Archive for December, 2011

So the year is ending or has already ended, depending on when you read this or your fiscal focus for December. I know everyone earning a living in Real Estate looks forward to some time off through the holidays at the end of every year. I sure do. In Craig’s office, his entire team takes a few personal days just to enjoy the holidays, the year end, and see the new one begin.

Personally I’ll be enjoying the holidays in Phoenix, away from the hustle and bustle of cold and snowy Calgary. I know what my southern friends, are thinking as they read this; “Why would anyone LEAVE the quintessential post card, Christmas setting of Canada at Christmas? Isn’t that the most beautiful place to be at this time of the year?” I know, I know.  Tourism is HUGE to this part of the world at Christmas as folks flock in for all those seasonally driven, activities. Skiing is big,Banff goes nuts, and all the winter driven things are in full swing.

I was raised here, grew up here and believe me when I tell you that I’ve done them all, countless times, skied my rear end off over Christmas, stayed all over ski country during the holidays including the Banff Springs Hotel, Panorama, Whitefish, Apex, I’ve sat out by all the camp fires, done all the hay rides in the snow, snowmobiled up in the back country of the Rocky Mountains, along with all the rest of the winter holiday things people come here for. It’s all been tremendous fun and great life-long memories have come from it. However, simply, I’m tired of shoveling snow. Been doing it for over 50 years and when we bought our home in Phoenix, it was partly for an escape in the winter, partly for our retirement (something we keep saying we’re doing soon), and partly just to have a place to go when we feel the urge to get out of town (most of the time I feel that way). I know lots of Calgarians who’ve done the same as us NOT because we don’t like living here, we just want a break and because real estate prices inArizonaare insanely low compared to what we pay here inWestern Canada.Arizonalets us enjoy about 3 times as much house for about 1/3 of the standard house price here.

Carol and I are extra excited to get away this year because we’ve decided to take and old fashioned road trip for our year end vacation toArizona. We’ve made this trip back and forth on the bike numerous times and we really enjoy the 3 days where we’re practically OFF the grid. No computers, cell phones turned off, just a ribbon of highway stretching out in front of us and not knowing what we’ll encounter. We always encounter interesting people, one of the best parts of the drive.

Part of our trip however is all about the business plan for 2012. Subconsciously, we’ve decided to work a little more in our Real Estate business in 2012, more than we did in 2011. Simply put, we’re still a relevant and very natural choice for helping folks accomplish their real estate goals plus we’re armed with a system that, essentially, lets us do as much or as little as we choose. We have the liberty of choice and enjoy the comfort of predictability using the Quantum Leap, real estate business model.

So looking at 2012 is a good exercise for right now, as 2011 draws to its end. You’re fresh off a year of business and its specifics are still fresh in your mind. You should look at more than how much cash you earned. While the end result has a financial reward you look forward to, the fact that it’s simply a by-product of all you do helps teach a valuable lesson. Improve the models’ efficiency and reduce overhead category costs and you should be able to improve your bottom line. One of the behaviors I’ve noticed over the years is how UNwilling Realtors are to acknowledge that they run a business. A business should see a measureable amount of profit – not just exist by breaking even and making the payments. Profit is a nice word and there are a few ways to increase it when you look at your business model. I alluded to them already but let’s look at some key factors to see if there’s room for thought or even improvement.

     When I look at the entire pie, how big of a slice is actually dedicated to helping me create new business opportunities?  So, first and foremost, I like to know how much money I spent on LEAD GENERATION. I just like to know that the % of my gross I’m sliding back into business has an acceptable ROI. Some of you may actually lump your referrals in there as well but I don’t. I actually look at referral business (and its negligible accompanied expense) as a separate line item. For me, referrals are just pure bonus, something that comes my way because of a relationship I’ve forged with another agent or because someone in my organization did a good job with a past client. In my entire “New Business Opportunity” category, this represents the least amount of cost for me. I DON’T spend a lot of time and money chasing people in my database. I know what you’re thinking, I should be doing more of that and perhaps you’re right, but with the efficiency of the model I use through the Quantum Leap System, new business shows up every day asking for assistance. (The subject of the value of the database has risen in priority year after year and looks to be one of our big business plan discussions on our drive)

Now I’m not saying my methods of counting the dollars are correct in terms of accepted business practice but every year I do this and I have a clear picture of how much money I need to participate in a marketing dominated, Lead Gen strategy. I can tell you today how much I spent in 2011 and how effective it was for me in terms in it being a wholesale cost and the commission generated.

Another interesting way that works for me is understanding how our “people” leverage contributes to our bottom line. One of the changes I made a few years ago was deciding to only work with the dollars that FLOWED IN to my legal corp. As such, I don’t take in either actual dollar figure or the % of commission that goes to an associate on our team. I used to do that but because it’s paid out by the broker at our office, there was no benefit in me showing it at the company level. I’ve heard many agents tell me that their team of associate agents represents their biggest expense year after year. Year after year, our agent partners are a very small sliver of my yearly pie. Based on the Canadian taxation liability picture, this is a good thing.

I also look at how much time I personally spent working in the business. For the last 5 or 6 years it’s been less and less every year and I’m OK with that. I’ve never once said I’m trying to build the biggest, highest producing team in the market anymore, in fact it would be safe to say I’m doing the opposite. Carol and I are slowing working our way out so we can enjoy our lives more and more. However, we’re not 100% retired so I need to understand my yearly commitment. For me it’s another pie slice.

Finally, I need to understand gross revenue and where it all comes from. How many buyer side sales? How many listing side sales? I simply take an acceptable number and we work backwards. If I want to have a strong 70/30 split I need to know how many transactions that represents and how much business that represents. In our market, a huge % of home don’t sell, it takes a good amount of time to get them sold even at the right price. Knowing that, I need to understand what our ongoing inventory might need to look like and how to attain that number. I need a clear picture of the buyer side interviews the girls need to do to hit the numbers we’re looking at so my job is to support that initiative. How much time will that take ME?.

Also, I look at my personal revenue. How much do I want? How much do I take, how much do I leave in the company?  I don’t pay myself in the traditional way, in fact for the past 10 years I’ve used a CRA approved profit sharing plan. It’s complicated and requires me to flow revenue through a personal trust account, but it works wonders come tax time in April. It saves me tens of thousands every year in tax liability and anyone that owns a Canadian company SHOULD be doing the same. Even those of you who think you CAN’T do this because of some obscure interpretation of your local or provincial laws can do this. If your CPA or tax lawyer doesn’t get it, get another team. Every Canadian should own their company and flow revenue through it. It’s accepted business practice and our American friends should structure their LLC the same way. If you want more information on this, be sure to send me an e-mail and I’ll point you in the right direction. We’ll do more with all this next year for sure.

Have a great holiday and a stupendous New Years. We’ll be back it in 2012…



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