Tips for your 2018 strategic business planning
As the end of year approaches, and the housing market typically slows in December, it's a great time of year to grab an eggnog and reflect on the year that's been and plan for the year ahead. Setting a business plan for the 2018 year doesn't have to be an arduous task; the most important thing is taking what's in your head and writing it down so you can hold yourself (and your team) accountable.
1. Get the right people involved
If you work solo, then the only person who needs buy-in is you. But if your business is run by a team, then you will want to get key people involved so that they feel a sense of ownership over the outcome. Even if they don't have the final say, they feel like their concerns have been heard. You should have the functions of finance, HR, marketing, operations and sales represented, which may be handled by just a few people in a small organization.
2. Plan your plan
Once you know who you want to get involved, you need to ensure your time with them is structured and that any data or market research required as input is gathered and reviewed by all parties involved ahead of time (see: Where are we now below). Then, determine your agenda for the day following the outline below.
I have found in my career that the most effective business planning sessions do require some work ahead of time, whether that's gathering data or reading material, so everyone starts on the same page. Then there needs to be a clear agenda with outcomes for the day, a person responsible for writing the plan, and time set aside for follow up. If you are part of a large franchise organization, they likely have business planning guidelines or market analysis tools you can use.
3. First up: Reflection. Where are we now?
To know where you are going, you need to know where you have been. Or in the words of Jim Collins (Author of Good to Great), you need to confront the brutal facts. You are inviting your team to have input and need to create a climate of truth. The brutal facts can include some or all of the following points. If you don't have the resources to delve into this level of detail, that's ok—pick what's most important to your business and relevant to your success.
- financial performance year-to-date (and up to 5 years back if you have it)
- competitor analysis
- market share analysis – what percentage of listings did you close in your market?
- consumer trends – changing demographics in your area, changes in lending practices, migration trends
- sales analysis – how many leads came in, what was your conversion rate, average sale price, commission splits, agent productivity, ancillary service sales
- marketing performance – cost per lead, cost per converted lead by channel, brand (or office) level marketing performance
- operational performance – training, technology, and facilities costs and considerations, cost per transactions
- people analysis – turnover, recruitment costs, engagement (if you measure it)
If everyone in the team comes prepared, having read the background analysis, then you can get straight into debate and insight. What are your strengths, weaknesses, opportunities and threats? Yes, the good old SWOT. Dust off your university business 101 texts!
4. Where do you want to be?
This is the goal setting section of the plan and how far in the future you want is up to you, but I'd recommend setting 1, 3 and 5 year goals, as that will shape how you approach getting there.
Your goals should cover revenue, profit, and market share. This could also be where you craft (or refine) your vision for the type of brokerage you want to be. Do you want to move into the luxury market? Or new builds? Is there a level of service you want to be known for?
To make your goals achievable, they should be S.M.A.R.T – Specific, Measurable, Attainable, Relevant, and Timely. In defining your goals through the S.M.A.R.T. framework, you will also be setting out some elements of your course of action, which is the next step in your business plan.
For example, if your general goal was to increase revenue, a S.M.A.R.T. goal could be stated as:
Specific: In 2017, we generated $1M in
commission. In 2018, we want to generate $1.2M in commission to
achieve 20% year-on-year growth.
Measurable: To generate $200,000 in commission, we need to sell an additional $6,666,666 worth of property (at 3% commission), which is at our average sale price of $800,000 is 8.3 properties.
Attainable: We will launch an online advertising campaign to generate new leads. Assuming a 1% conversion rate (which is not great, but normal), we would need 800 leads over 12 months.
Relevant: Revenue growth is key to enabling investment in the brokerage. Internet leads are a good source of new business.
Timely: Each month we will invest $1305 per month in pay-per-click advertising (assuming $15/lead and a $300 management fee) to gain 67 leads per month.
As a team, you will need to prioritize which are the most important goals and focus on what is realistically achievable given your resources.
5. How will we get there?
With specific goals in place, now you need to determine what needs to be done to get there. Taking your S.M.A.R.T. goals as a starting point, you will also need to determine:
- Sales forecast - usually by month or quarter, including percentage of agent sales, broker sales, referrals, and any other revenue streams
- Marketing spend and strategy – given your desired market share and positioning, what activities will help you get there? What activity will help you achieve your sales goals (in our example, how much will you need to spend on lead generation and how will you do it?)
- Operations budget – what will your overheads be and are any new investments required?
- New services – if you want to service another market segment, do you need to create a new type of service? How will you define it and bring it to market?
- People planning – how many agents and admin staff do you need? Is training required? What is the recruitment and retention plan? What industry events will you attend?
Each person in your planning team should be able to outline their plans for the functional areas they are responsible for at the planning meeting, then work out the details in the following days to present back at your next scheduled meeting.
All in all, business planning does take some effort but it pays off when your entire organization is clear on what the goals and priorities are and the role they can play in achieving them.