Have you ever stopped and looked at your bank account and thought, “Wow, where is all my money going?” Well, friends, join the club.
We talk a lot about running your real estate business as a business. This could be real estate, insurance, financial services, medical device sales, Arbonne, Stella & Dot (shout out to one of the best sales managers I ever had while consulting at CareerBuilder.com, Tara Renze!), etc. Anytime you are self-employed, it is important to know what is coming in and what is going out.
In this post, we may lose some of you. We’re going to talk about Income Statements. What are income statements? According to Investopedia, an income statement is:
“A financial statement that measures a company’s financial performance over a specific accounting period. Financial performance is assessed by giving a summary of how the business incurs its revenues and expenses through both operating and non-operating activities. It also shows the net profit or loss incurred over a specific accounting period, typically over a fiscal quarter or year.
Also known as the “profit and loss statement” or “statement of revenue and expense.”
Who’s still with me? Does it take you back to your accounting classes? It sure does me. It makes me wish I would have paid more attention, worked a little harder at accounting, and possibly even gone to more classes while at Mizzou…
So today, fellow small business real estate owners, we are tackling the income statement. What does it look like? I put one together. Here’s a snapshot (for the spreadsheet, just send me an email and I’ll share with you):
Before we proceed, be sure to check with your accountant on how this affects your taxes. I am not a CPA, nor do I ever aspire to be.
Our definition of income statement includes revenue, expenses (operating and non-operating). What are some examples as it relates to real estate?
We drive revenue by our activities, but that is another topic, Ground Zero Prospecting. Let’s talk income.
Commissions – pretty obvious, your success fees for doing your job.
BPOs – Broker Price Opinions. Do you perform BPOs for REO type business? Track it and see what your return is. Do you do the $50 BPOs, only to not get the listing? Is it really worth your time? What is your hourly wage?
Referrals – are you taking full advantage of your referral network? A real estate license gives you an opportunity to virtually facilitate a real estate transaction anywhere in the world. Are you keeping up with your friends and family outside your market area?
Marketing Fees – check with your broker and Real Estate Commission, but many agents are successful because they have a Marketing Plan. What’s in a Marketing Plan that you can earn additional income above and beyond your commission? Stay tuned or contact me.
How much expense do you have? A lot right? Here are just a few examples. What did I miss? I want to hear from you.
Adjustments & Rebates
Assistant Payroll Salary
Non-Exempt Hourly Assistants
Payroll Tax Expense
Business Promo & Publicity
Advertising – Direct Mail
Promotion & Publicity
Conferences & Meetings
Awards & Prizes
Building & Equipment Expense
Building & Ground Rental
Furniture & Equipment Rental
Depreciation – Comp/Elec Eqt
Computer Maintenance & Support
Maintenance & Repairs
Personal Property Taxes
Printing & Reproduction
Dues & Subscriptions
Multiple Listing Penalties
Messenger & Delivery
Other Operating Expense
Other Taxes, Licenses & Fees
Recruiting & Training
Other Operating Expense
Subtract your total Operating Expense from your Gross Profit; you get your net income.
NOI (net operating income) is a before-tax figure; it also excludes principal and interest payments on loans, capital expenditures, depreciation, and amortization.
How do you increase your net income? Do more, work smarter not harder, and stay tuned. It’s time for Ground Zero and to ASPIRE for more.