Chris Hanley knows how to make money and more importantly – how to keep it. He has been a real estate agent for more than 30 years and under his leadership, Byron Bay First National has been the leading agent in Byron Bay and its environs for more than a decade, and is also the leading office in the First National network. To ride the ups and downs of the property market like Chris Hanley, you have to know a thing or two about money.
Chris says, “My view of money is that you can develop the feel for it exactly the same way as you can develop the feel for a listing and the feel for working with a buyer but a lot of salespeople never learn the money in a business because they don’t think it’s sexy. They think that learning the money is about as interesting as watching grass grow.”
Not so, says Chris. He knows that knowledge is power. “It is very, very exciting to be able to run a good business, but you can’t run a good business unless you get the money, and you can’t get the money or understand the money, unless you learn what you’ve got to look for.”
Here are his top tips for developing a feel for money
“Having a big income is not the same as having a big profit. In our industry people totally misunderstand what income and profit are. For example, I’ve seen businesses that turn over $1m in sales commission and make $200,000 - $250,000 a year net profit and I’ve seen businesses that turn over $3m and don’t make any net profit. So a big income is not a big profit; they’re different things.”
Be profitable from the beginning
“Every organisation should be profitable. Not next year, not the year after, not in three years. Don’t have a three-year plan to be in profit, have a three-month plan. That’s the most important thing you can do with money. Sure, there might be a few quarters at the start when you need a bit of running money to get you going, but set your business up from Day One so that the costs of running that business are minimal.”
A big income is not the same as having a big profit.
Save from Day One
“Saving's a habit; get it in place from Day One. You can adjust the amount that you save to suit the times. We’ve reduced it, we’ve made it bigger, but just do it - it’s a habit and a great habit. Save, save, save even when there’s no money. We’ve always had a saving business. Whenever we get any commissions into our business, in any market at any time, we take some of the money off that and we put it away and it's like having one of those little savings boxes that you get at school and it introduces you to the habit of saving. You put it in the tin; you can’t get your hands on it. “
Debt is not your friend
“Do not spend money that you don’t have. Do not borrow money for things. There is good debt and bad debt and as far as I can see the only good debt is that debt where you buy some asset, for example a rent roll, pay it off over time and then you own it and it produces income. So don’t have debt. Hate debt. That is a really, really good idea: hate debt.“
Tax deductions don’t necessarily mean profit
Just because something is tax deductible does not mean it’s profitable. If I hear one more boss say, ‘Oh it's okay, it's tax deductible’ I’ll go crazy. It’s ridiculous. If it's tax deductible, you’ve still got to spend the money. The profit doesn’t go in your pocket - it doesn’t make any rational sense to me.”
Reduce costs sensibly
“It’s a waste of time cutting costs if you focus on that end and then your sales slide so that your income drops as well. But there are many ways that you can reduce costs. Look at renting, for example. A lot of people own their premises but if you don’t, you have to rent. Until recently, we were paying extraordinary rents for two different premises in the same town. Our rental department was in one and our sales department in the other. I moved everybody together because the rents we were paying were unbelievably high and our business has prospered since. We’ve saved a large amount of money.
Work out the difference between muscle costs and fat costs. You’ve got to know the costs in your business that you can’t take out and those that you can. A lot of people are convinced that they need certain things that they don’t. There’s a whole pile of things you don’t need in your business.
Take one thing out at a time and then you hold your breath for a few weeks and months to see whether the place still works well and if it does, then you take another one out and learn from trial and error.”
Work out the difference between muscle costs and fat costs.
Be proactive
“You’ve got to be doing things, you can’t be passive. Be on the attack. We’re always in our market place out there with new ideas; we’re always trying things. Not everything works but we’re always out looking for things, we’re always asking questions, we’re always coming up with new innovations and we’re never waiting.”
Look backwards
“Most people do look forwards and upwards and that’s a mistake. The future is something that hasn’t happened yet. I look backwards. I look at what the business has made in terms of income this year and then I take some money off that. I actually think that next year is going to be harder. So what I’ve just recently done and done a couple of times in the last four years, is when we get to the end of the year, I look at what we’ve made in terms of income and what I do then is reduce the income for next year deliberately. So if the business is going to turn over $1m this year, for the next year, I’d project and say, ‘Well we might only do $900,000 next year or $850,000’. Then I make my costs fit into that model so that if we only do make $850,000 or $900,000 in terms of fees, the business will make money because costs have been reduced to fit into that lesser figure.”
Building an ALL WEATHER Business: Leadership Workshop 2014 in Singapore
Chris will share the 16 modules of his All Weather Business model in a 2 day Singapore conference, co-hosted by Lee Woodward on 2nd & 3rd of June 2014.
Register today and you will also receive the complete audio series for a special package price of $1495 per person.