Can you really tell how well your year in real estate went? How are you tracking performance over the past? How are you using data to ensure you keep getting more of what you want?
Take a look at these seven metrics, and you should be able to determine how your 2015 went:
1. Gross Income: Gross income is probably the most common metric most real estate investors, agents, and business owners are familiar with. You’ve probably got a good idea of how much you made last year. If you don’t, you can just look at your tax returns. This is probably the one goal that everyone shares. However, are you also tracking your gross income year-over-year? Are you seeing it increase on a yearly basis? Are you setting higher income goals each year? Your gross income is unlikely to increase unless you set higher goals.
2. Net Income: Gross income is great, but net income is far more important. It doesn’t matter how much your gross is, if your net isn’t stacking up. This is the amount of your income that you can actually use. When it comes to your tax returns and mortgages, your Adjusted Gross Income (AGI) is normally the number lenders will use to qualify you for a loan. Some additional amounts like depreciation may be added back.
3. Profit Margins: Profit margins are the difference between your gross and your net. In real estate, you’ll have “per deal” profit margins, business profit margins, and you’ll even have a personal profit margin. How much you make on each deal is important. It makes all the difference in competitiveness, and if you’ll be able to keep doing deals when others can’t. It also dictates how many deals you’ll need to do to hit your top and bottom line revenue goals. If you have a real estate business, or are a full-time investor, you have a business profit margin. It costs money to be in business, and this figure shows the average profit margin of all your deals. Your personal profit margin is your living costs versus your income. How much extra surplus are you generating for disposable spending, saving, investing, and philanthropic goals? How can you improve these margins?
4. Number of Deals Done: After gross income, deal count is probably the most common figure tracked by real estate pros. It’s one of the favorite numbers to show off. Depending on what part of the business you are in, the number of deals you conduct can be tracked in different ways. Transaction sides serve as the most accurate way to count the number of deals done. That means either selling or buying real estate. Others may count the complete flipping of a property, or rental transactions too.
Consistently growing deal count year-over-year is an important metric. You certainly don’t want to see your business shrinking. However, it is far more important to focus on net profit. If you can make more in one deal a year than the competition makes in 100 deals, you’ll probably have to do a lot less work, for a far higher return. The higher your margins, the less you’ll feel the pinch of changing market dynamics. Counting deals is easy, and an easy metric to use to motivate and compensate staff, but don’t lose sight of the dollars and margins in the process.
5. New List Members: They say “the money is in the list.” So you need to make sure your list is constantly growing. The size of your lists are important, and have an impact on your deals. However, you will lose some contacts, and others will go stale. So watch the totals, but keep growing towards your goals. The more detailed you are in tracking contacts, the better off your business is. Track annual figures, but also track weekly numbers. This will help focus on the right activities.
6. Website Visitors: Website visitor count isn’t always a direct reflection of net profit for real estate pros and companies, but it can matter. In fact, some will find the bulk of their business value in their website visitor numbers alone. Others will find it directly relates to revenues via sideline revenue streams. You must know your visitor counts, and which direction they are trending. Knowing what draws them and what turns them off can help you focus on the most profitable factors. Make sure you are using Google Analytics to track page views, time on page, and number of blogs posted. Just don’t get lost in these metrics at the expense of real revenue.
7. Customer Satisfaction: New business is great, but repeat business and referrals can be the most profitable. Consider running an annual survey to gauge customer satisfaction, and see how likely they will be to refer you. Work on improving this figure each year and you will do very well.
