In today’s post we are going to cover 7 ways to cut expenses for more profits. Don’t worry, in a future post, we will also cover ways to increase revenue for more profits. Benjamin Franklin once said: “Watch the pennies and the dollars will take care of themselves.” There is a lot of truth in that statement.
As real estate agents, we have a fiduciary responsibility to our clients, whether we represent the seller, the buyer, or (where it’s legal) both. But we also have a fiduciary responsibility to our company, and many of us tend to overlook it. We focus on GCI (gross commission income) or on how many units we sell. I know agents who sell 100’s of homes a year. I know agents who bring in over a million dollars in GCI.
Do you want to know a dirty little secret?
Some of them are broke.
“How is that possible,” you ask? Well, they focus on top line revenue only (the money coming in), and they are not focusing on their expenses. They have no idea what their cost per lead is. They have no idea what their cost per transaction is. They don’t watch the pennies, they are only counting the dollars. Each dollar they bring in, may be costing them $1.10 to generate. That is why the focus of the rest of this post will be 7 ways you can cut expenses, so that we can actually increase the amount of profit your business earns. Let’s get started…
1) Lead Generation Cost Reductions
Sure, we use Zillow and Realtor.com, and some of the other companies out there to buy leads from. I am not saying you shouldn’t be using these to compliment your prospecting. But you need to watch your cost per lead. You need to analyze exactly how much each lead is costing you. When we first began breaking down the cost of leads across the different zip codes, we found the range to be shocking. Some zips were costing us $50 dollars per lead, and others were as high as $175! Now don’t let that number scare you. If that zip code is bringing in deals that are more than paying for themselves, great. However, if you are paying $175 per lead, and haven’t closed a deal in the last 3 months from that zip code, it may be time to reevaluate.
2) Continuing Education/Conferences/Trainings
I am a firm believer in industry seminars, continuing education, company conferences, etc. That being said, there are ways to be smart about attending these events when there is traveling involved. Depending on the duration of the flight, it may make sense to fly out on one day versus another to get the best airfare. Check out this article from www.airfarewatchdog.com to find out the best combination of days to book flights. Also, make sure to stay at business class hotels rather than the much more costly “luxury” or “boutique” hotels, as many times you can get a better value. Lastly, share the cost of the room with a team member or colleague, and ask for the charges to be split at checkout, so both of you may be able to write it off at tax time (check with your accountant, of course).
3) Go Paperless
“Knock, Knock.”
“Who’s there?”
“It’s me, 2016, and the world is digital now…just sayin.”
Use the cloud and technology in as many ways as possible to be as paperless as possible. Most agents, especially teams, don’t realize the hundreds, if not thousands they spend each year between paper, toner, ink, etc, not to mention maintenance on the printers. Yes, I understand, some offices still require paper files, but do your best to eliminate as much as possible. You can utilize technology on your buyer consults and listing appointments as well. For instance, you can buy this iPad and this pencil and never have to deal with paper while on an appointment ever again. You also get the added benefit of showing your clients that you are an “outside the box” type of agent who will also go above and beyond when it comes to marketing their home for a faster sale.
4) Use A Corporate Card With A Rewards Program
Does your ego get a little boost when you pull out that Amex card with your company name on it? Well, if you are paying a high annual charge for the “privilege” of being a card holder, while not getting any rewards, you should stamp “sucker” on your forehead. There are plenty of cards out there that offer you cash back or points towards rewards such as free travel. Many of these are low fees, and some don’t have any fees. Not only will you be saving money, annually, your rewards will offset some of your other expenses, so it’s a double profit pop for you.
5) Join An Association
If you are already a member of the National Association Of Realtors (NAR), are you using their benefits? Besides having plenty of information you can use for stats and content for your blogs, etc, there are a ton of benefits afforded to you including discounts on everything from health insurance to car rentals, to office supplies. You can click HERE for a full list of their benefits. Also, your membership may be tax-deductible as well, check with your accountant.
6) Utilize Virtual Assistants
You can utilize virtual assistants for just about any non-licensed activity needed these days. There are companies out there that you can hire to find, train, and coordinate the entire process for you. By doing so, you will could save money on payroll, which is great for those agents who aren’t busy enough to bring on a full time hire, or growing to a point where they are in that messy “in-between stage” where it’s too much for one person to handle, but not enough for two hires. If you want to find out more, I recommend checking out www.myoutdesk.com. We have had some great results with this company.
7) Outsource, Outsource, Outsource
This goes hand in hand with #6, and covers being able to outsource locally for people who many high transaction solo agents and teams have on their payroll. Couriers, sign hangers, photographers, showing agents come to mind here. You need to do a cost analysis to see if hiring someone full-time is more affordable. There is another factor here as well though…we are heading for a shift in the market (don’t shoot the messenger). It may not be the bubble burst of ’07-08, but it’s coming. Outsourcing personnel in a shift is one of the shrewdest things a business owner can do. Agent services demand services will be able to save you money, as well as the emotional guilt some entrepreneurs face when times get tough and expenses need to be cut. My colleague and good friend, Shawn Lowery has a new company that does exactly this type of “on demand” services. His company is www.myagentbutler.com, and if he is not in your area at the moment, contact him and find out what his timeline is for coming to you.
What other ideas do you have for cutting expenses, so you can increase profit?