If you want to grow your real estate business, then you’ll need to get clear on where you want to go and how you can get there.
Research from the Harvard Business Review indicates that entrepreneurs who create formal business plans are 16% more likely to achieve viability than those who don’t. Further studies also demonstrate that business planning can accelerate a firm’s growth by 30%, and the time invested in writing a business plan can significantly enhance the likelihood of success.
In this article, we’ll guide you through the critical elements of a strong real estate business plan, helping you create a unique strategy aligned with your company goals.
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Why every agent and broker should have a real estate business plan
A real estate business plan acts as a strategic blueprint for an agent, team, or brokerage, mapping out key facets, critical milestones, company goals, and the business’s overall financial health. A plan needs a clear vision and roadmap for how the company will achieve its goals and grow within its specific market.
Additionally, general business plans are pivotal in securing capital and compelling potential investors or partners. A great business plan can attract skilled employees and top-level talent, leading to further expansion and growth.
For an agent or a broker, a real estate business plan is essential for determining your identity in the luxury market and what you can offer clients. It helps you hone in on your ideal customer and allows you to assess the financial viability of your business easily.
Your real estate business plan is a guide to your goals and a clear-cut strategy for how you can stand out from the competition, grow your business, and fulfill your overarching mission.
Real estate business plans: the basics
When constructing your real estate business plan, it’s best to keep things simple, manageable, and achievable. Focus on where you are now, where you want to go, and how you can reasonably get there.
Here are six critical elements of a straightforward real estate business plan:
- Executive summary: The executive summary serves as a brief overview of who you are, your purpose, and your goals.
- Overview and objectives: The overview and objectives section can vary somewhat based on your individual needs, but they should include your mission statement, your history, and your objectives.
- Market opportunities and competitive analysis: Your business plan should outline where market conditions are ideal for the rapid growth of a business and what your competition is already doing in that space.
- SWOT analysis: SWOT stands for Strengths, Weaknesses, Opportunities, and Threats and is a useful analytical tool for determining your strategic position.
- Marketing plan: The marketing plan identifies and details how you will reach and attract your target audience.
- Financial plan: A financial plan is a fairly straightforward snapshot of the economic health of your business.
Most business plans adhere to a timeframe of three to five years, though some are as short as one year, others as long as seven. Although everything in this article provides recommendations for a three to five-year plan, it’s worth looking beyond five years for future growth opportunities.
Creating your own real estate business plan
Now that you know the main sections of your real estate business plan, let’s dive into exactly what goes into each element.
Executive summary
A good summary is typically one to two pages (although one is optimal) and should include the following:
- Description of services
- Summary of objectives
- Brief market and competition snapshot (you’ll dive deeper into this later in your business plan)
- Capital or partnership requirements, if applicable
Your executive summary is the one part of your business plan you can recite from memory. There’s no fluff. Consider this your elevator pitch to sell your vision and convince others to join you on your mission.
Overview and objectives
Mission statement
Your mission statement is why you do what you do—the guiding principles for your business.
For example, here are two excellent real estate company mission statements:
- Compass: Our mission is to help everyone find their place in the world. Compass is building the first modern real estate platform, pairing the industry’s top talent with technology to make the search and sell experience intelligent and seamless.
- Sotheby’s Realty: Built on centuries of tradition and dedicated to innovation, the Sotheby’s International Realty brand artfully unites connoisseurs of life with their aspirations through a deeply connected global network of exceptional people.
History
Your history is just that—when you started, location, leadership, milestones, and notable services or specializations.
Objectives
Objectives are your primary goals. A common technique for establishing your goals is through the “SMART” method, ensuring your goals are Specific, Measurable, Achievable, Relevant, and Time-bound.
Objectives that might cover the course of a five-year plan include:
- Rebrand the company website in 30 days.
- Establish a social media presence in 90 days.
- Close five transactions per month in year one and double transaction volume by year three.
- Double the size of the firm by year five.
Ensure your goals are targeted and realistic within your set time frame.
More likely than not, your business will have multiple objectives simultaneously. Group them based on category and designate a team member who will be responsible for managing achievements, setting milestones, and assessing progress.
Market opportunities and competitive analysis
Understanding your market and your competition involves taking stock of the landscape’s size, demographics, demands, and trends.
Market opportunities
When determining your market opportunities in your business plan, consider the following questions:
- What is the size and stability of the market?
- Is the market currently on an upward or downward trajectory?
- What are the current demographics of the market?
- What segment of the market do I want to target?
- Is there a demand for a particular type of housing?
- Are there more sellers than buyers, or vice versa?
Also, pinpoint specific market circumstances that could significantly impact your business, like interest rate trends or local economic development. Be sure to document these insights in your plan as well.
Competitive analysis
In many business plans, competitive analysis is worthy of its own standalone section. Regardless of how you present it, devote some space to your competition and thoroughly research what they currently do in the real estate market.
Include both immediate and secondary competitors, and note if the market is primed for new competitors in the future. Also, identify the risks and opportunities when comparing your niche market and services versus others vying for similar business.
Remember to ask yourself:
- What do I offer clients that the competition does not?
- Can I stand out in this market and generate revenue?
- How can I advertise myself to showcase these differences?
SWOT analysis
Through its matrix-like formatting, you can use data-backed facts to analyze your team’s strengths, weaknesses, opportunities, and threats in a visual way. Here are some questions you can ask yourself for each section:
Strengths
- Is your brand recognizable?
- Do you have an in-house expert for each specialization within residential or commercial real estate (or both)?
- Do you have an active pipeline of new leads?
- What is your unique selling proposition (USP)?
Weaknesses
- Do you lack consistent social media or online content?
- Is your brand relatively new or unrecognizable?
- Are you missing out on lead-generation opportunities?
- Is your website engagement lacking?
Opportunities
- Has your team just branched out to a new area of real estate?
- Is market demand growing in your area?
- Have you uncovered a new source of referrals?
Threats
- Are there any new teams in your niche that offer a USP similar to yours?
- Are mortgage rates rising enough to slow down demand?
By uncovering factors in each grid of the SWOT analysis matrix, you can identify areas that need immediate attention or capitalize on specific strengths.
Marketing plan
Creating a marketing plan is an exercise in understanding your ideal client and then molding a campaign that ensures you can target those customers. Here are a few key points to outline in your marketing plan:
Demographics
- Consider your ideal client persona, including age, location, income, and profession.
Attraction
- Consider what attracts this ideal client. What are they looking for in properties? What are they avoiding?
Style
- What type of neighborhoods, amenities, or lifestyle are they seeking?
Marketing channels
- Which platforms are your ideal clients engaging with the most? Which ones do your competitors frequently utilize?
Along with these aspects, consider how to position yourself better than your competitors to attract this client. Think about the benefits you can offer and how you can showcase this with a smart real estate marketing campaign.
Financial plan
A financial framework is a crucial aspect of your real estate business plan since it provides insight into the economic health of your business. It gives you a better idea of the valuation of your business, acts as a guide for your budget, and helps you set more realistic financial goals.
Here are the elements of a financial plan that should be included:
Profit and loss statement
- This is also called an income statement or pro forma. This shows a company’s profitability (or loss) over a certain length of time.
Cash flow statement
- This statement provides an overview of your actual cash position.
Balance sheet
- A balance sheet shows where you stand regarding assets, liabilities, and equity at a specific point in time.
Operating budget
- An operating budget is a detailed view of your income and expenses, usually over 12 months.
Break-even analysis
- This outlines the revenues necessary to cover all costs and your business’s potential to be profitable.
Depending on your real estate business position or if you’re an individual broker or agent, you can simplify this area with just an operating budget and break-even analysis.
4 common mistakes agents make when creating a real estate business plan
1. Thinking the business plan needs to be perfect
Your real estate business plan will not be built overnight. You can still run a successful company while your business plan is being created. Instead of waiting to make a “perfect” business plan, follow our step-by-step guide to get started. Then, you can modify as you learn more about your client, your competition, and the trends in the market.
2. Not having someone else review your business plan
Like any other business document, having a second pair of eyes review your real estate business plan is always helpful for typos or mistakes and for any glaring questions or inconsistencies. Be open to feedback from people, both in the industry and outside it—if someone is confused by an aspect of your plan, chances are they won’t be the only one.
3. Not using the business plan to gain more clients
While your plan is useful for an overview of your business and its goals, don’t forget to use it as a guiding tool. For example, once you make your marketing plan, you’ll have a stronger idea of your ideal customer. So, be sure to use that information to create more targeted outreach efforts. This includes:
- Adjusting your marketing and advertising budget
- Creating a more targeted marketing campaign, including website, social media, and email
- Determining how to nurture non-specific outreach efforts such as referrals, SEO, and open houses
- Developing a data analytic strategy—how will you measure your marketing success and make changes if necessary?
4. Not coming back to the business plan
Your real estate business plan is not a one-and-done proposition or something to be written, tossed in a drawer, and forgotten.
Make time to periodically reevaluate your progress and see where you stand in reaching your goals. Once every 90 days is a good rule of thumb, but review more or less frequently as you see fit. And if you start hitting those goals early, take the time to make new ones.
Lastly, don’t be afraid to pivot if something isn’t working. Goals can change, so return to your business plan and modify it as your company ebbs and flows.
Luxury Presence: your real estate business plan partner
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