When you’re looking to improve the cash flow at your agency, you have two main options: increase the money coming in or decrease the money going out. However, while we might believe that we can generate more income, in reality, the market decides. The only aspect that is truly under your control is your expenses.
For many modern real estate outfits, especially those with a franchise agreement and a physical space, there are plenty of opportunities to reduce agency operating costs while still delivering the same great service to your clients.
Before you start work on reducing your costs, it pays to know exactly what you’re spending ‒ and where. Setting up a spreadsheet with all your annual outgoings (as some payments will be one-off while others may be weekly or monthly) will show you what your expenses are.
From that list, you can see at a glance what the largest outgoings are and what can be trimmed. It could be that some of the most expensive items are the most valuable and least likely to be pruned. However, when you take the time to examine all your outgoings carefully, you might find that you can make cutbacks in the most surprising areas without compromising your level of service or your productivity.
The first step in reducing operating costs is to create a checklist.
One traditional (and, in my opinion, outdated) measurement of success is how big the staff in an office is. However, this has led to many a bloated and expensive team. Working with local freelancers, agencies and virtual employees can save money and increase your productivity while also ensuring you get the benefit of some of the best professionals in your area.
Jobs on the periphery of your core offerings are prime for being outsourced. Think about things like graphic design, social media and admin work like bookkeeping that could be handled elsewhere. You'll only pay for the time actually spent on your work, while also reducing the office space that you need to pay for.
Another way to reduce rent on office space is to encourage staff to work from home or from a shared office space. Managed carefully, this can reduce the number of people in your office while giving staff the flexibility to work from other areas that reduce their commute. Being more flexible with how your team works also gives you the opportunity to scale up or down as needed.
Review suppliers regularly
Running a business often means working with lots of other businesses. While it can be tempting to set up a relationship with real estate suppliers and leave it running perpetually (“set and forget”), reviewing rates and comparing with rivals on a regular basis can save you big dollars.
Whether it's for your insurance, your print work, your electricity or your website maintenance, there are plenty of options available, and you might find a better deal away from your current provider.
While some comparisons, such as your electricity provider, will be like-for-like, bear in mind that there can be a big difference in the quality of work in some areas, which should also be taken into account.
Pay invoices on time
While it can be easy to let invoices slide, paying them on time (or early) can have benefits for you. Many providers offer a cheaper fee if you pay by a certain date while others will start adding to their invoice if you take too long to pay them.
The other benefit of paying invoices promptly, especially with service providers, is that you strengthen your relationships. If you work with freelancers such as graphic designers, photographers and the like, paying their invoices promptly makes their lives a lot easier and this one simple, but often overlooked, action can lead to happier workers and better performances.
Embrace green technology
Although there's a little outlay required to improve your office's eco-friendliness, in the long term you'll save money with lower running costs. Replacing lights with LEDs or compact fluorescent lighting will lead to smaller electricity bills, as will improving your insulation ‒ especially around windows and doors ‒ to improve the efficiency of the air con or heating.
Another easy way to reduce power bills is to turn off lights and unused equipment at night. To save this falling on the shoulders of the last person to leave the office, consider upgrading your office to a smart office and use automated technology through devices like Amazon Echo or Google Home ‒ or even your own smartphone.
Examine your franchise agreement
Franchises can offer real estate agents a lot of benefits, but it's always worth examining the finer details and seeing what else is available. One major thing to look at is the financial side of an agreement. Reliable industry benchmarking suggests that a typical real estate shop front business across Australia shows a net profit (before tax) of approx 15% or 15 cents in the dollar. This is considered 'normal' ‒ but we believe it’s a huge risk to spend 85c to make 15c. You only need a small increase in costs and a small drop in income can see your business going into the red quickly. And paying your franchisor 8-10% of your income in franchise fees can convert to hundreds of thousands of dollars over the franchise agreement period.
Rather than paying for bells and whistles you don’t need, you could be spending under $20K set-up fee and around $1,000 for a “user pays” model that's just as good for the essentials you need (such as branding and marketing. And under the One Agency model, provided you follow the formula, keep costs down and generate decent business, as a principal you can expect to retain around 95% of gross income as profit.
With this vast increase in earning potential comes more freedom, the chance to build your own name and a way to get off the treadmill.
If this sounds like something that could be for you, give our team a call on 1300 792 388 or get in touch using our contact form.