Busines Plan Real Estate Agent

Real Estate Agent Business Plan

Threats • Competition With two classes, and high school diploma, and age limit, anyone can become a real estate agent. These minimal criteria are what separate Me Realty from the competition. This is a threat because every newbie that sells two or three homes one year and quits, is taking two or three sales away from Me Realty. As of January 2005, there were over one million licensed REALTORS registered with the National Association of Realtors. This national association promotes real estate as a career, further increasing the likelihood of increased competition. •

Government Government involvement with interest rates, regulations governing real estate transactions, and involvement with who can sell real estate effects the entire industry. Interest rate manipulation can increase or decrease the demand for real estate financing. Regulations governing real estate transactions will require continuing education and knowledge to properly ensure compliance. The continued government involvement will increase the time needed for education, reducing the time devoted to income generating activities. Lastly, government involvement with control who can sell real estate will have a large impact on competition. If the government continues to allow financial institutions and banks access to the real estate market, what will stop insurance companies and retail companies (Wal-Mart, Target, etc.) from entering real estate sales.

•

Lower Commission Competitive forces may create downward pressure on sales commissions. The competitive nature of real estate and ease of access to the industry will decrease the commission rate on homes. This can only be combated with direct inquiry and sales finesse. Customers/clients will work with an individual who is providing added value and the perceived increased value that experience, knowledge, and confidence provide. The downward pressure will also increase the number of sales needed to reach financial goals.

Other potential threats: salaried salespeople become a reality, discounted commissions to 1.5 percent, and acceleration of homebuyers' use of the Internet.

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Company Analysis Name Me Realty, LLC is a one-person real estate company based in Metropolitan, State. The name Me Realty, LLC was chosen because it describes the business and brand. Me Realty is building brand recognition for long-term client satisfaction. Mission The objectives for the first three years of operation include: To create a real estate company whose primary goal is to exceed customer's expectations. To increase the number of clients served by at least 30% per year through superior performance and word-of-mouth referrals. To satisfy client’s real estate needs and wants profitably. To develop a sustainable real estate business that generates value for customers. To uphold the ethical codes set forth by the State Real Estate Commission. Company History The principal, Gadda Mooga, has a BS-Marketing from the State University and an MBA from University of State. Ms. Mooga has over five-years experience in retail sales, ascending to Department Manager at Retail Store, a small pet store. As Department Manager, Ms. Mooga was responsible for customer service, inventory orders, and selling pet supplies. This experience has taught Ms. Mooga how to overcome customer objections, different closing methods, and how to manage multiple tasks. These skills have built an excellent foundation for a successful career in real estate. Current Situation Market Situation Real estate has experienced three years of unprecedented growth and success. Fueled by historically low interest rates, new and existing home sales have exceeded prior year’s sales records. Various economists predict a real estate bubble, which will effect home values and real estate sales. The bubble burst theory is highly speculative and one that most real estate professionals are cognizant of but nothing to be alarmed. Historically, rising interest rates have adversely effected home sales by reducing the number of individuals buying and selling homes. Individuals will always need basic shelter and homes satisfy that need. According to the Multiple Listing Service, the market Me Realty, LLC will be competing had 4,705 sold residential units in the last six months, with 1,776 currently pending. This is a very active market and one that can sustain Me Realty, LLC’s participation. Currently the market has over 3,635 active residential listings, or 7.75 months of supply, with an average 96 days on the market. This is higher than the historical sold days on market of 51.

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made in sales volume, gross commission income, net commission percent earned and total deals. These last goals will be used to measure and adjust the assumptions already discussed. Goal # Sales Volume $3,900,000 Gross Commission Income $75,000 Net Commission Percent Earned 2.8% Total Deals 26 Legal Form of Ownership Me Realty, LLC is organized as a limited liability company that offers more protection than a sole proprietorship. Ms. Mooga’s rental properties are also under the LLC designation, further insulating the principal from legal issues. Resources/Technology/Development When Is a Real Estate Agent a Realtor? Me Realty, LLC is a REALTOR as Gadda Mooga is a member of the National Association of Realtors, the world's largest professional association. The term Realtor is a registered collective membership mark that identifies a real estate professional who is a member of the National Association of Realtors and subscribes to its strict Code of Ethics. Founded in 1908, NAR has grown from its original nucleus of 120, to over 1,000,000 members today. NAR is composed of Realtors who are involved in residential and commercial real estate as brokers, salespeople, property managers, appraisers, counselors and others who are engaged in all aspects of the real estate industry. Members belong to one or more of 1,700 local associations/boards and 54 state and territory associations of Realtors and can join one of our many institutes, societies and councils. Additionally, NAR offers members the opportunity to be active in our appraisal and international real estate specialty sections. Realtors are pledged to a strict Code of Ethics and Standards of Practice. Working for America's property owners, the National Association of Realtors provides a facility for professional development, research and exchange of information among its members. Professional Development Me Realty understands that to be a professional requires continual growth and improvement. Much like corporations and their quality and continuous improvement initiatives, Me Realty has defined a plan that combines training, real estate course work, and customer feedback. Training Real Estate Courses Sales Training Customer Feedback

Improve Knowledge Improve Skills

Increased Customer Satisfaction Increased Sales

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•

Audience. This is the specific target market in a particular segment or geographic area. o

Me Realty will concentrate on the Meadowstream and Elk Scent neighborhoods

o

Me Realty will work the For Sale By Owner web sites.

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Differentiation. This is setting the company apart from the competition and offering a unique value-added service. Me Realty hasn’t determined this, but will answer the following questions; how will Me Realty approach sales that will set them apart from others in the market and whom will they appeal to.

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Media. This is the communication method used to reach the target audience.

•

o

Print advertising; brochures, business cards, and real estate magazine

o

Company web site and broker web site.

o

Community involvement in the Meadowstream and Elk Scent neighborhoods

Action plan and schedule. This is the schedule of when each step will occur. This is the to-do list that will make the marketing plan successful and achieve the results. Below is a list of tactics Me Realty will use to reach the target market.

March -- spring greeting post-card/letter with flower seeds, to family and friends reminding them that Me Realty sells real estate. This will give them a reminder prior to the busy spring/summer sales months. The reminder will place Me Realty’s name in their evoke set and instant recall before they sell, buy or refer an acquaintance. July -- sponsor a 4th of July neighborhood (Meadowstream & Elk Scent) with flags. Fall/Autumn - distribute yard waste bags with Me Realty’s logo to former clients, friends and family. December -- Holiday cards to former clients, customers, friends, and family •

Budget. Now that the marketing plan is in place, it needs fuel to move, that’s the budget’s role. The budget must be used efficiently, otherwise the message will be sent but no one will receive it. Me Realty has set an advertising budget of ten percent of earned commissions, or $7,500. To get started, the company will purchase business cards, personal brochures, directional signs, and personalized sold bags, and allocate ten percent of all commissions to develop other marketing materials. ⇒ Business Cards will be purchased with all appropriate contact information. $100 ⇒ Real Estate Magazine Ads will be purchased for all listings. Each ad costs $50 for a two-week publication and is distributed to all retail outlets in Metropolitan. This is an effective and efficient mode of advertising. The ad will promote the current listing and offer a brief tag line about Me Realty. $4,000 Copyright 2005 SmallBusinessPoint.com, Inc.

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⇒ Sales Promotion material such as newsletters, cards, letterhead, flyers, brochures,

pens, and key chains will be purchased throughout the year and passed out during open houses, meetings, and listing appointments. As discussed above, Me Realty will send periodic notices to past clients/customers with varying messages. So the recipient doesn’t grow tired of receiving the mailers, each communication will relay a different service provided by Me Realty and personalized when possible. $1,000 1. Personal Selling 2. Public Relations a. Articles b. Press releases c. Interview 3. Advertising a. Most costly b. Most used Sales Strategy Me Realty, LLC sale’s strategy is to emphasize comprehensive research and in-depth product knowledge. Me Realty’s goal is to know everything about the client’s home, neighborhood, and community, before the agreement is signed. This approach is likely to turn prospective clients into long-term customers. Buying and selling real estate is a because people are often cautious with their property decisions and offering a comprehensive solution will likely allay their concerns because Me Realty, LLC is willing to work extra hard to research all options. The time needed to provide the high level of service will be more than the typical agent provides, but will have great dividends. Commission Code (Cooperating Commission) The cooperating commission structure continues to decrease with just over half of all residential detached homes sold in the last six months, paying less than two percent to cooperating brokers. This means that sales people are earning less per transaction on a percentage basis than agents did in years past. This also means that sellers are becoming more cost conscious and squeezing dollars out of the transaction. According to the MLS, these are the last six-month cooperating commissions Rate Frequency Percent Cumulative Percent 1.8 1 0% 0% 2.0 4,003 50.1% 50.1% 2.2 4 0.1% 50.2% 2.4 2,419 30.3% 80.5% 2.6 76 1.0% 81.4% 2.8 1,410 17.7% 99.1% 3.0 75 0.9% 100% Copyright 2005 SmallBusinessPoint.com, Inc.

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Below is a top ten list of the competing real estate companies and number of licensed agents.

Company Holding Company Realty Sandy Real Estate Rock Solid Realty Difference Maker Realty Millennium Real Estate Climate Real Estate Weird Al Realty Chutes Realty Smalltown Real Estate Cake Real Estate

# of Agents 659 426 177 157 136 57 51 38 27 15

Below is a top five list of competing agents. Name Annual Average $ Deals Deal Person One 202 $180,132 Person Two 170 $187,736 Person Three 154 $186,689

Days on Market 64 47 51

Commission

Strategy Team of six Team of nine One assistant & broker’s staff One assistant & broker’s staff Team of four

Person Four

133

$125,603

37

5-7% 5-7% 1%, 2.7%, 4.9% 5-7%

Person Five

125

$273,778

51

4-6%

Each competing agent has a different brokerage contract that ranges from a commission split of 60/40 to 100%. The top five agents each earn 100% commissions and pay a monthly fee to their company/broker. In addition to the monthly fee, these agents may also pay a marketing fee, administration fee, and advertising fee to the broker. The second level of competition is all the For Sale by Owners, or FSBO’s, who believe they can sell their home without a licensed agent. The number of FSBO’s has increased in recent years, and as homeowners become more and more knowledgeable, they will become a major force in the market. FSBO’s are better organized with several web sites catered to thrifty homeowners. For a flat fee and monthly subscription, the FSBO business will provide a magazine ad, signs, Internet ad, and sales training. This market is wide-open for an entrepreneur looking to enter real estate without the licensing requirements. The third level of competition is loosely named other. These are attorneys, home builders, and financial institutions that have capability of selling real estate. The Metropolitan area has seen an increase in the number of financial institutions who offer lending and real estate services. They often offer their services for lower than established commission rates or at flat rates. Because of their low costs and aggressive advertising this area has seen increased activity and acceptance by sellers. Homebuilders, who sell their own homes, also remove potential inventory from the market. Copyright 2005 SmallBusinessPoint.com, Inc.

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Barriers to Entry According to the state real estate commission, the only three requirements to become a real estate agent are; 19-years-old, high school diploma or GED, and two real estate classes. These barriers are attainable for virtually anyone. In order to increase the barriers to entry, Me Realty, LLC will pursue additional training and classes. The additional training and real estate classes will differentiate Me Realty, LLC from the poorly skilled agents. Me Realty, LLC will have more knowledge to handle customer inquiries, overcome objections, and salesperson negotiations. In addition to education and training, Me Realty, LLC will ‘get involved’ in civic, social, and community organizations. Being visible in the community and being recognized as a civic leader will increase credibility and further create barriers for less astute agents. Change Mechanisms This section details the internal and external factors that may effect Me Realty in the short and long-term. The company must have a contingency plan in place to prepare for change. Me Realty believes the changing economy and the acceptance of e-commerce will change the real estate paradigm. The company believes that interest rates will increase slowly over the next couple of years and the economy will slowly grow. These changes will adversely effect real estate sales. Consumer acceptance of e-commerce and Internet confidence will increase a consumer’s reliance on electronic medium. This change is acknowledged and addressed through the company’s use of their Internet web site and electronic commerce mechanisms. Me Realty will have a searchable web site that will provide access to all the areas listings and information on recent sales. The site will be used to generate prospects and leads. The site will also have cutting edge technology that isn’t currently used by any other real estate professional. This technology will allow completion of the documentation and submission to Me Realty without every interacting with the client. Me Realty is also trying to identify trends in real estate that will completely change the business cycle in less than a decade. Reading real estate magazines and industry rages is a way the company can stay current with trends and predictions and design ways to mitigate the changes. Conclusion In conclusion, Ms. Mooga is excited about the real estate opportunity that has been presented. With this business plan as a roadmap and broker support, Me Realty will achieve the short-term and long-term goals. It will be difficult with may aches and pains along the way.

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Real Estate Agent Software

Income Goal Per Year Estimated Income Goal Per Month Estimated Income Goal Per Week Estimated Income Goal Per Day How Many Hours Worked Per Week Estimated Income Per Hour Average Sale Price Average Earned Commission Commission Split with Broker Total Average Net Sales Commission Per Deal Total Number of Deals Needed Per Year Percentage of Cancellations/Expirations Total Number of Deals including Cancellations Total Number of Deals to Close Per Month Total Number of Deals to Close Per Week Percentage of Deals - Listings Total Listing Deals before Cancellations/Expirations Total Listings that will Successfully Close Total Buyer Deals that will Successfully Close

$ $ $ $ $ $

$

75,000 6,250 1,442 208 30 48 150,000 2.8% 70% 2,940 26 25% 33 2 1 60% 20 15 11

Appointments Appointment Closing Percentage Appointments Needed Per Year to Reach Listing Goal Appointments Needed Per Month Appointments Needed Per Week

5% 39 3 1

Prospects Prospects Needed to Get One Appointment Prospects Needed Per Year to Reach Appointment Goal Prospects Needed Per Month Prospects Needed Per Week

10 390 33 8

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Work Estimator

Plan vs Actual First Year Prospects Plan Actual Monthly Difference YTD Total

January 33 30 -3 -3

February 33

March 33

April 33

May 33

June 33

July 33

August 33

-33 -36

-33 -69

-33 -102

-33 -135

-33 -168

-33 -201

-33 -234

-33 -267

-33 -300

-33 -333

-33 -366

3

3

3

3

3

3

3

3

3

3

3

3

-3 -3

-3 -6

-3 -9

-3 -12

-3 -15

-3 -18

-3 -21

-3 -24

-3 -27

-3 -30

-3 -33

-3 -36

2

2

2

2

2

2

2

2

2

2

2

2

-2 -2

-2 -4

-2 -6

-2 -8

-2 -10

-2 -12

-2 -14

-2 -16

-2 -18

-2 -20

-2 -22

-2 -24

1

1

1

1

1

1

1

1

1

1

1

1

-1 -1

-1 -2

-1 -3

-1 -4

-1 -5

-1 -6

-1 -7

-1 -8

-1 -9

-1 -10

-1 -11

-1 -12

Appointments Plan Actual Monthly Difference YTD Total Active Listings Plan Actual Monthly Difference YTD Total Active Buyers Plan Actual Monthly Difference YTD Total

September October November December 33 33 33 33

Goals for the Week/Month

I am working on:

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Real Estate Agent

Total 396 30 -366 -366

36 0 -36 -36

24 0 -24 -24

12 0 -12 -12

Graphs

Five-Year Forecast $120,000 $100,000

Total Anticipated Annual Revenue

$80,000 Total Expenses

$60,000 $40,000

Net Operating Income Before Debt Service

$20,000 $Base Year

1st Year

2nd Year

3rd Year 4th Year 5th Year

Debt Service & Cash Flow $25,000 $20,000

Net Operating Income Before Debt Service Debt Service

$15,000 $10,000

Cash Flow

$5,000 $Base Year

1st Year

2nd Year

3rd Year

4th Year

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5th Year

Real Estate Agent Graphs

Annual Operating Budget

Income Gross Scheduled Listing Income Gross Scheduled Buyer Income Gross Scheduled Income Income From Other Sources Total Anticipated Annual Revenue

$ $ $ $

Advertising/Promotion/Cards License Fees/Lock Box/MLS Dues Automobile -Gas/Maintenance Cell Phone/Pager Internet/Computer Insurance (Car, E&O, Health, Other) Administrative/Office Rental Income Taxes & Social Security/FICA Savings Other Total Annual Expenses

$ $ $ $ $ $ $ $ $ $

45,000 30,000 75,000 500 $

75,500

$

65,700

$

9,800

Expenses

Net Operating Income Before Debt Service

7,500 2,500 1,100 1,200 1,500 1,200 3,600 43,500 3,600 -

Annual Debt Service

$5,659

Cash Flow

$4,141

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Real Estate Agent Annual Operating Budget

Expenses

Description Income Tax Rate Social Security/FICA Estimated Annual Cost Increase Estimated Annual Sales Increase Estimated Annual Other Income Increase Expenses Description Advertising/Promotion/Cards License Fees/Lock Box/MLS Dues Automobile -Gas/Maintenance Cell Phone/Pager Internet/Computer Insurance (Car, E&O, Health, Other) Administrative/Office Rental Income Taxes & Social Security/FICA Savings Other Total Annual Expenses Debt Service Car Loan Amount Number of Year's Financed Annual Interest Rate Annual Debt Service

Percent 50.0% 8.0% 5.0% 5.0% 10.0%

Annual Amount $ 7,500 $ 2,500 $ 1,100 $ 1,200 $ 1,500 $ 1,200 $ 3,600 $ 43,500 $ 3,600 $ $ 65,700

$

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24,000 5 5.8% $5,659

Real Estate Agent Expenses