Know the Past to Manage Your Future:
Keys to A Strong Business Plan
BY: Dan Gramann, HFI Consulting
Looking at your 2014 business plan, are you on track to hit your goals? Did you write a business plan? Did you just write one to write one? It’s almost time to have your 2015 business plan ready to roll, so let’s talk about how to write one with purpose.
Vision, Goals, Metrics and Forecasting
As a coach in the realty world, I see common themes where entrepreneurs succeed and fail. Common themes of success include:
- Determination (fight to win)
- Persistence
- Hard work (working as many hours as it takes to succeed)
- Following the roadmap of your plan to achieve results
There are many people in sales who feel that it is a bit of skill and a lot of luck. I love running into these entrepreneurs because when you help them see the reality of how they can plan and control their own “destiny”‒ the sky becomes the limit. Many times this starts with a strong business plan.
Here are four keys to a strong business plan:<?h3>
1. Have purpose (Vision)
Why are you doing this? How is this important to your future and to those you are serving? What do you want to feel through your work? How does it align with your needs and life goals? Many people just work to work, but when you fully understand your “why” so you can perform at a whole new level.
2. Know the hard facts (Break down your metrics)
Take the time to fully understand how every step of your business impacts the next. You get a lead, you convert it to a prospect, the prospect signs and becomes your client. Then, this turns into income when they purchase/sell/lease a property.
Key metrics to evaluate include:
Sales
If your average sale was $425,000 in 2014 and you want to earn $95,000 as an income in 2015 – Take your commission into account and divide your salary goal by that amount to figure how much in sales you will need to earn.
Average lead time
For example, look at how many leads you had in March that closed in May, and plan to hit that number or higher to achieve the income you want in May.
Ratio of leads to a contract
If you averaged five leads to one contract and you need nine sales to reach your income goal – multiply 9 by five to figure you will need 45 leads.
Break down each number to fully understand the trends for taking a lead to a prospect to a signed contract. When you know your numbers, you know “The How” to hit your goals. It also allows you to discover your bottleneck (where you are lacking in your sales skills). Some people are excellent on the phones to get a lead to the next stage of showings, but they might not be great at closing the deal on the property and helping them make a decision. Identify your weaknesses in each step of your sales process to open new opportunities.
3. Forecasting
Take the metrics from previous years to understand the peaks and valleys of your individual business so that you can trend out your own business. If this is your first year or no data can be analyzed, you should seek industry metrics to start and then begin tracking your own data. Don’t guess, and don’t think that business is “luck.” Take control by truly analyzing your history and the industry’s history, in your specific location, to make sure you know how your business should trend in years to come. If your previous years have shown that 12 percent of your buyer leads come in May, and only 2 percent come in January, it would be wise to create a strategy and goals around these common trends.
It is also important to pay attention to your “lead time” or how long it takes for a new lead to convert into a sale for your business. This allows you to set goals and trends properly for your business plan. If 12 percent of leads come in May and your average “lead time” takes three months for the sales to happen, then May leads will likely be reflected in July or August.
Pay attention to the facts and build your plan to be a true roadmap for you to follow and believe in. This is not exact science, but it is far more accurate than tossing a coin and creating a business plan based on what you have heard, or what you “think” sounds right.
4. Set Smart Goals
What goals are you planning to hit today, this week, this month, this quarter and this year? How do you measure success? Using your vision, the breakdown of your metrics and accurate forecasting it is time to set goals. These goals should align with your vision, and be broken down in metrics using your history to achieve accurate forecasting.
You take the time to create a plan. December 2014 comes and goes. Now, you are looking forward to 2015 as you have a roadmap for the future of your business.
Now for the most important part: Make it happen. This plan is nothing without accountability. Look at your plan at the beginning of every quarter, month, and week. Set daily goals. Live it, breathe it and own your business plan.
Dan Gramann is a consultant with HFI Consulting. HFI offers coaching and consulting for real estate professionals. See
Brewyourskill.com for information on upcoming events.
