(This is Part 1 of a three-part series. See Part 2: Birth date impacts real estate success and Part 3: Real estate biz prosperity changes with the seasons.)
Ninety percent of all businesses lack a business plan. Even among those who do have a plan, their plans often fail. Did you know that the season in which you are born might be an influence on whether your plan will succeed?
For the last seven years, I have been using the Native American Medicine Wheel as a coaching tool for people to have better lives and better businesses. Native Americans divide the wheel into four directions representing the different seasons of the year. They also believe that the season in which you are born influences you throughout your life. Surprisingly, hundreds of research studies support this proposition. Season of birth influences everything from your longevity to the types of diseases you are most likely to experience. For example, in the United States, those born in July survive the longest while those born in October have the shortest life expectancies. People born in March or April are more likely to be schizophrenic. Those born in the spring are more likely to die earlier from heart disease, diabetes and influenza than those born in the fall.
Using the Native American approach, each of the four seasons carries an energy related to the activities that take place during that time. During the winter, (“North” on the Wheel — and includes December, January and February) you consume what you grew during the last season and make plans for the upcoming year. It is no coincidence that most businesses do their business planning at this time of year. During the spring (“East” on the Wheel — and includes March, April, May), you plant your crops. This is an act of belief that the seed you plant will grow and flourish. During the summer, you nourish what you have planted (“South” on the Wheel — and includes June, July, August) and in the fall you harvest (“West” on the Wheel — and includes September, October, November). Native Americans believe that following the Earth’s patterns creates positive results. Not following the pattern creates chaos and poor outcomes.
How does this apply to the creation of your personal business plan? The challenge that virtually all businesses face is the “think-do” pattern. This involves making a plan and then implementing it without checking how the plan will work with your community and without doing the necessary work to make the plan a reality. This is the equivalent of thinking about planting a crop and then expecting a harvest when you didn’t plant anything in the first place. Virtually every real estate business plan follows this think-do pattern. The following approach to creating a business plan illustrates the think-do approach:
1. Begin by determining your average sales price for the previous year and your average amount of commission. Determine how much you would like to make and then divide that by your average commission to see how many transactions you will have to close to hit that goal.
2. Review how many appointments you went on, how many converted into signed business, and how many actually closed. Knowing your closing ratios (i.e. how many contacts it takes to produce a lead, how many leads are required to place a property under a contract, and how many properties actually closed after being placed under contract), will allow you to determine how many people you must contact on a daily basis to close the number of transactions you set as your goal.
3. Evaluate the number of leads from each of your marketing activities: geographical farming, Web marketing, referrals, relocation, expired listings, etc. Determine which activities are the biggest moneymakers and devote more of your time to these profitable activities. Make this determination after calculating your revenues, expenses and net profits. For example, selling four $300,000 houses may takeless in time and marketing costs as opposed to selling a single home for $1.2 million. Your plan should include how to expand these two or three key niches rather than using a shotgun approach that tries to service the needs of every client you encounter. Focus your business on what worked and eliminate activities that had poor results.
4. Implement your plan, but be sure to review it each month to see if you’re on course. Make adjustments if necessary and do whatever it takes to hit the production goals you set.
Think about what you should do, evaluate what you did in the past, come up with a new plan for 2006, and then implement it. This pattern is think-do, think-do.
In contrast, a balanced business plan involves more than just evaluating past results and thinking about what you would like to do in 2006. A balanced plan incorporates past experience, analysis of the numbers, market research, customer service evaluation, and how well each of these relates to your personal motivation and passion. Without each of these parts, your plan may actually create more chaos than having no plan at all.
Special thanks to Marilyn Naylor whose work provided the core concepts for this article.
To learn more about how to create a business plan that really works, see next week’s article, “Are You Trapped in Think-Do?”
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