Today we are going to talk about a real estate team budget that will propel your growth. One of the most common team-related questions we get here at ICC is, “How can I grow my team? I’ve tried everything, and yet we’re stagnant.” At ICC, we provide teams with a roadmap to success, with the systems, structures, and templates needed to create sustainable growth. Let’s dive in and talk about money — how to allocate it, and why.
Also, this blog gives you access to download our real estate team budget guide, as featured in this video. This download is free for subscribers.
As a coach, I direct so many of my clients to this chart before I answer any of their budget questions. I use this to help clients better understand the answer I will give them about their real estate team budget.
It’s an important chart, as you try to understand:
In my experience, before you start to think about forming a real estate team, you need to be at (or near) the gross commission income (GCI) amount in the chart’s first column. If you’re not there yet, you need to work toward getting there before making your first hire. (NOTE: Of course, there are exceptions to this; for example, if you are independently wealthy.)
It isn’t until you reach that first column GCI number that you start having that overflow business where you get too busy that you can provide enough leads to members of your team.
Team members join because they want more leads, oftentimes. This is usually the primary reason that a real estate agent will join a team.
When looking at this chart, find your gross commission income (GCI) and follow that column down. These numbers will help you form your real estate team budget.
From real estate team budget schedules to organizational structures, job descriptions, team meetings, and more — I wrote the handbook. You can read the guide to growing a successful real estate team within my Amazon bestseller, The High-Performing Real Estate Team.
By subscribing today, you’ll receive this fillable form for FREE. If you’re working on your real estate team budget, or simply want to understand what needs to happen for you to achieve sustainable growth, use the video within this blog as a guide.
There are four gray boxes that you need to calculate in this real estate team budget tool: GCI, Total Operating Expenses, Cost of Sales, and Net Income.
First, calculate your GCI and enter it in the second fillable section. This will dictate the column that you follow as your guide.
Total Operating Expenses are all of your fixed expenses; you pay these every month, regardless of whether or not you sell any real estate. These operating expenses should never exceed 30% of your GCI. The two biggest chunks of that are administrative salaries (which we cap at 12%) and marketing (which we cap at 10%). The remaining 8% should cover all remaining operating expenses.
This is your “cost of goods sold.” We call it “cost of sales” because we don’t sell goods in real estate — we provide a service. Cost of sales is defined as any expense that is deducted from the commission check. It’s what you pay your brokerage. If you have buyers agents, you’ll pay your buyers agents based on your split. If you have to pay a referral fee, that comes out of a commission check, too.
You will notice that your cost of sales increases as you sell more real estate and move on to columns further to the right on this chart. You pay more cost of sales as you sell more, and the chunk that gets taken out of your commission check gets bigger and bigger.
At first, you may worry about this. It looks like the more your team grows, the smaller the percentage you take home. That’s true, and here is the reason why. Your own personal production is going to get smaller as you bring on more agents to your team. They are going to be doing more of the work and you will do less of the work, as a result. You will still continue to make more money, and you’ll be working less.
This box is determined by the three other gray boxes: GCI, Total Operating Expenses, and Cost of Sales. As you move to the right with each column, you’ll see that your percentage goes down. The profit margin is always going down as you move to the right. But, the dollar amount is always going up.
The reason for that is that more and more of the production on your team is being done by other agents. This is an important concept to remember, and it is true in all business. The more successful the person, the lower the margin. Most low-producers don’t understand this because they are too split-sensitive.
The biggest barrier to creating a successful team is that team leaders are too cost-sensitive. They’ll spend money on offensive strategies — for example, marketing — but then shy away from paying for administrative support. They also shy away from growing their team because they are too split-sensitive. Smart team leaders know that you need to pay for that support in order to grow.
These concepts are a lot for many real estate team leaders to handle. Even if you understand how this real estate team budget tool works, it’s another thing to use it and stick by it. With the help of a coach, you can get the expert guidance and support you need to successfully (and sustainably) grow your real estate team.