New This Month
Print Article Archives
Reprints / Subscriptions
Editorial Calendar
Media Kit
Popular Features
Architecture Guide
Cost vs. Value Report
Good Neighbor Awards
Handouts for Customers
Top 100 Companies
Take a Quiz
30 under 30
Young Professionals
REALTOR® Emeritus
Architecture Guide
Cost vs. Value Report
Good Neighbor Awards
Handouts for Customers
Top 100 Companies
Take a Quiz
30 under 30
Young Professionals
REALTOR® Emeritus | | Creating and Monitoring Business Systems Is Your Company Profitable? | |
| Financial Management Is Your Company Profitable? Tax Record Keeping Escrow and Trust Record Keeping Personnel Management Compensation Policies Policies for Real Estate Operations More Resources | Profitability depends not only on generating income but also on controlling costs. Calculating the Company Dollar Long the most common measure of a real estate company’s profitability, you can reach this figure by: -- this is a misplaced modifier. “you” are not the most common measure of a real estate company’s profitability. · Determining gross income · Subtracting the commission paid to salespeople and cooperating brokers · Subtracting any commission or overrides paid to management personnel · Subtracting the cost of sales, such as MLS, franchise, or referral fees. Calculating Breakeven Point A basic breakeven analysis will help you determine your company’s profitability. A breakeven analysis determines how many units of production (read salespeople) you need to cover your fixed costs. Breakeven 101 Divide your annual fixed expenses by your number of closed transaction sides. TIP: Don’t forget to add a reasonable profit into your fixed expenses. TIP: Dividing total fixed expenses by the number of salespeople will give you your company’s desk costs. Breakeven 201 A more sophisticated breakeven analysis subtracts fixed and variable costs from the revenues figured above to determine a breakeven amount. The formula for determining your company's profitability is: Fixed costs / (revenue per unit [salesperson] – variable costs). TIP: Don’t count part-time or inexperienced salespeople as “whole” revenue units when calculating a breakeven analysis. If a new agent is performing at half the average for the company, count them as only “one-half” a person, in your calculation. —David J. Cock CRB, in “Salary or Commission,” Real Estate Business, July/August 2000. Next Page: 10 Items to Add to Your Income Statement |