latte

Success in Real Estate and the ‘Latte Factor’

If you buy yourself a latte every morning on the way to the office or when you head off to show a client a house, prepare to say goodbye to a good $1,000 a year in your hard-earned commission income. That’s about how much buying a latte every workday will run you. Would that money have been better spent marketing your business or getting a professional certification to help set yourself apart from the competition?

That’s the kind of question you want to ask yourself when you sit down to prepare your budget each year, says Victoria Gillespie, director of business development at REALTORS® Federal Credit Union, a division of Northwest Federal Credit Union.

As independent business people, real estate practitioners can benefit from planning their expenses at the beginning of each year just as a business does, Gillespie says in the fourth video in REALTOR® Magazine’s financial planning series, Your Money Matters. That means examining even small expenses like dry cleaning and getting your car washed, both of which are necessary expenses for maintaining a professional appearance but which can be managed through attentive planning. For example, buying clothes that don’t have to be dry cleaned and buying a light-colored car that doesn’t show dirt as much as a darker car can save hundreds of dollars a year in expenses.

One way to get a handle on your expenses is to identify the minimum expenses you need to do your job: office costs and marketing expenses are two examples. Once you have a projected dollar amount for the year, calculate how many transactions you have to close to reach that number. You can do that by identifying your total income from the previous two or three years, dividing that number by the number of transactions you had, and deriving an average commission amount for each transaction. Then divide your minimum expense number by your average commission income to get the minimum number of transactions you need to meet your expenses. Once you know that number, you’re in a good position to look at what you’re spending your money on to see if your dollars spent are getting you contacts with customers who eventually will close a deal with you.

Will the latte help you get there? If not, that might be one expense to curb. Get more on these ideas in the six-minute video above. You’ll find the previous Your Money Matters videos below.

Watch the fourth video now.

Go to the third video on credit unions.

Go to the second video on reserve accounts.

Go to the first video on taxes.

Robert Freedman

Robert Freedman is manager of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

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Comments
  1. PUHLEEZE.

  2. If this is your best advice I feel my dues are sorely misspent.

  3. I thought we were thinking about the possibility that of a cup of latte each morning could be a good way to meet people, and a good investment in getting new business, instead of a waste of money that could be better spent elsewhere. Actually, we just never know from where we might get new business.

  4. Julia Foley

    To the contrary I have met and networked with many clients in neighborhood coffee shops-not to mention picked up info on neighborhood listings and insider info etc etc etc- Being out and about and known in your hood is crucial to getting business. Worth every penny of a good latte!

  5. Go ahead, have a Latte!

  6. John Gillespie

    Thanks for this Pearl! (of wisdom)
    Very true and accurate article,
    IF you are financially conscious
    OR you are not a personality type that mingles well.

    I get the 99 cent c-store coffee: Only taking $150 from my BUDGET.

    (Robert, for other comments about pearls see Matthew.)

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