REAL ESTATE B-SCHOOL HIGHLIGHT: When it Comes to Your Business, This is the Only Score That Matters


Let's start with the importance of monthly financials. This is something I've been doing definitely since my first full year, possibly because I had a business background. I got an MBA from Duke and I worked on Wall Street for a couple years, and I worked in Acquisitions and Strategy for an aerospace company. So I definitely knew that the scorecard is your financials.

The Key to Having a Real Business

But here's what I see a lot, and here's what I know. You will never have a real business without having clarity on your financial situation every month. I'm not saying this is the only measure when it comes to your social life, but when it comes to your business, this is the only score that matters. It's the ultimate scorecard of your business - your P&L and your balance sheet.

Most agents only "do" their financials when it's tax time, so in March they're scrambling to get receipts, and their credit credit card statements. They have no real concept of what their business has done all year long. This is an absolute recipe for disaster.

I haven't missed a month since I started back in my first full year. It's not really complicated. I'm gonna go through my Chart of Accounts, but it's really revenue. Revenues come from commissions, referral checks, or transactions. I don't overcomplicate my Chart of Accounts with tracking every agent in my Chart of Accounts; I just track listing commissions, buyer commissions, and transaction fees. Operating expenses, there's about 7 or 8 categories that I track, which I'll show you as well.

It's Not Rocket Science

It's way easier than it seems. A lot of agents are freaked out by this whole topic. All you need is the Chart of Accounts, which you have, and a Quickbooks-certified bookkeeper. I found mine on Craigslist. I used my accountant, who had sort of a junior level accountant on staff. I used her for a while, but it was too costly. You can get a bookkeeper for about a third of the cost of having a junior level accountant.

On Craigslist all you have to do is post an ad that you're looking for a bookkeeper. I think I even just typed in "bookkeeper", and I interviewed two and picked one. She actually does work for consulting clients of mine as well. She does a really good job.

And it's not rocket science, either. If you know Quickbooks, you know Quickbooks. If you give them the Chart of Accounts, you're actually directing that process. It organizes your revenue, your cost of sales, and then it calculates your gross margin. When I talk about gross margin, that's what I'm talking about. It's all the revenues you've collected - all your commission checks, transaction fees, referral income minus everything you've paid out to your agents. That's your gross income.

When I talk gross margin, my gross margin is 65%. I have .$65 out of every dollar remaining for me to pay my operating expenses before I calculate my net. So my $.65, I pay out roughly $.33 to $.35 to operating expenses, and I have roughly $.30 to $.32 left over as profit before I pay the government, and before I pay myself.

Why This Must Be Outsourced

It's really not complicated, but you have to commit to doing it monthly. You cannot do this yourself. I have agents who think that this cannot be outsourced, and it's just about the most ridiculous thing I've ever heard. When you can hire someone at $20 to $30, even $40 an hour to do something you're not even qualified to do. You're not a Quickbooks-certified bookkeeper, and you'll have inefficiency doing it yourself.

You have to outsource this, especially if you don't have the money to do it. That's because you don't have any clarity on your financial situation. Buy gaining this clarity, you'll start doing a monthly monthly review with your bookkeeper. They'll prepare your books. This takes me about 10 minutes a month to give my bookkeeper all of my important documents. I print out my credit card statements, I print out my bank statements, my check stubs, and my PayPal account. I do that for a few other business I have. She handles all my bookkeeping.

This is something that you have to commit to.

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