Today, real estate has transformed to a whole new level whereas as an individual or as a company you have to become much more efficient in creating a business plan. A study conducted by Harvard Business Review revealed chances for real estate business success largely depend on a well-crafted business plan.
A study conducted on 2877 business owners found that companies alleviate their chances of securing loans and funding if they produced a well-thought business plan with all the necessary pointers.
Since a plan is vital for a real estate business’s success, it makes sense to create one that would solve a problem for the prospective consumers.
So, here are some crucial elements for a successful real estate business plan:
Start with a Solid Foundation
Writing an Executive Summary for your Business
Your executive summary must capture your vision statement i.e., what are you trying to achieve with this business. It must be able to depict your goals, your target market parameters, and decisions that would align with your plan.
It would include points on:
- Target neighborhoods and price ranges
- Target clients and brief descriptions of the persona
- Brief marketing plan overview
- Market threats and opportunities
Identify Who You are as a Real Estate Agent
It is crucial to identify what we are trying to achieve with this business, whether we are solving a problem or creating a new trend. You must have a clear idea about ins and outs of your current market.
For a real estate team, it should be what ideas everybody brings to the table, and for a brokerage firm, what type of real estate agents you have to attract as you will be the captain of your ship.
Write a Business Description in Detail
There should be a story and context behind your business and this is where it has to shine. Part of your business description should entail your mission statement.
A well inclusive mission statement should include the following:
- When you were founded
- Where you are located
- Who the leaders are
- Special advantages/partnerships
- Market opportunities
- Legal structure
Analyze Your Target Real Estate Market
Targeting the right market is important otherwise you would be beating around the bush. You should examine every corner of your market, which sections are hot, where the market is a little low, and most importantly, where the opportunities lie.
Although numbers are fun to look at but don’t spend too much time examining them. For the real estate market, the ups and downs of your local community would be very helpful.
Here are some of the metrics to look out for:
- Average days on the market for property for different prices and types.
- Typical listing commission rate
- Average price trend for a market you are interested in participating
- Number of new listings in a particular sector month over month and this year versus last year
Perform a SWOT Analysis
SWOT analysis is a practical assessment of several key characteristics that will affect your business: Strengths, Weaknesses, Opportunities, and Threats.
Strengths and Weaknesses are internal whereas Threats and Opportunities are external. An analysis can be as simple as making lists of items under each of these categories.
To make the picture much more clear and easier, you can formulate questions like:
- What do our competitors do better than us? Threat
- What is our Unique Selling Point? Strength
- Why have customers stopped trusting real estate, business owners? Weakness
- Which markets are underserved in our territory? Opportunities
Now, to flourish in the real estate market, some key focus areas are needed to be covered before making a successful business plan.
Here is the breakdown of these focus areas:
- Defining your Marketing Strategy
- Creating a Financial Plan
- Implementing Action Plans
- Evaluating and Revising your Plan
Defining Your Marketing Strategy
Identifying Your Market Niche
Before evaluating facts and figures, it is crucial to throw light on your target market and how you will serve this niche. While honing in on a narrow target seems a little exclusionary, a niche market can save you time, effort, and money on marketing.
One tool to help you define your market is the buyer persona. It is a fictional typification of your ideal customer and with the help of that information, you will steer your sales and marketing in the right direction.
Here’s a typical example,
To get started creating your persona, ask yourself a set of simple questions like:
- What is the demographic of your ideal buyer? (Age, location, gender, etc.)
- What is it that makes or breaks a deal with this buyer?
- Which nearby amenities matter to this buyer?
- What is the ‘brand’ of the neighborhoods this buyer skews towards?
- What are this buyer’s job and household income?
- How does this buyer like to be contacted? (Twitter, email, SMS, phone call?)
To make this easier, you can use a simple template.
At the end of this step, you should be able to answer:
- Who is your target customer? Use a customer persona guide to find your target customer.
- What are the defining characteristics of your target customer?
- What service is your target customer seeking?
- How will you attract, nurture, and service this target customer?
Assess the Viability of Your Niche Market
It’s important to assess your niche and make sure it is consistent with the market in your area.
For example, if you’ve decided to focus on first-time buyers, do some research to look at relevant stats and figures:
- What percentage of sales in your market were first-time buyers in the last 12–14 months?
- What was the average sales price to first-time buyers?
Also, assess how competitive this market is:
- Are you the only agent catering to the young first-timer?
- Are you competing with well-known heavy hitters?
A competitive SEO can be helpful when looking for your real estate competitors. You can also learn from your competitor’s properties, branding, content, and other key information to help in your market analysis.
Build a Digital Home Base
The modern home buyer predominately starts their house search journey online (44%), and 95% use the internet during their whole process.
So, it becomes very important to go through the real estate articles SEO, and real estate keywords for the initial phase to help you build a strategy, and a complete list of keywords to attract potential buyers/sellers to your website.
Identify your Core lead Channels
Since most homebuyers prefer the internet for their home search, it becomes essential to look for the correct online channels for your leads. Social media channels like Facebook, Instagram, Twitter, Linkedin, etc. can become handy for your lead generation.
Other than search, you might generate leads with paid social ads, client referrals, outdoor advertising, or local events. With the insights on your competitors on websites from websites like SimilarWeb, BuiltWith, etc, you can track online traffic and can draw an initial set of lead generation channels to your leverage.
Creating a Financial Plan
Having a sound financial plan for your business is essential. To assist you, we’ve created spreadsheets you can use to estimate goals, income, and expenses.
To create your plan, determine what your expenses will be.
Here are three main areas your expenses may fall into:
- Licensing: These expenses will include training, state exam fees, etc.
- Personal: This can include your wardrobe, technology fees (like computer and phone), and car fees.
- Business: Business expenses will include items like your broker fees, website and MLS fees, marketing and advertising, etc.
For our reference, expenses have been bifurcated into startup payments and yearly payments. Yearly expenses could involve office rent, electricity bills, annual fees, etc.
Estimating income is the biggest concern for most new agents.
To do this, you will need to decide how much money you need to make in your first year, and how much you would like that figure to grow. You will also need to research some basic figures for your market, like the average sale price for homes.
Transactions and Leads
To meet your income goals and cover expenses, you’ll need to conduct a certain number of transactions. And, to complete a certain number of transactions you’ll need to work a set number of leads.
An example has been mentioned to cover this factor to meet your income goals but you need to assess these figures in real-time to decide whether they are reasonable for your business or not.
Dividing your business goals into small and effective pieces is crucial for the successful implementation of your real estate business. It is advised by experts that the action plan should be tangible to ensure you are making strides to achieve them.
Here are some key ways to convert the business plan into actual business metrics:
Creating a Marketing Plan
Marketing is how you will get your services and listings in front of the right customers. You can take on inbound strategies, like content marketing, which allows you to build trust, nurture leads by capturing their contact info, and convert interested buyers online without putting in constant effort with a sustained-effort tactic like cold calling.
While evaluating inbound strategies, you could consider creating content and ads for buyers at each stage of the funnel, ranging from purchase-driven buyers to information-seekers.
To target the correct customers, you must have efficient marketing potential, and to achieve that you must consider the following metrics:
Product: The product for real estate agents is both your listings and your brand. A decision to work with you is as much based on your expertise and sales style as the listings you represent. Determine what distinguishes you in the market and constitutes your brand.
Price: you cannot control the prices of the listings, but you can still research the market rates and if possible, can provide prospective buyers a rate that would balance both the parties and make them ecstatic during the discussion phase.
Sale on the listings can be given by considering the average market prices which would enhance the business in the long run. The capital saved during transactions can be used for marketing which would further facilitate new leads and thereby, benefitting the company as a whole.
Place: Once you have established a strong idea of your target market, then it becomes quite easier to understand where and when to interact with them. Is your target demographic social and constantly on their smartphones, or are they less tech-savvy and more likely to enjoy print materials? How and when you showcase your services to the right leads determines a large part of your marketing success.
Promotion: Determine the exact channels where you’ll promote, how often, and the language you’ll use to communicate your goals and branding message to your prospective buyers/sellers.
Making your Goals Tangible
When developing action plans, get as literal and specific as possible. Take the goals you outlined earlier in your financial business plan and expand on each of those in the area, strategy, and specific actions you’ll take to fulfill that strategy.
Here’s an example:
Goal: To generate 500 leads in my first year
Area: I want to generate leads through Facebook
Strategy: I will post content consistently and advertise on the platform
Specific Activities Involved:
- Developing my blog so I have effective and efficient content to share with the potential market.
- Signing up for social media scheduling technology will help me post around the clock.
- Researching Facebook advertising campaigns and setting up weekly ads campaigns to target quality leads.
- Assess the success rate of my inbound and outbound campaigns and develop strategies to tweak based on the leads generated.
Forming a Lead Nurturing Strategy
This is the crucial step for any real estate business where you will determine how to move your leads through the sales funnel. This is known as lead nurturing and is the process of making your ideal buyer aware of why they are the best option for them.
According to Forrester Research, companies that performed well at lead nurturing generate 50% more qualified leads for 33% less cost and make 47% larger purchases.
Nurturing leads involves communicating with them regularly on the channels they use. For example, a series of emails or a targeted direct mail piece with a special offer based on prior interest. This can be automated at scale with real estate CRM automation tools.
Determine if online communication and content distribution is your style, or if you’re more comfortable meeting in person consistently and answering questions on the spot. Make note of the materials that you’ll invest in to nurture leads, like handouts or online resources, and create an ideal sales timeline.
You can also follow the steps outlined in our lead nurturing process article:
- Clean up your database
- Label your leads
- Prioritize your prospects
- Add leads to campaigns
- Monitor lead engagement with campaigns
- Contact engaged leads
Building a Team
A team of highly motivated individuals is essential for the successful implementation of any business practice. Determine if you’ll be hiring or working closely with a team of associated agents to reach your goals. If you don’t have a team, take the time here to write out any connections that will help you execute your tasks regularly, like a printing vendor, brokerage team, legal aid, marketing intern, etc.
Evaluating and Revisiting your Plan
A business plan cannot be effective if the goals outlined do not work as per planned scenarios. To avoid this, some necessary steps would help you stay on track and get the most out of your real estate business plan.
Constantly reassess the market
The housing market is constantly changing, and that can cause you to reassess your current real estate business plan. Stay on top of market changes:
Read real estate industry news and tips: Industry news, mergers, and new statistical data emerge throughout the year that can impact the values of the properties you sell, the pool of leads, or the types of customers you sell to. Use these reports and articles to fuel your knowledge so you can be proactive about your strategies (and work them into your business plan).
Attend conferences: Much of what will inform your marketing and business tactics will be industry advice you gain from successful real estate agents. Real estate conferences will help you repurpose strategies to strengthen your business plan.
Implement feedback from clients: Clients will give you an honest picture of your business. While you can try to figure out what worked, it’s often good practice to provide a questionnaire after closing or ask for reviews or testimonials from former clients who were happy with your services so you can grow your business in that area.
Hire a real estate coach: If you’re fairly new to the business, there’s no better way to shorten the learning curve than by getting guidance from a real estate coach, who can advise you on both your business plan template and how to become a successful real estate agent.4
Staying on Track and Measuring Success
Outline standards for measuring success and check in on the business plan regularly to make sure you’re hitting all the steps leading to your goals and projections.
For example, if you’re hoping to close 10 transactions by the end of the year, and spring is an active sales time in your area, outline how many transactions you’ll need to be closed at the end of the first and second quarters.
Looking at these early in the year will help you determine if you need to reframe your business plan and add more effort in a specific area.
Reassess Your Real Estate Plan Annually
Look over your business plan each year and set new goals and projections based on data from the previous year. This will ensure your market analysis, expenses, and tactics are up-to-date.
Important: Tailor the Real Estate Plan with Your Growth Stage
A business plan for a new real estate agent will be wildly different from one created for a well-established agency. Each company has a different scope, goals, and finances.
For example, It doesn’t make sense to do a large-scale marketing campaign if you don’t have the budget or resources to handle the leads.
If you’re just starting, focus on getting 10 leads and closing 3-5 deals. Focus initial marketing effort on activities that don’t necessarily scale – tap your network, ask for referrals, send mailers, host a local meetup and run open houses.
Ready. Set. Plan
Whether you’ve got a ready-to-execute business plan or it’s still being drafted, the most important thing is to start now — and fast.
Having a business plan puts you on a clear track that makes your business 75% more likely to grow.
About the author
Tushar Upadhyay is an intern at the International Institute of Digital Marketing (IIDM). He has wide experience in the service industry and aims to reach the target audience using his experience and training at the IIDM. Since digital marketing is a widely growing field, IIDM also offers globally recognized online digital marketing certifications for learners who are willing to dive into the ocean of digital marketing.