What was your profit last calendar year?
• What is your target next year?
• How are you tracking?
• Do you have a growth plan?
• Do you have a budget?
• Do you split your profit centres?
These are questions and conversations that I hear being asked in offices and at real estate events. Do you have the answers? Why are you in business? As an entrepreneur, it may be to, make money. Whilst there are other benefits to having your own business, this is the bottom line. In basic terms, making money maps back to having a profitable business.
So how do we build a profitable business?
In building a business, you must start with a clear outline of the current position. My number one rule is that you MUST split out the various business units. i.e if you have a property management department and a sales department these should be separate cost centers.
Separating the businesses provides a clearer picture of the financial position of the property management department. Simply all income and expenditure for that department are allocated. In the case of operational costs these are proportioned for the department. The key is accurate allocation - Start by mapping last financial year and identifying your true department profit.
All building is done with a great plan. Create a plan to build a profitable business by setting your targets for the year first. Do you want to increase profit, $ or %? Or decrease expenses.
To achieve these targets you will need to look at planning for both the direct financial aspect of the business as well as the non financial actions that must be taken to reach the goal.
• Financial planning is in the form of a budget.
• A budget identified income and expenditure predictions and the projection of profit.
• To achieve the financial targets there will be clear actions that must be taken. What are these actions?
• A simplistic approach is to create projects. Using growth as an example, what needs to be done in order to grow the income of the business?
• One aim may be to increase the number of properties under management. Great, how do we do that? What actions are needed?
• What resources?
• What materials?
• A project plan will assist in creating this strategy, but of course it is the execution that is fundamental.
Next week we take look at Execution and Accountability and its role in building a budget for a profitable department.