Budget is Not a 4-Letter Word. Matt Fetick

Transcription

1 Budget is Not a 4-Letter Word Matt Fetick

2 Matt Fetick Kennett Square, Pennsylvania Mega Agent, OP, MC Investor KWU Master Faculty 2

3 Tell Keller Williams University what you think! Simply enter into any mobile device to complete your evaluation for this session. 3

4 Learn to love the MREA budget model and plan your way to a successful 2015! 4

5 4 MREA* Models: Economic: The money you ll make Lead Generation: How you ll make it Budget: How you ll spend it Organization: Who will help you *The Millionaire Real Estate Agent 5

6 Everyday Questions About the Organization Model (Leverage/Team) Am I ready for an assistant? How much can I pay an assistant? How much can I pay a buyer agent? 6

7 Everyday Questions About the Lead Generation Model Should I buy that new shiny thingy? How much can I spend on farming? What can I spend on a 33 Touch? 7

8 ANSWER What does your budget say? The budget model answers all of these questions. helps you determine how much money you can spend on specific expenses. helps you to track the source of your income. 8

9 The Budget Model Based on using a Profit and Loss (P&L) statement also know as an Income Statement. A P&L tracks all of your income and expenses. 9

10 INCOME Tracks the GCI, not what you take home The total amount of commission paid at closing for your side of the transaction 10

11 INCOME EXAMPLE: You represent the buyer who purchases a $300,000 home. The listing agent is offering 3% buyer agent commission. At closing, the total commission paid is $9,000 This is the total commission, regardless of splits, referrals, etc. 11

12 P & L Income Section 12 Income Residential Income Listing Income $ Sales Income $ Referral Income $ Leasing Income $ Total Residential Income $ Commercial Income Listing Income $ Sales Income $ Referral Income $ Leasing Income $ Total Commercial Income $ Other Real Estate Income $ Total Income (GCI) $

13 Cost of Sales Track the costs directly associated with the closing of a transaction. Examples Local cap Royalty Referral fees Team commissions 13

14 Example 1: The gross commission earned at closing is $9,000. You have not yet capped. Cost of Sale: GCI: $9,000 - Local MC Cap (30%) $1800 KWRI Royalty (6%) $540 The Cost of Sale is $1800 in Commissions due to company and $540 in Royalty. 14

15 Example 2: The gross commission earned at closing is $9,000. You have capped and the client came as a referral at 25%. Cost of sale: GCI: $9,000 - Referral fee (25%) $2250 The cost of sale is $

16 Example 3: The gross commission earned at closing is $9,000. You have capped and you are paying a buyer agent 40% for working with the client. Cost of sale: GCI: $9,000 Buyer agent (40%): $3600 The cost of sale is $

17 P&L Income and Cost of Sale Income Residential Income Listing Income Sales Income Referral Income Leasing Income Total Residential Income Commercial Income Listing Income Sales Income Referral Income Leasing Income Total Commercial Income Other Real Estate Income Total Income (GCI) More detail of Income and Cost of Sales. Cost of Sales Commissions Paid Out Commissions to Office Royalties Paid Listing COS Buyer COS Other - Commissions Paid Out Total Commissions Paid Out Other - COS 17 Total Cost of Sales Gross Profit

18 Question: Why should we track the Cost of Sale and not just our take-home income? 18

19 Answer It is important to know what it COSTS you to be in business. These are the fixed expenses you cannot control, except for renegotiating the costs. 19

20 Answer Most agents don t truly know what it costs them to be in business with both the broker and team members. Agents in companies that don t have capped commissions but perhaps an initial higher fixed commission may think that being on an 85/15 split with no cap, is better than being on a 70/30 split with a cap. By tracking the cost of sale, agents have a better financial picture of what it costs them to be in business with their Broker and team members. 20

21 Operating Expenses: Everyday costs of your business that can fluctuate and can quickly get out of control. Office rent Copies Licensing Signs Lockboxes Insurance Salaries Marketing expenses Training Meals and more 21

22 P&L Expenses /MREA Budget 22

23 Expenses Salaries/Benefits Salaries Management Administration Other - Salaries Total Salaries Benefits/Processing Benefits Payroll Processing Payroll Taxes Other - Benefits/Processing Total Benefits/Processing Contract Labor Total Salaries/Benefits Lead Generation Advertising *62300 Print/Direct Mail Internet Lead Generation Entertainment/Other *62700 Other - Lead Generation Total Lead Generation Occupancy Rent/Desk Fees Utilities Repair/Maintenance Depreciation of Capital Improvements Other - Occupancy Total Occupancy Communication/Technology Telephone Services Answering Services Internet Service Provider/Hosting Charges/ IVR Service Website Creation Website Maintenance *64800 Other - Communication/Technology Total Communication/Technology Education/Dues Education/Training Coaching/Consulting Books/Audio-Visual/Subscriptions Dues Other - Education/Dues Total Education/Dues Automobile Mileage or Interest Portion of Payment or Percentage of Lease Depreciation Gas Maintenance Other - Automobile Total Automobile Equipment/Furnishings Rental Depreciation of Capitalized Equipment/Furnishings Repair/Maintenance Property Tax on Equipment/Furnishings Other - Equipment/Furnishings Total Equipment/Furnishings Supplies/Office Expenses Banking Charges Office Supplies (consumables) Office Operations Other - Supplies/Office Expenses Total Supplies/Office Expenses Insurance Automobile Error & Omissions Property/Liability Other - Insurance Total Insurance Professional Services Accounting & Tax Preparation Legal Other - Professional Services Total Professional Services Other Expenses Charitable Contributions Loan/Interest Payment Office Transaction Fees Paid State Sales/Franchise Taxes Other - Other Expenses Total Other Expenses Total Expenses

24 Examples: Where would you account for purchasing a listing sign? Lead Generation Advertising Print/Direct Mail Internet Lead Generation Entertainment/Other Other - Lead Generation Total Lead Generation 24

25 Examples: Where would you account for the cost associated with renewing your license? Education/Dues Education/Training Coaching/Consulting Books/Audio- Visual/Subscriptions Dues Other - Education/Dues Total Education/Dues 25

26 Examples: Where would you account for the cost associated with your assistant? Salaries/Benefits Salaries Management Administration Other - Salaries Total Salaries Benefits/Processing Benefits Payroll Processing Payroll Taxes Other - Benefits/Processing Total Benefits/Processing Contract Labor Total Salaries/Benefits

27 Examples: Where would you account for the registration cost associated with Family Reunion? Education/Dues Education/Training Coaching/Consulting Books/Audio-Visual/Subscriptions Dues Other - Education/Dues Total Education/Dues 27

28 Examples: Where would you account for the meals and hotels associated with Family Reunion? Education/Dues Education/Training Coaching/Consulting Books/Audio-Visual/Subscriptions Dues Other - Education/Dues Total Education/Dues 28

29 How Much You Make Income Cost of Sale Expenses = Net Profit $$$ 29

30 What Are the Guidelines? Know how to read a P&L Track income and expenses Now what are the guidelines? 30

31 MREA Guidelines: Cost of Sale: 30% Expenses: 30% Profit: 40% As a business owner you should be able to net 40% of the GCI for owning the business. Keep in mind, that when you are performing in a role, you are getting that income as well. 31

32 Example 1 You Are a Solo Agent You earn: Buyer Agent Income Listing Agent Income Admin Salary + Profit 32

33 Example 2 You Have an Assistant You earn: Buyer Agent Income Listing Agent Income + Profit 33

34 Example 3 You Have an Assistant and a Buyer Agent You earn: Listing Agent Income + Profit 34

35 Example 4 You have a 7th Level Business You earn: 40% Net Profits 35

36 Note COS how to limit it to 30% with team members earning more than 30% COS is capped and goes away as the business increases in volume Your local company cap and royalty will be zero for each transaction after you ve capped so those dollars can be assigned over to the team member. 36

37 Setting Up Your Budget 1. Begin with a blank P&L. Download the MREA P&L from KellerInk.com 2. Fill in the income amount (how much you ll make.) 30% for Cost of Sale 30% for Expenses 3. Use MS Excel it s not hard! 37

38 Monthly Tracking Track your P&L Use software (Quickbooks upload your budget into its P&L.) Track your Budget vs. Actual Your actual income and expenses against your budget 38

39 Thank You! Please complete an evaluation for this session. Use any mobile device! To download a free copy of this presentation: