We’re already halfway through the fourth quarter.
If you want to level up in 2025, you need a solid business plan—and that starts with knowing exactly where you stand today.
So, I want to encourage you to do a deep dive on the numbers that have created your 2024.
I know they aren’t yet fully complete, but you should have a pretty good idea of what the last few closings will bring for the year and where the bulk of your expenses will finish up as well.
Your business tells a story—one written in data. And by understanding the big picture and then drilling down into the details, you’ll uncover key insights that can sharpen your strategy for the year ahead.
Let’s dive in!
Revenue
The quick and dirty high-level numbers you need to know are—
- How many units sold
- How much volume was closed
- How much money came into your business—aka, your revenue.
I personally think that, at high level, you should not look at the total gross commission, but rather look at the commission you received after splits with your broker.
More often than not, your split structure will stay the same from year to year, and since the full commission check isn’t coming into your personal bank account, your broker splits aren’t an actual expense.
Finally, you need to know which lead source resulted in each deal and have the revenue for each specific transaction tracked as a line item.
Expenses
Next, do the same thing with your expenses. If you keep a dedicated business credit card and bank account, this exercise will be a hundred times easier. If you don’t have those dedicated items but have kept all of your receipts in one spot, you’ll be one step ahead.
If you’re not one of those people—and don’t think this means I’m judging because I myself am not one of those people—this exercise will be harder, but probably more important. This will help result in some epiphanies.
Like my daily Dunkin Donuts habit, which I don’t track. I say I spend $50 a month on my daily coffee, but if I’m really, really honest about it and look at the numbers, I probably spend more like $70 per month on my coffee.
Even as I say this, I’m remembering why I should just buy a travel mug and make my coffee at home.
But my point here is that as we move further through these exercises, we need actual numbers.
Making decisions based on your gut instincts is okay, but to move the needle in your business, you need to remove emotion and look at the black-and-white facts.
The added bonus to this exercise is that you will likely start to find some of those good-intentioned expenses you keep paying for but forget to actually use—like the app you thought you would love.
For me, it was the Calm app to help me meditate. I paid for almost a year. I used it once.
Or maybe it’s the auto-refilling Audible credits—because your New Year’s resolution was to read more. Eleven months later and you realize you’ve got 11 new audiobooks and have spent an average of five minutes listening to each one.
So, as you take a closer look at your numbers for 2024, three things will start to shake out:
- Profit & Loss (P&I)
- Return on Investment (ROI)
- Minimum Sales Requirement
Profit & Loss Statement
Once you’ve calculated your sales income and expenses, you have the foundational items to start creating your own P&L, or profit and loss statement.
You can start by sorting your expenses into different categories to get a handle on exactly where the money is going. Start to look at the ratios of your expenses going to the different categories, to get a feel for where you’re potentially both overspending and underspending.
You can then benchmark your expenses in those expense categories against other similar businesses. You may not geek out on that as much as I do, but I guarantee you will have some A-HA moments.
With all these numbers in front of you from 2024, the next thing that will start to shake out is what you truly made as profit.
The income at the top minus the expenses is your actual profit. You may need to offset things a smidge to account for the last few weeks of 2024, but you’ll have a pretty clean look at where things stand.
Keep this new P&L as a living, breathing document—one you’ll update monthly so you’ll always have this information handy.
Return on Investment (ROI)
The next step is to get even more granular on some specifics. We’ll start with your ROI, or return on investment.
Return on investment (ROI) is the metric used to evaluate the performance of an investment in a lead source or marketing funnel. ROI is expressed as a percentage and calculated by dividing an investment’s net profit or loss by its initial cost.
This metric helps you make apples-to-apples comparisons and rank which lead sources are the most profitable or the best performing.
You should be able to get an ROI number for each of your lead sources.
A big part of your ROI is your customer acquisition cost (CAC), which is a measure of how much you spend to attract new customers. This metric includes all sales and marketing expenses, such as lead costs, salaries, referral fees, software used for nurture, and on and on.
You can do this as a blended number for your business as a whole, and then look at each lead source individually. This is often eye-opening, as I promise you, more likely than not, you will look at the numbers and be surprised at which lead source has the lowest CAC.
The number will play a critical role in your business as you grow. One thing you should start to think about is lowering the CAC year over year.
As you do this, you will not only increase the ROI for each lead source, but you’ll also increase the profitability of your business as a whole.
Minimum Sales Requirement (MSR)
Finally, there is your MSR—your minimum sales requirement. I truly believe all of us should base our MSR around covering not just our business expenses, but also to cover our personal expenses. This will require you to dig a little deeper on your expenses and go beyond just the expenses on your P&L.
Once you know the full breakdown of your expenses and your average tech size, you’ll be able to calculate how many sales you need to make to break even or to cover all your expenses.
It’s both scary and liberating to know these numbers.
And there you have it. You now have the tools you need in order to start taking control of your money, to move away from those gut reactions, and to lay the foundation for your goals and business plan for 2025.
We need to know where we’re starting from. It truly is the foundation for goal-setting and planning for your next year as a real estate professional.
