Chris Hanley, from Bryon Bay First National has seen it all. Over the last 30 years, he has ridden economic booms and busts because he understands the truth about money. Chris believes that most real estate agencies can’t handle the truth and have learnt nothing from the GFC. He says, “A business should make money from day one, not a few years down the track.” Chris warns that if agencies don’t have a saving plan or good reporting, if times get tough again, businesses could go under.
1. Study Failure
Don’t just study success, don’t go and find out all the good businesses - go and study failure. What you’ll find by studying failure is that you’ll learn as much, sometimes more, so go and study what has made some businesses collapse. Usually the answer is a lack of funds and a lack of flexible strategy. Most businesses are set up with one strategy: it's wrong, they fail and they don’t have enough money to continue.
2. Do your homework
Don’t just go and set up a business because you hate your boss and you want to get even with him and there’s a vacant shop down the road. Do your homework. Do it extensively and do the best homework you can do. I’ll tell you right now, find out how big the pie is. If in your area there were 72 house sales last year and there’re 16 agents selling, I can tell you right now, if you’re going to operate just in that area, you’ll go broke within two years, so do your homework.
3. Underestimate income and overestimate cost
Underestimate income and overestimate cost. Whenever you’re doing any projections or doing anything about your business, make sure you use that dictum.
4. VPA is not income
Many real estate businesses unfortunately include VPA in their accounts as money coming into the business; it's not. You are a collection agency for Fairfax and local newspapers or realestate.com. VPA is not income. GST is not income. When you collect GST you are acting for the Federal Government collecting tax; both of those things are not income. Okay?
5. Know the difference between gross profit and net profit
Know the difference. I have sat with people who’ve told me the profit in their business over and over, only for me to find out later they’re talking about the gross profit. There’s only one thing you’re interested in a business and that is the net profit.
6. Always have a Plan B and a Plan C and a Plan D
It’s not enough to have a Plan B. You need a Plan B, C and D. We had a Plan D in 2008 and 2009. Our Plan D was that if all else failed in the post-GFC world, the six of us in our business who’ve been together for a long time, would go back on the tools and make the cost changes that we needed to ensure the business survived.
7. Always have a stash
Always have money put aside somewhere so that if all else fails you’ve got some cash; the stash is cash. The stash is not credit. You can’t have a credit stash, right. You can’t go and borrow. You can’t use your credit cards or some overdraft to get you out of trouble; you’ve got to have a stash. So always have a stash in your business.
8. A duck is a duck
If I hear one more person, tell me this new beaut thing that’s going to do this or it's going to produce this - it isn’t. If something smells likes a duck, quacks like a duck and looks like a duck – it’s a duck! It isn’t going to get you out of trouble and always remember here too with money that there’s a time delay. We’re not in an industry like the ice-cream business where you can reduce the cost of your stock this afternoon and tonight; and then have all this extra money in the till. With us it takes three or four months for it to come through so there’s always a time lag which needs to be taken into account.
9. Be afraid when people are greedy and greedy when people are afraid
Take advantage of fear. During the GFC, the market and the public and other companies were all anxious between 2009 - 2011. We took advantage, we branded our business, and expanded our market share from the low 30’s, well into the 40’s, and we expanded our sales team. We grew our business at a time when most players in the industry contracted.
10. Always pay yourself first and put some money away
If you’re running a business where you keep saying to yourself ‘Yeah, yeah, I’ll take some money out later’, that’s wrong. You need to take the money out to reward you for the work you’re doing every week, so always pay yourself first.
11. Analyse and chart the yearly cash humps and the bumps in your business
In our part of the world, our market has been reduced to about ten months or nine-and-a-half months a year of effective cash flow. That’s because in the holiday period in December and January, people come to be on holidays, not to buy a lot of real estate. We’ve had to plan and look at the last couple of years and see when we’ve got cash in the bank and when we haven’t. You’ve got to do this to make sure you’ve got some extra money to get you over those money speed bumps. In our business, I know exactly when that is.
12. You can’t bank market share or rewards or profile
The only thing you bank is profit.
Chris will share the 16 modules of his All Weather Business model in workshops across the country.
Register today and you will also receive the complete audio series for a special package price of $995 per person.
Register today www.realestateacademy.com.au or call 1300 367 412