Why Most Real Estate Teams Aren’t Truly Profitable

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.

Are you looking at your Profit and Loss statement and comparing your numbers to other real estate team leaders? Maybe you’re at a conference or talking to someone on a mastermind call. Here’s the problem: You’re probably comparing apples to oranges.

If someone says their team is 35% profitable, and you think, “I’m not close to that,” or “I’m doing better than that,” you’re missing the full picture. Without the right context, those numbers don’t mean much.

The problem is that false profit comparisons don’t give you the full picture. Here’s the truth: Many team leaders think they’re profitable, but they’re not. A team leader might claim 35% net profit, but you need to ask them these questions:

• How much production did they actually do themselves?
• How much did they pay themselves in salary?

These details are essential. Without them, you can’t make an accurate comparison. Without an accurate comparison, the numbers will not be able to tell the real story.

Here’s another issue: Many team leaders run personal expenses through their business to reduce tax bills. We’ve all done it. However, if you’re not separating those expenses properly in QuickBooks, you don’t have a clear picture. Without separated numbers, you don’t know what’s really going on in your business.

True profitability starts with accurate numbers. You need to track the right numbers. Know exactly how much you’re paying yourself and if you’re properly tracking indirect expenses. Only then can you truly understand your business’s profitability.

I help real estate team leaders set up bookkeeping systems that reflect the true health of their business. By using a real estate-specific chart of accounts, you can see where your money is going and how much you’re actually making. This is critical when comparing your numbers to others.

If you’re not comparing apples to apples, you’re setting yourself up for failure. You might think your business is doing better than it really is, or worse, you might think you’re doing worse than you actually are. If you have any questions or you need help to get clear on your numbers, you can email me at andy@simple-numbers.com. I will help you get your bookkeeping right to ensure you understand your business’s true financial health.