If I asked you, and be 100% honest, to give me your exact year to date net profit and monthly expenses, would you be able to answer?

Don’t feel bad if you can’t give me the answer yet; over 95% of realtors don’t know those exact figures.

So far in this blog series, we have discussed some real estate specific numbers such as tracking your lead sources, appointments set, closing ratios, etc. But you must also track and pay attention to your business financials, aka your profit and loss statement (P&L).

In short, a profit and loss statement shows you how much money you are actually making and how much you are losing. However, a good P&L will show much more than that!

I highly recommend you run and review your profit and loss statement every single month. But where do you start, and what should you be tracking on this statement?

First, understand that tracking your business financials does not need to cost you any money. You can spend money and get a program like QuickBooks, of course, but you don’t have to. Word or Excel can work just fine.

Items You Want To Have and Track Monthly On Your P&L:

1: Track/Document your Revenue. For realtors, this will be your commissions. I recommend you break it down from buyers/sellers/rentals, as well as each lead source so you know what is coming in and from where. 

2: Track Your Expenses. Just like your revenue, you want to break down your expenses. Some examples would be: individual lead sources, websites/systems, rent, license fees/dues, vehicle expenses, property photos, flyers, open house signs, etc. You will want to break each category down individually, so you know and can see those exact costs each and every month.

3: A Total of your Gross Revenue, Gross Expenses and then Net Profit or Net Loss.

You cannot make intelligent financial decisions for your business without a detailed business financial tracking plan. When you track these figures each and every month you are forced to pay attention to your finances and see a true picture of what is happening.

Every month, when I review my P&L statement, I analyze every expense to see if it is absolutely necessary. I also look at all my revenue to look for opportunities to increase sources with a high return on investment. For example, with this information you can see your exact ROI for each lead source. You may discover one lead source is getting you double the return of another. You can then safely cut the lower ROI lead source and put those funds into increasing the lead source getting you the better ROI.

IMPORTANT NOTE: You must stay organized to properly analyze your business financials. I recommend getting a large, letter-size envelope and writing the month on the front, and then toss every invoice you pay and every receipt you get inside that envelope. Of course, you should be tracking your closings as well in Word or Excel, for instance. Then, after the end of the month, you will have all the information to enter onto the document. Yes, it is another task you are adding to your schedule, but one of those absolutely crucial non-negotiable tasks which must be added to create success!

If you are not doing so already, start running your profit and loss statements ASAP! I can assure you it will be a game changer!

Thanks for reading!

  Joshua Smith, Realtor/Mentor/Entrepreneur

-Voted 30th Top Realtor in America by The Wall Street Journal

-Over 5,000 Homes Sold & Currently Selling More Than 1 Home Daily