WEALTH BUILDING Six Tips for Reviewing Your P&L
Prosperous agents keep fiscal health first Ross Clawson, Chief Administrative Officer, PLACE
60% profit margin, but as your business expands, revise your estimate to a target of 30 to 40%. Our own PLACE Co-Founder, Chris Suarez, decided to run his business as a team from the get-go. When creating his initial P&L, he put himself on a commission split, allocating 10% to leverage and an additional 10% to lead generation in his operating account. This approach also helped attract talent, as agents had the same potential net profit margins as the business as a whole.
We sat down with PLACE Chief Administrative Officer Ross Clawson to discuss best practices for reviewing a profit and loss (P&L) statement to ensure your business is making enough money after expenses to justify your output and identify areas of improvement.
Ross Clawson has led PLACE finance as Chief Financial Officer since the company’s inception, and was recently promoted to Chief Administration Officer in September 2022. In this new role, Ross and his team work closely with PLACE Operators to evaluate the financial health of their businesses and drive profitability. In speaking with so many real estate professionals over the years, his team noticed a common theme: most novices, and even agents further along in their careers, consider gross commissions a top success metric. Ross says that prosperous agents take a more well-rounded approach, adopting the lens used by successful business owners to examine fiscal health. This tactic means diving deeply into company financial activity and asking tough questions around revenue, operating expenses and more, with a thorough review of your profit and loss statement. As you review your company’s P&L, Ross recommends these six tips to live out your own version of the PLACE vision: win in business, make money, give to others, live experientially, and do good. REVIEW YOUR PROFIT TARGET When you created your first P&L, you probably set an initial profit target (and if you haven’t created that P&L, here is your first order of business). Take a look at that target through fresh eyes. As an individual agent, it is not unheard of to hit a 50 to
40% COST OF SALES + 10% LEVERAGE + 10% LEAD GENERATION =
40% PROFIT
TAKE A DEEP REVENUE DIVE Don’t just take your GCI at face value. Instead, ask yourself these five questions to help understand what is driving this critical metric and identify areas for improvement: • How does my GCI compare to what I budgeted, and if there is a variance, why? • What is my ratio of list vs. buy units for the month, and the year? • What sort of training does my team need to focus on more- profitable listings? • What was the overall team commission percentage this month, and year-to-date? • What is my average selling price year-to-date and how does it compare to last year?
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