This post was last updated March 24, 2022.
As we know, real estate has been a wild ride over the past couple of years. Many real estate agents are doing better than ever. Congrats! However, with that financial success often comes expense creep, which may leave you in a worse off position than you were before if you’re not careful.
I was recently talking with a few fellow business owners, and they are experiencing this first-hand. They had record-breaking years in their businesses, and yet, are starting to feel financially strapped. What gives?
A couple of things tend to happen. As your business income grows, you begin to spend more on the business and in your personal life. At the office, you may be paying less attention to the catering budget for a client event here or the new lead generation platform there.
Like many business owners, you may have had to hire additional staff to support your booming business. With that came added employer expenses and higher than usual salaries due to the employment market we’re in.
In addition, you may have begun living on the edge of your means in your personal life — upgrading your car, adding on an additional four days to your vacation, or hiring a private chef. Why not? Your business is doing well, and you should enjoy it, right?
Well, kind of. If you and your business can support these increased expenses, then, by all means, go for it. But if you’re starting to feel even a little bit of stress over your financials, it’s time to take a step back and evaluate your expenses.
The market isn’t going to stay this way forever. Inventory remains low and the market will eventually shift. It takes longer to find your buyers a home and longer to secure listings to sell. As buyers get frustrated and take a step back and political and economic factors contribute to instability, your business may take a hit.
Because your expenses are up, it’s going to take more volume just to cover your overhead to break even. In fact, while your business may be doing well, your profit margin may not have moved or it may have even gone backward if your expenses are up significantly.
The good news? You can get ahead of it now by regularly reviewing your expenses and making some tough decisions about what you really need for your life and business to succeed.
Set aside time to review your financial picture
If you haven’t reviewed your business or personal financials in a while, you may need to set aside a full day. Do it. It’s worth it.
You’ll likely need to check with your operations team or Director of Sales, if you’re a team leader, or with your assistant on some of the expenses to confirm if you’re even still using them or if you’re getting a return on the investment.
You may need to downgrade various software or cancel it altogether. Take a look at all of your lead generation platforms. Did you sign up for a few free lead generation trials that you are now being charged monthly, but that you don’t actually use?
Where is your marketing budget being spent? Are you getting an ROI on social media graphics and videos or would that money be better spent on an Inside Sales Agent?
Each item may seem small, but every little bit helps. Question everything. Better to scale back to the items that are truly impacting your business. You can always add more later.
Make monthly financial review a part of your schedule
Once you’ve done your initial recalibration, set aside at least half a day on your calendar every month to do this exercise. You may only find $50 here or there to cut, but every dollar you save increases your profit margin.
Once you have your business financials in order, turn your attention to your personal expenses. It’s easy to allow luxuries to become necessities, but that’s a dangerous game to play.
Let me repeat that, luxury items will become a necessity if you are not careful! Before long, you’ll be stuck in the trap of always needing more out of your business to support your lifestyle, instead of having your business truly work for you.
For the long-term success of your business and personal financials, it’s wise to live below your means and constantly evaluate your expenses. So, take a look at what you’re working with.
Are there places in your personal life where you can eliminate or cut expenses? Subscription services and various memberships are always a good place to start. Are you really using them? Do you need to be using them?
Can you Door Dash twice a week instead of every night? Can you cut back on your housecleaner from weekly to bi-monthly and enlist your kids to help with the cleaning (that’s what we did!)?
Are you really using your gym membership or have you switched to Tonal workouts at home? Heck, you can even go big and trade your vehicle for one with a smaller monthly payment or move into a less expensive home.
Again, most of these small changes may not feel like much. However, it’s more about getting into the habit of expense management and making conscious financial decisions that truly bring more joy and fulfillment into your life versus spending mindlessly, just because you can.
Now that you’ve completed this financial review, what did you find? What did you learn? How does it feel?
The key to good financial management for yourself and your business is being intentional and proactive. Don’t wait for the market to shift before you evaluate your spending and lower your expenses. Get ahead of the game now and you’ll be having exceptional years in real estate for many years to come.
Adam Hergenrother is the founder and CEO of Livian, the author of The Founder & The Force Multiplier, and the host of the podcast, Business Meets Spirituality. Learn more about Adam’s companies and culture here.
