Download presentation
Presentation is loading. Please wait.
1
Budget is Not a 4-Letter Word
Title of Breakout Budget is Not a 4-Letter Word Learn to love the MREA Budget Model and plan your way to a successful 2015! ©2015 Keller Williams Realty, Inc.
2
Learn to love the MREA budget model and plan your way to a successful 2015!
Budget is Not a 4-Letter Word
3
4 MREA* Models: Economic: The money you’ll make
Lead Generation: How you’ll make it Budget: How you’ll spend it Organization: Who will help you *The Millionaire Real Estate Agent Budget is Not a 4-Letter Word
4
Everyday Questions About the Organization Model (Leverage/Team)
Am I ready for an assistant? How much can I pay an assistant? How much can I pay a buyer agent? Budget is Not a 4-Letter Word
5
Everyday Questions About the Lead Generation Model
Should I buy that new “shiny thingy”? How much can I spend on farming? What can I spend on a 33 Touch? Budget is Not a 4-Letter Word
6
ANSWER … What does your budget say?
The budget model … answers all of these questions. helps you determine how much money you can spend on specific expenses. helps you to track the source of your income. Budget is Not a 4-Letter Word
7
The Budget Model Based on using a Profit and Loss (P&L) statement also know as an Income Statement. A P&L tracks all of your income and expenses. Budget is Not a 4-Letter Word
8
INCOME Tracks the GCI, not what you take home
The total amount of commission paid at closing for your side of the transaction Budget is Not a 4-Letter Word
9
INCOME EXAMPLE: You represent the buyer who purchases a $300,000 home.
The listing agent is offering 3% buyer agent commission. At closing, the total commission paid is $9,000 This is the total commission, regardless of splits, referrals, etc. Budget is Not a 4-Letter Word
10
P & L Income Section Income 41000 Residential Income 41100
Title of Breakout KW Family Reunion 2015 P & L Income Section Income 41000 Residential Income 41100 Listing Income $ 41200 Sales Income 41300 Referral Income 41400 Leasing Income $ Total Residential Income $ 42000 Commercial Income 42100 42200 42300 42400 Total Commercial Income 43000 Other Real Estate Income $ Total Income (GCI) ©2015 Keller Williams Realty, Inc. Budget is Not a 4-Letter Word
11
Cost of Sales Track the costs directly associated with the closing of a transaction. Examples Local cap Royalty Referral fees Team commissions Budget is Not a 4-Letter Word
12
Example 1: The gross commission earned at closing is $9,000.
You have not yet capped. Cost of sale: GCI: $9,000 - Local MC Cap (30%) $1800 – KWRI Royalty (6%) $540 The cost of sale is $1800 in commissions due to company and $540 in Royalty. Budget is Not a 4-Letter Word
13
Example 2: The gross commission earned at closing is $9,000.
You have capped and the client came as a referral at 25%. Cost of sale: GCI: $9, Referral fee (25%) $2250 The cost of sale is $2250 Budget is Not a 4-Letter Word
14
Example 3: The gross commission earned at closing is $9,000.
You have capped and you are paying a buyer agent 40% for working with the client. Cost of sale: GCI: $9,000 – Buyer agent (40%): $3600 The cost of sale is $3600 Budget is Not a 4-Letter Word
15
P&L Income and Cost of Sale
Title of Breakout KW Family Reunion 2015 P&L Income and Cost of Sale Income 41000 Residential Income 41100 Listing Income 41200 Sales Income 41300 Referral Income 41400 Leasing Income Total Residential Income 42000 Commercial Income 42100 42200 42300 42400 Total Commercial Income 43000 Other Real Estate Income Total Income (GCI) Cost of Sales 51000 Commissions Paid Out 51100 Commissions to Office 51200 Royalties Paid 51300 Listing COS 51400 Buyer COS 51500 Other - Commissions Paid Out Total Commissions Paid Out 52000 Other - COS Total Cost of Sales Gross Profit More detail of Income and Cost of Sales. ©2015 Keller Williams Realty, Inc. Budget is Not a 4-Letter Word
16
Question: Why should we track the Cost of Sale and not just our take-home income?
Budget is Not a 4-Letter Word
17
Answer It is important to know what it COSTS you to be in business.
These are the fixed expenses you cannot control, except for renegotiating the costs. Budget is Not a 4-Letter Word
18
Answer Most agents don’t truly know what it costs them to be in business with both the broker and team members. Agents in companies that don’t have capped commissions but perhaps an initial higher fixed commission may think that being on an 85/15 split with no cap, is better than being on a 70/30 split with a cap. By tracking the cost of sale, agents have a better financial picture of what it costs them to be in business with their Broker and team members. Budget is Not a 4-Letter Word
19
Title of Breakout KW Family Reunion 2015 Operating Expenses: Everyday costs of your business that can fluctuate and can quickly get out of control. Office rent Copies Licensing Signs Lockboxes Insurance Salaries Marketing expenses Training Meals and more ©2015 Keller Williams Realty, Inc. Budget is Not a 4-Letter Word
20
P&L Expenses /MREA Budget
Budget is Not a 4-Letter Word
21
Budget is Not a 4-Letter Word
Title of Breakout KW Family Reunion 2015 65000 Total Education/Dues 66000 Automobile 66100 Mileage or Interest Portion of Payment or Percentage of Lease 66200 Depreciation 66300 Gas 66400 Maintenance 66500 Other - Automobile Total Automobile 67000 Equipment/Furnishings 67100 Rental 67200 Depreciation of Capitalized Equipment/Furnishings 67300 Repair/Maintenance 67400 Property Tax on Equipment/Furnishings 67500 Other - Equipment/Furnishings Total Equipment/Furnishings 68000 Supplies/Office Expenses 68100 Banking Charges 68200 Office Supplies (consumables) 68300 Office Operations 68400 Other - Supplies/Office Expenses Total Supplies/Office Expenses 69000 Insurance 69100 69200 Error & Omissions 69300 Property/Liability 69400 Other - Insurance Total Insurance 69500 Professional Services 69510 Accounting & Tax Preparation 69520 Legal 69530 Other - Professional Services Total Professional Services 69600 Other Expenses 69610 Charitable Contributions 69620 Loan/Interest Payment 69630 Office Transaction Fees Paid 69640 State Sales/Franchise Taxes 69650 Other - Other Expenses Total Other Expenses Total Expenses Expenses 61000 Salaries/Benefits 61100 Salaries 61110 Management 61120 Administration 61130 Other - Salaries Total Salaries 61200 Benefits/Processing 61210 Benefits 61220 Payroll Processing 61230 Payroll Taxes 61240 Other - Benefits/Processing Total Benefits/Processing 61300 Contract Labor Total Salaries/Benefits 62000 Lead Generation 62100 Advertising *62300 Print/Direct Mail 62400 Internet Lead Generation 62500 Entertainment/Other *62700 Other - Lead Generation Total Lead Generation 63000 Occupancy 63100 Rent/Desk Fees 63200 Utilities 63300 Repair/Maintenance 63400 Depreciation of Capital Improvements 63500 Other - Occupancy Total Occupancy 64000 Communication/Technology 64100 Telephone Services 64200 Answering Services 64300 Internet Service Provider/Hosting Charges/ 64400 IVR Service 64500 Website Creation 64600 Website Maintenance *64800 Other - Communication/Technology Total Communication/Technology 65000 Education/Dues 65100 Education/Training 65200 Coaching/Consulting 65300 Books/Audio-Visual/Subscriptions 65400 Dues 65500 Other - Education/Dues ©2015 Keller Williams Realty, Inc. Budget is Not a 4-Letter Word
22
Examples: Where would you account for purchasing a listing sign? 62000
Lead Generation 62100 Advertising 62300 Print/Direct Mail 62400 Internet Lead Generation 62500 Entertainment/Other 62700 Other - Lead Generation Total Lead Generation Budget is Not a 4-Letter Word
23
Examples: Where would you account for the cost associated with renewing your license? 65000 Education/Dues 65100 Education/Training 65200 Coaching/Consulting 65300 Books/Audio-Visual/Subscriptions 65400 Dues 65500 Other - Education/Dues Total Education/Dues Budget is Not a 4-Letter Word
24
Examples: Where would you account for the cost associated with your assistant? 61000 Salaries/Benefits 61100 Salaries 61110 Management 61120 Administration 61130 Other - Salaries Total Salaries 61200 Benefits/Processing 61210 Benefits 61220 Payroll Processing 61230 Payroll Taxes 61240 Other - Benefits/Processing Total Benefits/Processing 61300 Contract Labor Total Salaries/Benefits Budget is Not a 4-Letter Word
25
Examples: Where would you account for the registration cost associated with Family Reunion? 65000 Education/Dues 65100 Education/Training 65200 Coaching/Consulting 65300 Books/Audio-Visual/Subscriptions 65400 Dues 65500 Other - Education/Dues Total Education/Dues Budget is Not a 4-Letter Word
26
Examples: Where would you account for the meals and hotels associated with Family Reunion? 65000 Education/Dues 65100 Education/Training 65200 Coaching/Consulting 65300 Books/Audio-Visual/Subscriptions 65400 Dues 65500 Other - Education/Dues Total Education/Dues Budget is Not a 4-Letter Word
27
Income – Cost of Sale – Expenses = Net Profit $$$
Title of Breakout KW Family Reunion 2015 How Much You Make Income – Cost of Sale – Expenses = Net Profit $$$ ©2015 Keller Williams Realty, Inc. Budget is Not a 4-Letter Word
28
What Are the Guidelines?
Know how to read a P&L Track income and expenses Now … what are the guidelines? Budget is Not a 4-Letter Word
29
Cost of Sale: 30% Expenses: 30% Profit: 40% MREA Guidelines:
Title of Breakout KW Family Reunion 2015 MREA Guidelines: Cost of Sale: 30% Expenses: 30% Profit: 40% As a business owner you should be able to net 40% of the GCI for owning the business. Keep in mind, that when you are performing in a role, you are getting that income as well. ©2015 Keller Williams Realty, Inc. Budget is Not a 4-Letter Word
30
Example 1 You Are a Solo Agent You earn: Buyer Agent Income
Listing Agent Income Admin Salary Profit Budget is Not a 4-Letter Word
31
Example 2 You Have an Assistant You earn: Buyer Agent Income
Listing Agent Income Profit Budget is Not a 4-Letter Word
32
Example 3 You Have an Assistant and a Buyer Agent You earn:
Listing Agent Income Profit Budget is Not a 4-Letter Word
33
Example 4 You have a 7th Level Business You earn: 40% Net Profits
Budget is Not a 4-Letter Word
34
Note COS – how to limit it to 30%
with team members earning more than 30% COS is “capped” and goes away as the business increases in volume Your local company cap and royalty will be zero for each transaction after you’ve capped so those dollars can be assigned over to the team member. Budget is Not a 4-Letter Word
35
Setting Up Your Budget Begin with a blank P&L.
Download the MREA P&L from KellerInk.com Fill in the income amount (how much you’ll make.) 30% for Cost of Sale 30% for Expenses Use MS Excel – it’s not hard! Budget is Not a 4-Letter Word
36
Monthly Tracking Track your P&L Track your Budget vs. Actual
Use software (Quickbooks – upload your budget into its P&L.) Track your Budget vs. Actual Your actual income and expenses against your budget Budget is Not a 4-Letter Word
37
Lunch 'n Learns for Market Center Delivery
8 x Touch = Magic! Action Plan List at least ONE action you will take as a result of what you’ve learned. 1. _________________________________________ 2. _________________________________________ 3. ___________________________________________________________ Now that we have discussed this topic, it is time to take action! Activity: Write down three action items you are going to do when you leave this training. Circle the ONE action that you are going to do first. Create your plan to accomplish this ONE action item. Brought to you by Keller Williams University ©2015 Keller Williams Realty, Inc. Convert More by Knowing the Score
38
Title of Breakout Thank You! Thank you for attending. I hope you have learned how important this topic is for your business. Please complete your evaluation: go to kwueval.com to complete the evaluation. Please complete an evaluation for this session. Use any mobile device! ©2015 Keller Williams Realty, Inc.
Similar presentations
