Office premises (often little immediate impact though)
  • Sales PAs and assistants (are they proving valuable to the agent and/or office?)
  • Retainer-based team members (that are not performing)
  • Unused technology subscriptions
  • Unfunded vendor advertising (recover from the vendor or the agent)
  • Office support staff (usually reception and accounts are the first to be questioned)

2 Principal sales
Selling more properties can solve a lot of problems. The one person who should be more motivated than anyone else is you, the principal.

Often, I see this industry frown upon a strategy that focuses on the principal selling but, if you want a quick fix, a principal getting out there and selling again has the biggest and fastest impact on risk and profitability.

It may not be a long-term strategy for everyone, but it can be a great stepping stone.

3 Invest in culture
If times are already tough, the last thing you want is instability in the team. Invest in your staff and culture as a way to improve retention.

It may seem counter-intuitive, but now is the time to increase the time, and potentially money, you invest in culture rather than the alternative.

4 Buy a rent roll
If you can add a rent roll that will produce incremental profits from day one, it will reduce your breakeven point and increase the overall stability of your business.

Yes, you need to allow for principal debt repayments, but often we have latent capacity in our business that can be used to service a new rent roll without material increases in costs.

Any such acquisition should not be a stretch though, so do your numbers and you might be surprised by the impact the purchase can have.

5 Recruit based on target staff mix
One of the things in real estate businesses that gets little attention is staff mix – the number of agents who perform at different levels within your business.

Don’t underestimate how incredibly important those agents that sell one property per month are. Don’t only recruit new guerrillas for the office; work out what mix of staff would be best for your profitability and recruit with that in mind.

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