KEY AREA OF YOUR BUDGET MODEL

In reality, you probably would equate a budgeting seminar with a yawning festival. Right? Admit it. And you wouldn’t be alone. Most agents just can’t get their heads around the fact that a budget is a powerful financial-planning tool. They tend to see budgets as a necessary evil, more a record for income tax purposes and audits than anything else. I’m here to tell you this is wrongful thinking and, I hope, to change your paradigm, your way of thinking about budgets .

When people sit down to discuss refinancing a mortgage or maybe costing out the potential return on renovating their kitchen—despite all the math and calculations—don’t they tend to get energized? Of course they do. They get energized because they understand that implicit in these calculations is the opportunity to save thousands on their mortgage or markedly increase the value of their home through renovations. It can be the same with your budget. When you view the money you spend (expenses) as simply the cost of doing business, budgeting remains a chore. However, when you see every dollar spent as an “investment in your future,” you’ll approach budgeting with more excitement and a high level of interest. Budgets can be interesting, and it is time to change your perspective. Your philosophy should be that for every dollar invested in a business expense, you should receive some multiple of that dollar back.

 Dollar for dollar isn’t enough. Why? If you were to invest a dollar and get only a dollar back, why would you go to the trouble of spending it in the first place? Just keep the dollar and save the time. However, if you can get multiple dollars in return for a dollar investment, then you know you are not spinning your wheels. Every dollar in your business can be accounted for in this way. And when you view budgeting in this manner, where expenses are investments, you’ll get excited and see your budget for the powerful financial-planning tool it is.

When it comes to your Budget Model, you’ll want to concentrate on three areas in particular. First, you’ll want to adopt “Lead with Revenue” as your financial motto. Next, you’ll need to get into the habit of playing the mental game of Red Light, Green Light with your expenses. This is about getting incremental results from incremental increases in expenses through accountability. And lastly, you’ll have to develop the self-discipline actually to stick to the Budget Model you’ve adopted. Let’s quickly take a look at these important budgetary issues.

The key to budgeting and spending is to subscribe to one critical discipline: Lead with Revenue (not expenses)! The basic idea is to try to spend only money that your business has generated. Or, to put it simply, make money before you spend it. The beauty of the real estate sales business is that the actual cost associated with getting a single buyer or seller listing is really quite low. With a proportionally small investment, you can generate revenue in your real estate sales business that will, in turn, fund the growth of your business. The key is to start with this approach as early as possible and keep it as a discipline throughout your career. Often, the difference between a successful start-up business and an unsuccessful one is usually decided before the business ever opens its doors. Companies that successfully minimize their start-up cost and debt before they open for business and start generating revenue quickly have a much better chance of survival. As we saw in the dot.com boom-andbust era, some companies perceived as having smaller “upsides” ended up outliving many of the high-profile companies by following better business practices.

 A good example is a now-defunct software company in my hometown, which was a poster child for what we call “leading with expenses.” Here was a company that spent millions on Super Bowl ads before they had positive cash flow in their business! Unfortunately, many real estate agents take this same Field of Dreams (“if I spend it, they will come”) approach. They think that if they spend a lot of money up front or build the infrastructure of a big sales organization up front, the business will come.