Why Most Team Leaders Miscalculate Profit

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.

If you’re a real estate team leader, there’s a good chance your profit isn’t as strong as it looks on paper. CPAs and bookkeepers often report healthy numbers, but many leaders later find out their business is only staying profitable because their personal production is doing the heavy lifting. You should see the real numbers before you invest more time into a model that depends on you to keep it running.

Why does adjusted net profit matter? This is where adjusted net profit becomes important, because most team leaders who are still in production have never seen an accurate picture of their profitability. When you’re selling, managing agents, and trying to grow at the same time, the business feels active and productive, which creates the illusion of strength. Deals close, money comes in, and the team looks busy, but none of that proves the model can stand on its own.

If your team can’t stay profitable without your personal sales, you are not building a scalable business, and many leaders feel shocked when they finally run the right numbers and see how much their own production has been masking.

How do you calculate your net profit? Adjusted net profit is the clearest way to see the real health of your business.

First, you start by looking at the net profit on your financial statement, then subtract the unrealized cost of sales from your production. This is the amount you would have paid another agent to handle your transactions, and removing it shows you whether your business is profitable without you.

After that, you add back any owner salary you pay yourself. Then, include any indirect expenses that reduce your taxes but do not reflect real operating costs. These can include a gym membership, a vehicle, or personal travel that was coded as business travel.

Once you have this number, you divide it by your true total revenue before any broker fees, agent splits, or referral fees are paid. This gives you your adjusted net profit margin, which becomes the most accurate view of your financial performance.

What should a healthy margin look like? A strong real estate business should run at a 20% to 25% adjusted net profit margin. When the number drops below 20%, the model is not healthy, and the issue almost always comes from one of two places. Your cost of sale is too high, or your spending is too high. In some cases, both areas need correction, but it always comes back to these two factors.

What should you do next? If you have never calculated your adjusted net profit or your books aren’t set up to produce these numbers, this is the point where clarity becomes essential. When you understand your real profit, you can see if your business is truly working or if your own production has been holding everything together. This is the moment when you can make informed decisions about your structure, your margins, and your future.

Stop letting unclear numbers shape the future of your business. You need books that reflect how a real estate team truly operates, so you can see your adjusted net profit with accuracy and make decisions that move you forward.

When you understand the real health of your model, you can finally fix what’s broken and build a business that performs even when you’re not the one selling. Schedule a strategy call today and take the first step toward running a team that stays profitable without relying on your production.