The Real Estate Encyclopedia
Expenses and the Vitality of Your Career Pt.1
Category - Real Estate Information Sources - Real Estate Articles
It’s Inevitable

We all spend money. Like death and taxes, it’s simply an indistinguishable part of life. The question we often take for granted, though, is “Why?” Before you give what may be the obvious answer (because things cost money!), consider this: depending on how you spend your money, that question can be answered in a variety of ways.

From a professional financial standpoint, as it pertains uniquely to business, we can separate how we spend our money into two basic purposes:

  1. To Maintain Your Business
  2. To Grow Your Business

Learning how to better understand and manage the money you spend can make a tremendous impact on the health of your career. For instance, in order to make your money work the best for you, the following is always a strong two-part question to posit: 1) how consistently are you making a profit, and 2) how does that profit provide for all of the aspects of your life?

Those two answers will reveal much about your individual spending habits – namely where and how you spend money, and also how your expenses affect the larger span of your career.

Growth & Maintenance

Where and how do you spend the money that your business generates? Basic accounting or business acumen tells us that there are two types of expenses: fixed and variable. From a real estate perspective, this translates into: 1) transaction expenses and 2) overhead expenses – which include 3) personal marketing exercises. Each of these three expenses covers both growth and maintenance business elements.

To discover where and how you spend money, start with your business plan. Briefly list the expenses you incur each time you take a listing or work with a buyer. With a listing these might include:

Expense Description:                                         Expense Type:
Just Listed Cards                                               Growth
Just Sold Cards                                                 Growth
Virtual Tours                                                      Maintenance
Meals and Entertainment                                    Maintenance
Advertising                                                        Growth
Closing Gift                                                       Maintenance
Flyers and Brochures                                         Maintenance

Each and every expense that you incur can be labeled in this fashion, and subsequently measured for effectiveness. After listing your expenses and indexing them with the proper purpose, the next step is to measure your results for any expense whose sole purpose is to grow your business. For example, if you distribute “Just Listed” cards with the intent of generating more listings in your market, how many cards must you send to secure one appointment? Remember that unless you specifically track and measure the rate and type of responses you receive from your marketing endeavors, you will never be able to accurately grasp the overall effectiveness of your chief marketing activities.

Next week:
Direct & Indirect Expenses, Liquidity & Longevity


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