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The Not-So-Secret Formula to Building a Million-Dollar Real Estate Business

Many real estate professionals dream of building a million-dollar business. However, to hit that $1 million annual revenue mark, you need to have a solid sales system and abide by some basic good practices.

So, let’s get back to basics, shall we? Starting with the infamous “red book.”

The Millionaire Real Estate Agent (MREA) by Gary Keller offers a well-defined and easy-to-grasp model and systems to hit that million-dollar mark.

Keller recommends that real estate businesses follow the MREA Economic Model. In short, it’s based on three concepts: What goes in, what goes out, and what’s left over. In financial circles, those concepts are called income, expense and profit, respectively. The MREA model recommends that the proportions look like this:

What Goes In (Income): Gross commission income (GCI) is 100% of the revenue your business takes in.

What Goes Out (Expenses): Expenses have two categories:

  • Cost of sales (COS), which are the costs of making a sale including marketing, should be limited to 30% of GCI.
  • Operating expenses include your real estate business’ overhead, including your office and your staff. That should also be limited to 30%.

What’s Left Over (Profit): When you keep your expenses to those levels, you’re left with profit. Some of that is for you to enjoy as the fruits of your labor, some of it is for savings, and some of it is to reinvest in your business to grow it.

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It’s often easy to get caught up in more complicated financial measurements, but keeping it simple frees you to focus on the real drivers of wealth in your business and in your life.

Keep an eye on the bottom line, including meeting proper gross income levels, as well as keeping expenses in check. The latter is critical because even “minor” expenses can add up and eat away your profitability.

When you abide by these thresholds, your profit margins are healthy enough to provide enough income for you and your team members, allowing you to attract new talent and grow your business to that million-dollar mark and beyond. 

Keller and co-author Jay Papasan, share their own insights in this video from the Keller Williams You Tube Channel.

Posted in Leads, Leverage, Listings
 
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