Budgeting 101: 5 Rules Real Estate Agents Should Follow
Jan 28, 2022There are two things that real estate agents (almost) universally dread: doing taxes and budgeting. No matter how badly we want to avoid them, they are some of the most important parts of running a small business. For the sake of this article, we’ll leave the taxes out (for now) and dive into how and why budgeting should be an essential part of your strategy.
Yes, Even Brand New Realtors Should Create a Budget
It’s common for people to get into the real estate industry with no budget in mind. Why think about spending money before you make any? Word to the wise: don’t make this mistake. Creating a budget before you start your business will help ensure your success in your first year and beyond. Do you ever wonder why the failure rate of agents in their first year is so high? You need to give yourself the time, space, and budget to succeed.
That means giving yourself permission to spend on things that will help grow your business down the line. And when you’re ready to put pen to paper, here are five rules for creating your budget from scratch:
Budgeting Rule #1: Keep new initiatives in place for 90 days or more
As you think about putting new marketing or lead generating practices in place, plan your budget around funding at least 90 days’ worth of effort. You see a lot of Realtors start a marketing plan, and immediately end it if it doesn’t work out the gate. The problem here is that most of these initiatives take some time to get going. If you don’t let them run their course, you’ll just waste money in the process and potentially miss out on significant long term results.
Budget the full cost for the first 90 days, and commit to keeping it going no matter what.
Budgeting Rule #2: Consider seasonality
Depending on where you live, seasonality can play an enormous role in the eb and flow of your month-by-month income. If you live somewhere with frigid winter temperatures, you might see a dip in buyers house hunting during those months. If you live in Arizona, you may find buyers skipping out on the summer months.
Whatever seasonality may look like for you, it’s essential that you plan for it when creating your budget. Build your budget based on your slowest month, so that you feel comfortable continuing all marketing efforts even when sales are slow.
Remember that people are still thinking about moving during these “off” months (potentially even more!), so it’s certainly worth investing in staying top of mind.
Budgeting Rule #3: Review your budget monthly
Like anything, budgeting will only work if you do. Don’t create a budget just to set it and forget it. Make time in your calendar to review your budget every month. What’s working? What’s not working? What’s costing more or less than you planned? Think of your preliminary budget as a starting point that only gets stronger and more accurate as time goes by.
Budgeting Rule #4: Have a conversation with a tax expert
As you create your budget and track expenses, it’s extremely helpful to know what tax benefits you might have at year’s end. Understanding and planning for what you might be able to write off will help you create a more accurate budget (and take advantage of those small business perks!). Find a tax expert you like and trust before tax season to set you on the right path.
Budgeting Rule #5: Focus on longevity
It’s easy to think in the short-term in this business, but try building your budget based on the success you want to see in the next 5-10 years. Spending more on marketing now may mean you need to squeeze in other areas, but could get you where you want it in the end. Think small, and you’ll get small results. Think big, and you’ll build the career you truly want.
Build your business around longevity and consistency — and make sure your budget and daily activities reflect that.
