After a rollercoaster couple of months, the real estate sector is now looking to get back to business as usual. But like it or not, the playing field has shifted markedly since the beginning of the year, and agencies large and small are being forced to re-evaluate, reconsider, and reposition.
To assist, we’ve assembled some of the top business tips put forward by your favourite industry experts over the past year, and right about now, many of them are more relevant than ever.
What opportunities are you missing?
In May 2019, Eddie Cetin offered this sage advice on identifying missed opportunities. Noting challenging conditions often forced businesses to streamline and cut costs, he urged real estate leaders to shed the silo approach and look at their business as a whole, examining the following four areas:
- Missed sales opportunities
How many of your rental properties end up on the market with another agency? Why does this happen? How many of your sales listings could be purchased by an eager investor who is a current landlord?
- Missed leasing opportunities
How many of your sales listings are sold to investors? What proportion of these are you then gaining as a landlord for ongoing property management services?
- Not tracking your client for life metrics
Are you monitoring opportunities and setting targets for keeping clients for life? What operational tasks should be implemented to help achieve these goals?
- Poor client experiences
How often does your sales or property management department deliver a poor client experience that impacts your ability to list that property in the future?
Read Eddie’s full article here
Know your break-even
In good times and bad, there’s one number every business should know, according to businessDEPOT managing director John Knight – your break-even.
“The breakeven point can be defined as the level of earnings for a business that results in zero net profit, or when you don’t make a profit or a loss,” he reflects.
Understanding your break-even allows you to:
- Understand the drivers of profitability
When you understand the drivers of your business better, you make better business decisions.
- Sanity check
This is the level of performance required from the business. For example, how many sales do I need to pay the bills.
- Remove costs
Focus on removing costs that don’t add value to your business and reduce the risk of your business by lowering your break-even point.
“If you are worried about where to focus in your business right now, start calculating your break-even. You can then focus on reducing the risk of not making that number through lowering where your break-even point sits.”
Read John’s full article here
When sales volumes are low
No matter what the market, there are always things you can do to improve business profitability, according to accountant Chris Mercer. Here is a brief recap of his top five actions to focus on when sales volumes are low:
- Cash flow management
Cash is king. A lot of business owners mistake costs with cash and this is a big error. Knowing how to utilise and protect cash flow in difficult times is vital to ensure you can make your way through a quiet income period.
- Reducing excess capacity costs
There are two types of costs in a business: Costs that are a percentage of generating income, and costs that support the transactional volume and capacity of your business, such as rent. Where you once needed two offices, experiencing a market downturn is a good time, unless you felt the market was likely to change quickly, to consider shutting an office and coming back under one roof.
- Review existing supplier fees/contracts
Many businesses have subscriptions and ongoing, long-term relationships where there has not been a renegotiation of standard terms in a long time. A low-income environment presents a good opportunity to examine reviewing terms with your major suppliers and look at whether all of your subscriptions are still required.
- Look at staffing
In real estate, staffing represents 70 per cent of the total cost to the business as personal services generate the income. Where people who are income producers are no longer bringing in more money than they are paid, their continued employment should be reconsidered.
Often real estate businesses build up a support team and, as loyal as they are, and as much as that works in times of plenty, you may be over supported. There are two ways to address this: Reduce the capacity of your in-house support, and outsource the solution and reduce the amount of time required.
- Examine refinancing facilities
Increasing your debt facilities in the current bank environment is difficult following the Banking Royal Commission. However, where a business has capacity on its balance sheet, and solid historical and current performance, they can negotiate a facility, such as an overdraft.
You can read Chris’s full article here