Photo by Tim Riley
For those of you who have been in business for anytime at all, you realize that cash flow is the life-blood of our businesses. It's the Holy Grail.
Today, many real estate agents are struggling to manage their cash flow because of fewer home sales, lower home values and commission pressure from clients. It's not hard to see that our incomes drop as the value of homes decline in our area. These factors make cash flow management critical for our survival.
Here are 6 ways you can increase cash flow in your business:
1. Reduce and control expenses:
I'm amazed at how my business takes on expenses. It's a constant battle to whittle these expenses down. Just this week, I spent some time going through every expense and found several hundred dollars worth of monthly expenses that weren't providing any return on investment. You must analyze every expense in your business and measure the return on investment. Is the expenditure providing a financial return? If not, you probably need to reduce or minimize the expense. As an example, I had a special Seller's account at Amazon.com to sell my books. This special account cost $39.95 a month. This account was no longer needed when I decided to give my book away for free. However, I've been paying $39.95 a month, month after month without any return on investment. Dan Kennedy once said, "It's not my nature to pinch pennies, but I've learned that controlling expenses is another way of making money, no less important than any other."
2. Delay Payments
As I was building my business, I constantly struggled with cash flow. Commissions earned always seemed to come after big expenses. One of my largest expenses was, and still is, advertising. To manage cash flow, I turned my advertisers into partners and delayed payments as long as possible. I realized that I could run an expensive advertisement, generate tons of leads and turn some of those leads into home sales before paying for the big expensive advertisement. This float helped me buy more clients faster. Try to negotiate extended terms with your vendors. You might be surprised at their willingness to work with you.
3. Only Work In Situations Where You Know You'll Get Paid
Do you spend time with unqualified prospects? If so, you're making a massive cash flow mistake. Don't show homes to a buyer unless you know they can qualify to buy. Be very firm about your time. Every minute you spend with someone who cannot or will not make a move is costing you hundreds of dollars. This includes sellers, too. DO NOT LIST AN OVER-PRICED HOME. Let your competitors waste their time and money, not you. Be very firm in your qualification of prospects, and don't be afraid to say "I'm not the best agent for you." Spending valuable time with a person who won't turn into a commission is like having thousands of dollars automatically sucked out of your bank account. Stop the bleeding right now.
4. Increase Sales By Attracting Higher-Quality Prospects
Where do your best clients come from? Focus more on acquiring and attracting higher-quality prospects. This will help you sell more homes in this challenging environment. Modify your lead- generation advertisements to repel unqualified prospects. If a prospect is unqualified, you don't want to waste a penny trying to convert them into a client. The highest-quality prospect is a referral. The problem is that referrals are typically limited in supply and dependent upon someone else. Instead, create strategic joint ventures to attract high quality referrals in large numbers. For information on how to do this, read this article: "Referrals on Steroids." Working with referrals is one of the best strategies for increasing your cash flow because you don't incur any advertising expenses, leaving your entire commission as profit. Referrals are your highest-margin clients. Reallocate time and money away from low-quality prospects into creating high-quality referral joint ventures.
5. Create BIG Pay Days
You have a huge advantage in today's market because you get to see great "deals" before anyone else. In today's market, you don't need to qualify with a lender to buy a great deal. In many cases, the seller would be happy to finance the sale of their home for you. Acquire a great deal and rent it for monthly positive cash flow or resell it for a big pay day. There is more opportunity for profit and cash flow in today's real estate market than there was two or three years ago. Use this situation to your advantage.
6. Use "Up-sells" to Increase Your Income From the Same Clients by 20% to 30%
This past week, I had to buy a new printer for my home office. The sales person tried to get me to purchase their upgraded printing package and extended warranty. I passed, but I appreciated the attempt to up-sell. There are countless ways for you to use up-sells in your business. One way is to create a higher level service for prospects. This service would include additional assistance and support for an additional fee or higher commission rate. Another up-sell would be marketing other targeted products and services to your clients and/or database. A great example of an up-sell most agents use is the Home Warranty. What other products and services can you offer to your clients and earn a fee? Moving assistance, home staging, home security systems, passive investment opportunities, etc. The opportunities to up-sell are unlimited. The problem is most agents haven't taken the time to add this cash flow opportunity into their businesses. Be sure you follow all applicable disclosure requirements with up-sells you implement into your business.
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