Category Archives: Income Management

Cash Flow Pressures

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Now might be the time (certainly in Sydney & Melbourne markets) where you might be discovering how strong the foundations of your Real Estate business are? When markets are strong and revenue plentiful, it can hide a multitude of sins. Got a problem, throw more money at it!

However for many, this may be the first time you’ve experienced such challenges in the real estate industry, especially if you’ve been in business less than 10 years, anyone remember the GFC….? Or more recently if you’re on the West Coast, the down turn that came via the mining sector correction, lots of listings no buyers or new managements, but no one to live in them.

It is now that your business requires strong leadership and financial management to push through the other side. First and foremost ask yourself these questions;

  • What is my businesses break-even point?
    • How many sales per month do I need just to keep the lights on?

  • Is my sales team being productive? Being busy and productive are very different, they’re not productive if they’re not listing and SELLING.

  • How does my cash-flow look for the next 6-12 months?

Two of these are financial, the one that is not, can have the biggest impact on the other two! Knowing your break-even is the barometer of your business. If you’re monitoring the productivity of your agents then you’ll know exactly when you’ve passed the “kept the lights on” moment. Your profit and loss report gives you great insights into where your money goes (and if you’re making any) and the trends of your business, a forecast cash-flow shows you where you are going! If you would like a break-even analysis done on your business or a forecast cash flow, then contact us now.

Now is the time for action, keep listing through Christmas up until the office doors close, if you stop so will your sales team! Remember your December BAS will be due for payment in February and March BAS in April, two big cash flow impacts in a short time frame, be prepared.

Outsourcing is a great way to protect cash during lean times, employing staff that are not busy or efficient is a drain on your business. By outsourcing you pay for only what’s required, by someone who specialises in that area. Think about this, if you had to go to court, you wouldn’t go get a law degree or employ a full-time solicitor, you go get a gun for hire to do that job that needs doing! Find out how we can help here.

How do you increase profit when everyone is ‘Discounting’?

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When Gerry Harvey was answering a question during the toughest moments of the retail ‘recession’, if Sales had become a permanent feature of all retail outlets. He answered, and I paraphrase:

“The secret to successful retailing is not just discounting, anyone can do that, but getting the customers into your store with discounted products and selling them the benefits of the better products with higher margins in store.”

So how does this apply to today’s property sales market?

Property is all the rage in the media, headline grabbing results in Sydney, are setting the tone for the country, but not everyone is enjoying the stronger selling conditions of Sydney, why?

Two Factors: 1) Low numbers of Stock, and 2) Discounting in the market by agents trying to get a listing.

Inexperienced operators, or the more tired operators are justifying their discounting because properties are selling quickly and not requiring a lot of time. Their thinking is “I’ll do it for 1.5%+GST because it will still be $10,000.”

Smart agents realised, that by showing the vendors they were willing to meet the market for an average result, they could ask for an incentive or “kicker” if a better than expected result was achieved. So rather than “just discounting” their fee to 1.5% +GST they pick a price point and ask for a higher%. The vendors are happy to agree to it, because they know they will have achieved their minimum expectations, and the rest is upside.

This is what Gerry Harvey was referring to when he pointed out the difference in retailers, providing a service to the customer, rather than flogging old stock at a discount.

I could mention a number of my customers that have enjoyed great commissions for great sales results, where everyone was happy with the outcomes. In fact, they have increased their average % commission fee as a result, even though they agree to “discount” and get the business. That’s smart business operating. The Live Bookkeeping Way.