Are You Tracking Your Real Estate Profits Right?

By Andy Mulholland

He has a background in leading a top real estate team for over a decade and an understanding of the critical role of clear financials, Andy, along with his wife Ellyn, a seasoned real estate CFO, co-founded Simple-Numbers.

You might think your real estate team is doing great, that you’re hitting all your targets, and that your business is running smoothly. But what if I told you that you could be looking at all the wrong numbers? You might be more “busy” than “profitable,” and that’s a big problem.

I recently had two strategic calls with real estate team leaders. These were high-level teams doing solid work in the market. But when we took a closer look at their numbers, we uncovered something shocking. Both teams thought they were healthy and running a scalable model, but it turns out that they weren’t. This is a mistake I see way too often.

The problem: They didn’t factor in the owner’s production. When you’re a real estate team leader, you likely handle a lot of the production yourself, and this can make your business look much more profitable than it really is. The reason is that you’re not factoring in the cost of your own work the same way you would for your team members.

Let’s break this down. To understand your true profitability, you need to calculate what’s called your “adjusted net profit.” This means taking your production as an owner into account and applying the same margins that you pay to your agents to your own production. Without doing this, you’re distorting the numbers, making your business seem healthier than it really is.

How do you really know if your business is profitable? Next time someone tells you their real estate’s financial health is excellent, ask them two things:

• Are they paying themselves like an agent with the same margins as their team members?
• How much of the production did they personally handle as the owner?

These two questions will tell whether you’re seeing the full picture or not. If you’re doing too much of the production yourself, you might be hurting your margins, even if you feel like your business is successful.

The solution: Adjust your numbers and know your true profit. If you’re unsure how to calculate your adjusted net profit or need help understanding these numbers, we can help. At Simple Numbers, we specialize in making sure real estate teams know their true profitability.

Don’t let yourself get stuck thinking your business is in great shape when it might not be—it’s time to take control and know your real numbers. If you need help in tracking your numbers, just email me at andy@simple-numbers.com. I would be happy to provide you with expert guidance and insights to keep your business profitable.