If you hope to grow your real estate business, it helps to know where you want to go.
According to research from the Harvard Business Review, “it pays to plan.” Based on their reporting, entrepreneurs who develop formal business plans were 16% more likely to achieve viability versus those who didn’t. Another study suggests business planning helps a firm grow 30% faster.
Additional data even suggests that how much time you commit to writing your business plan and when you write it can increase the likelihood of your business’ success.
Those reports—and many more like them—emphasize that writing a business plan is worthwhile. It can guide you and your team toward (and beyond) your real estate goals.
Let’s take a look at what a business plan is, why you need one, and the necessary elements to lay the foundation of your real estate business for the next 10 years.
What is a Real Estate Business Plan?
A business plan is a strategy outlining the major points of a business and how that business will grow and succeed in the marketplace—in our case, residential real estate.
The most common analogy is that of a map. A business plan lays out your road to success, including critical waypoints or milestones along the way and how you intend to accomplish them.
Why Do You Need a Business Plan?
In terms of real estate, business plans provide a clear outline of who you are and what you bring to the table, the foundation for your business, and how you plan to build upon that foundation.
Business plans can serve any number of purposes. They’re often used to secure capital or sources of financing, compel potential investors or partners to join or invest in your firm, or help solidify joint ventures or partnerships. A great business plan can even attract skilled employees and top-level talent.
Understand the Real Estate Professional You Want to Be
As a real estate professional, the services you provide might be fairly obvious. Whether you’re an individual agent, broker, or part of a larger team, identifying strengths, weaknesses, and the intangibles that set you apart directs your planning. Taking stock of who you are now and what you hope to achieve will allow you to better dissect and outline your future career.
Business Plan Timeframe
It’s worth noting that most business plans adhere to a timeframe of three to five years. 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, its worth looking beyond your short- to mid-term goals.
As an agent, for a 10-year plan, consider such growth initiatives as joining a brokerage, partnering with other agents, or earning your broker’s license. If you’re already at the broker level, you might be ready to start your own brokerage or expand a small operation.
Regardless of your starting point and how big your ambitions are, ensure your business plan is objective and honest and includes reasonable and attainable goals.
Elements of a Real Estate Business Plan
A business plan can be narrow or broad, succinct or highly detailed. When constructing your business plan through the lens of real estate, particularly as an individual agent, it’s best to keep things simple, manageable, and achievable. Focus on where you are now, where you want to go, and how to get there.
Let’s review the individual elements of a simple business plan and what each section should include.
The executive summary serves as a brief overview of who you are, you and your firm’s purpose, and your goals. 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 snapshot
- * Overview of market opportunities and competition
- * 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. This is your elevator pitch to sell your vision and convince others to join you on your mission.
Overview and Objectives
The overview and objectives section can vary somewhat based on your individual needs, but they should include three critical elements:
- 1. Your mission statement
- 2. Your history
- 3. Your objectives
Your mission statement is why you do what you do, the guiding principle, or principals for your business. If you’re looking for inspiration, two excellent examples from the world of real estate include:
- 1. 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.
- 2. 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.
Your history is just that—when you started, location, leadership, milestones, and any notable services or specializations.
Objectives are your primary stated 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 10-year plan include:
➣ Rebrand company website in 30 days.
➣ Establish social media presence in 90 days.
➣ Close five transactions per month in year one, and double transaction volume by year three.
➣ Double size of firm by year five.
➣ Expand operations to include two additional offices by year seven.
➣ Attain broker license and open independent brokerage within a decade
Again, these are just an example. Make sure your goals are targeted and realistic to achieve within your set timeframe.
Market Opportunities and Competitive Analysis
The best business plans outline where market conditions are ideal for the rapid growth of a business. This involves taking stock of the market’s demographics and existing opportunities, both current and future. Points to consider:
➣ Size and stability of the market. Is it on an upward trajectory? Downward spiral?
➣ What segment of the market will I target? What demographics make up the market?
➣ Is there a demand for a particular type of housing? Is there a type of homebuyer (first-time, luxury, young professional with children) that’s more prevalent than others?
➣ Are there more sellers than buyers? Is the opposite true?
➣ What do I offer clients that the competition does not? Can I stand out in this market and generate revenue?
Also, pinpoint specific market changes or circumstances that could significantly impact your business and others in your segment. For example, the soon-to-be home of Amazon’s HQ2 in Northern Virginia is slated to add 25,000 jobs over the next 10 years. That type of scenario, and others like it, carry enormous ramifications for the respective market. Make sure you document them.
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. 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 present when comparing your service and niche market versus other vying for the same or similar business.
The marketing plan identifies and details how you will reach and attract your target market. Effectively, it’s an exercise in the type of real estate client your services will appeal to most and having a plan that ensures they take notice. Key points to outline:
➣ Demographics of your ideal client, including age, location, income, and profession.
➣ What attracts this client? Turns them off?
➣ What type of neighborhoods, amenities, or lifestyle are they seeking?
➣ Which marketing and advertising channels are they most receptive to? Which ones do your competitors frequent?
➣ Are you positioned better than your competitors to attract this client?
➣ What are the benefits your real services offer to attract your ideal client?
From there, you can build a reasonably detailed profile of your ideal client—buyers and sellers drawn to your real estate services. After that, your advertising and outreach efforts will take shape and should feature:
➣ Marketing and advertising budget
➣ Planned marketing channels
➣ Digital footprint, including website, social media, or digital outreach marketing (such as email)
➣ Plans to nurture non-specific outreach efforts such as referrals, SEO, open houses, etc.
➣ How will you measure your marketing success? How will you address changes to your strategy if necessary?
➣ An addition to attracting clients, how will you market your business as a whole?
It doesn’t hurt to include marketing materials in your plan if you already have them. Items like brochures, print ads, website descriptions or screenshots, or advertising contracts are worthy of inclusion.
A financial plan is a fairly straightforward snapshot of the economic health of your business. It should feature basic elements such as:
• Profit and loss statement: also called income statement or pro forma, this shows a company’s profitability (or loss) over a certain length of time.
• Cash flow statement: an overview of your actual cash position.
• Balance sheet: where you stand regarding assets, liabilities, and equity at a specific point in time.
• Operating budget: detail of your income and expenses, usually over 12 months.
• Break-even analysis: outlines the revenues necessary to cover all costs and your business’ 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.
Finally, it’s critical to understand that your 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 feel free to be more or less frequent as necessary.
If you find yourself behind schedule, don’t be afraid to make strategic decisions to correct course and get you and your real estate career goals back on track. And if you start hitting those goals early, it might be time to make some new ones.