2 Section Business Planning How To?
Before you can start to create your Business Plan you need to review your business to avoid making costly mistakes in terms of strategies and tactics made in the past. As a business, you are an economic entity within a greater business environment and it is, therefore, essential that you also take note of what is happening in the marketplace, e.g. trends, opportunities, and challenges in the marketplace. Without analyzing the market trends, you will not be able to adjust your strategies in a timely fashion.
An industry and competitive analysis is a review of your larger business environment, the market conditions, the market trends and the challenges and opportunities in the Real Estate Industry. Analyzing the industry will include a review of:
2.1.1. The Market Size and the Market Growth Rate
- What are the prospects for above average profitability?
- What are the number of buyers and sellers in the market?
- How is the Real Estate industry being influenced by natural or economic events like Katrina, or oil prices?
- How will these events influence the prices of homes?
- Will these events influence home loans and the affordability of homes?
2.1.2. The Scope of Competition/Rivals
- Which company’s agents are in the strongest/weakest position in the market?
- What are the strategic moves they are likely to make next?
- Find out who your immediate competitors are – the real estate businesses which are the same size as yours, operate in the same area and the same market.
- Learn the strengths and challenges of immediate competitors.
- What is their focus?
- Uncover their strategy e.g. niche marketing and selling to a distinctive group like echo-boomers or immigrants.
- What services are they offering to customers?
- What kind of image and reputation are projected in the market?
- How does the quality of their associates compare with yours?
- What geographic market do they serve?
- What are the number of listings and number of sales?
- What are the listings taken versus listing sold?
- What is a number of expired listings, time on market and price reduction?
2.1.3. The Pace of Technology Changes and e-Commerce
- There are an increased amount and a wide variety of new technology devices on the market. How will these devices influence business in Real Estate?
- How will the growing use of e-commerce influence the competitive landscape?
2.1.4. The Societal, Political, Regulatory & Citizenship Considerations
- Government policies and regulatory requirements restrict companies in their formulation of strategy.
- Ethical considerations, societal expectations, and standards of good community citizenship also have an influence strategy formulation.
2.1.5. The Economic Situation
- What does the bigger economic environment look like?
- What are the interest rates?
- What is the economic forecast for the interest rates?
2.1.6. Geographical Changes
- What geographical changes are transpiring?
- Which areas are being developed, modernized or being stricken with natural disasters?
2.1.7. Demographic Changes
- What are the changes in the demographics?
- Who are the primary clients e.g. Echo-boomers, Generation X, Baby-Boomers, Immigrants, Single people?
2.1.8. Local Area Conditions
- What is the number of homes on the market?
- What is the sum total of homes sold in the past year?
- What is the ratio of homes sold to homes listed?
- What is the ratio of new homes listed and sold to resales listed and sold?
- What is the price ranges of homes?
- What is the average time on the market for various price ranges?
2.2. Analysis of your Business
Evaluate the performance of your company strategy. The first thing to pin down is the company’s competitive approach. Is the company concentrating on serving a broad spectrum of customers or a niche market? In other words, identify your best markets for business. What are your company strategies regarding marketing, human resources, and information technology? Have you made any strategic moves? For instance, have you stepped-up your advertising, entered into a new geographic area or merged with another competitor? Analyze your company’s financial performance and whether your company achieved its financial objectives and is an above-average industry performer.
2.2.1. Business in the Past Year
- Study whether the revenue increased, grew slower, faster or at the same pace as the market, thus resulting in a rising, eroding or stable market share.
- Whether the company’s profit margins are increasing or decreasing and how well the margins compare to rival firms’ margins?.
- What was the number of listings versus the number that sold?
- Average time on the market for your listings?
- The ratio of sales to list price?
- Where and how did you get leads? Has the method been successful?
- Open houses and floor time contacts. Does it work for you? Do you need to focus on other methods?
- How successful was your marketing? Do you need to refocus on a specific target market?
2.2.2. Business Strengths and Challenges
Sizing up a company’s resource strengths and weaknesses (challenges) and its external opportunities and threats, commonly knows as SWOT analysis, provides a good overview whether a business is a fundamentally healthy or unhealthy. The SWOT analysis is grounded in the basic principle that strategy-making efforts must aim at producing a good fit between a company’s resource capability and its external situation.
Author and President: Carla Cross Seminars, Inc.
“Having a system with which to think through your business is the important aspect of business planning.
Conducting a SWOT analysis:
S – Strengths. A strength is something a company is good at doing or a characteristic that gives it enhanced competitiveness. This could be strong e-commerce technologies, practices, and expertise; unique advertising and promotional talents; brand-name image or company reputation; talented, motivated and energetic employees; astute entrepreneurship; market share leadership; consistently good customer service or exceptional customer service.
W – Weaknesses (Challenges). A challenge is something a company lacks or does poorly in comparison with others or a condition that puts it at a disadvantage. For instance; having no clear strategic direction; obsolete technology and practices; falling behind rivals in putting e-commerce capabilities and technologies; a weak balance sheet – too much debt; weak brand image or reputation.
O – Opportunities. A market opportunity is a big factor shaping a company’s strategy. This could be defined as serving additional customer groups or expanding into new geographical markets; using Internet and e-commerce capabilities to cut costs and offer additional sets of services to customers; openings to exploit new emerging technologies; openings to take market share away from rivals.
T– Threats. Certain factors in a company’s external environment pose threats to its profitability and competitive well-being. Threats can stem from new competitors in the market and increasing intensity of competition; rise in interest rates and fuel prices; the slowdown in market growth; new state.
2.3. The Focus of the Business
Following the analysis of economical environment, the industry, rivals, target markets and your business, it is necessary to tie the loose ends into a strategy for your business. Rethink and drop the business and activities that are not profitable; change to different target markets if necessary or offer different services to your clients. Start with creating a Vision and Mission for your business in order to craft out a path for you to make better business decisions and serve customers/clients better. The purpose of the statement is to communicate:
- The specific business you are in
- The geographical target markets you serve
- The services you provide
- The specific groups of people you provide service to
- Your business ideals
These statements convey your company at best and how you see your business in real estate. Statements should be well-defined, restrictive and written in present tense.2.4. Setting Objectives
Through the Vision and Mission Statement, you have determined and defined your desired results. It is important to create objectives for your preferred market:
2.4.1. Develop Financial Objectives in Terms of a Budget
- Revenue Objectives
2.4.2. Derive Sales Objectives from your Financial Objectives
- Listing Appointments
- Listings Taken
- Listings Sold
- Buyers Closed
2.4.3. Set Marketing Objectives
- Determine the budget for marketing
- The channels for marketing and advertising
- The “how” of the marketing in the above channels
2.4.4. Set Professional Development Objectives to support The Business
- Determine the areas of knowledge deficiency
- Offer courses to staff members
Realty Executives of Nevada – over 3700 career transactions!
“I have found that by having a plan, and diligently following it, I have consistently exceeded my goals each and every year!”
2.5. The Action Plan
Your objectives must fit your big-picture goals and need to be broken down into everyday actions, which will have a time constraint, will be monitored and measured, and will be attainable. Plot your activities to results, be realistic in terms of the time certain actions will take; for example, the time to find buyers, work with them and close the deal. Ensure that your earned income and business expenses are logged in and keep to what you have planned.
2.6. Concept to Calculations
The time has come to now convert goals, and concepts into action plans, and specific targets. This requires calculations, many calculations, ongoing calculations and above all, to keep yourself accountable to the numbers.