YOUR ECONOMIC MODEL

Think of your Economic Model as a formula that describes the way your business works. It is your equation for success. Essentially, the Economic Model describes the relationship between a series of activities and the specific outcomes they produce. Actually, you can work the formula in reverse just as easily. If you start with an outcome, it will dictate the specific actions you must take to produce it. Now, whether you realize it or not, you have an Economic Model. Every business does—every real estate agent does. The issue is not about having an Economic Model; rather, the issue is whether you understand the one you have and whether it can get you the net income you want. A sound Economic Model should do three basic things for you:

1. Show you where your money comes from (gross revenue)
2. Show you where your money goes (expenses)
3. Show you how much is left for you (net income) This is basic economics and sounds very simple, but, in actuality, most people follow very unsound Economic Models.

1. They are not sure where their money will come from.
2. They are not sure which costs are critical and which ones are not.
3. They can’t be sure how much will be left at the end of the year. The problem is their Economic Model is based on activities with no projected outcomes attached. They have bought into the common fallacy that if they just work hard and spend money on their business, then somehow they deserve to make all the money they want. Sorry—it simply doesn’t work that way. Fortunately, highly successful real estate agents have lived before us, and we now have lots of examples to guide us. We can now put together a basic and proven real estate agent Economic Model that you can trust to help you achieve your maximum potential. The Economic Model we propose is about approaching your economics and this business in a manner that works for any real estate sales business, from a one-person sales operation to a large, dynamic team. Big Models work for everyone and lead to Big Goals. In fact, the model advocated here has no known limits.

There are three critical areas of focus in your Economic Model. First, you need to focus on knowing the key numbers you must hit. Understanding how the different aspects of your business interact to produce financial results is essential to making sound decisions. Then you’ll have to focus on the number of appointments you must make, the driving numbers in your Economic Model, and the conversion rates you must achieve, the key variable in the equation