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Are you investing or spending in your business?

June 7, 2019

Invest is a useful euphemism. It means spend, of course, but implies something more. Spending with a purpose, with a higher expectation. I have had multiple conversations over the course of the last few weeks around investing versus spending and how you run your businesses. 

There are some of us that like to lead with revenue and others that are seriously concerned about expenses and watch them like a hawk. In the end, both should be paid some attention. When you are the CEO of your real estate business it comes down to planning and executing, largely based on investment and return on that investment. 

When you invest in real estate, the stock market, or a savings account you expect a certain rate of return on your money right?

Savings accounts according to this link from last week, you can expect a 2% return on your money. Relatively low risk. The Stock market has returned 7% historically for the past 20 years. Real estate (unless you're me) should return in the low double digits. 

For your real estate business figure at least a 20% return on your money. Should you invest in an online lead source? If the cost is $300 a month and you are concerned about "spending" $300 a month, turn it around and do the math with a return connected to it. $300 x 12 months = $3,600 total investment. If you are motivated to close one deal for the year from that lead source, our average commission is $4,800 then you will have made your required rate of return on your investment: ​

 

Rate of return - the amount you receive after the cost of an initial investment, calculated in the form of a percentage.

Rate of return formula - ((Current value - original value) / original value) x 100 = rate of return.Current value - the current price of the item.

 

$4,800 - $3,600 = $1,200/$3,600 = 33% return on your money. Sounds like a good deal.

 

This way of looking at anything in your business regarding hiring an assistant, running a targeted marketing program, getting a designation, or going to a conference all can be distilled down to business rates of return and give you confidence in investing in yourself and your business instead of worrying about how much you are spending. As with anything, there is a certain amount of risk involved in any investment. Do your own numbers on average transactions, commission amounts, etc. and run the numbers for yourself. 

I am the son of two depression-era born parents and grew up in a household that was seriously conscious of spending. I find myself falling into the scarcity mindset more than I would like to admit, fortunately we have Kristin to remind us (there are two classes today "Living Abundantly") of our abundant mindset and how we can use it to reach heights we have never dreamed. 

 

Next time you find yourself fretting over how much money you are spending on something, put it to the test and get some tangible data for yourself that will paint a clearer picture (get clarity) of where you are. I have found many of these decisions revolve around fewer deals that we think to get it done. 

 

Another rule of thumb in your business is take your annual income and divide it by 2,000. That is your hourly rate. Anything you do that is under that hourly rate should be delegated. 

 

Running a business can be quite the amazing adventure. When it is referred to as building a business this is what it's all about. You create rules and systems that make decision making much easier and less stressful. As those grow, you free up time and are able to focus on the things that make the money to run the business. Before you know it, you have become super efficient and can start to delegate some of those systems to others, becoming even more efficient and creating more time. Then one day you look around and realize you have built a real estate sales machine.

 

Onward to building a thriving, profitable sales business!

 

Sarah is going to camp this week. Jay has never been more excited for his sister to leave the house. Pretty funny, he gets to be an only child and doesn't have to take the constant ribbing she gives him. Blair and I are looking forward to spending a lot of time with him. He is almost a different person when she's gone, it's really funny.  -Charlie

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