Drivers of profitability
The real estate industry has undergone a huge transformation in the past couple of years and that transformation has driven many real estate companies out of business and has financially strapped many others. Whether or not the market is beginning a rebound is still open to debate.
Whatever the market, the need to focus on profitability has never been more critical. With declining revenue and increasing expenses many offices are facing a pool of red ink.
In order to improve profitability we first need to understand what drives it. When asked the question, “What drives Profit” most brokers and managers reply “Profit is the end result of company dollar generated less the expenses!” While this is a good answer it does not begin to scratch the surface and identify the real drivers.
- What drives GCI?
· Agent count
· Agent productivity
· Average sales price (price point)
· Commission rate charged on sales volume
- What drives company dollar?
· Agent mix (number of experienced vs. newer agents)
· Commission plan structure
· Cost of sales – rebates, giveaways etc
- What drives expenses?
· Agents per desk
· Productivity per desk
· Operating expenses per desk
· Expenses per square footage
· Expenses per agent
· Expenses per closed side
· Expense control
· Office utilization and efficiency
- What are the drivers of the sub-categories and what impact do they have?
· Recruiting Activity
· Coaching and Training
· Listing Sold Percentage?
· Making each desk a profit center?
· Having 100% plus occupancy?
· Proper balance of staffing?
· Ancillary Services such as Mortgage, Escrow, Title etc?
These and many other factors are critical considerations when developing strategies to improve your bottom line. Understanding what drives profit and developing strategies around those drivers is critical in today's economy.
Shandrew and Associates can analyze your company and help you identify which drivers you need to work on and then help you track your performance as you travel the road to profitability.