Your Real Estate Business Plan - How to Plan for Real Estate Success

by Brandon Cornett

So you've done some soul searching and decided you're ready to start your own real estate business. That's excellent. Starting your own real estate business could be the most exciting and rewarding move of your life.

But before you do anything else, you're going to need a good business plan to get started on the right foot. A real estate business plan is a key piece of the puzzle when striking out on your own, and the effort you put into up front will pay off in success later on.

In this article, we will examine some of the components of a real estate business plan as well as what makes them important. This information will help you when planning a business of your own.

Why You Need a Business Plan

It's tempting to rush forward when starting a new business. After, the hunger for success and the thrill of having one's own business are enough to propel anyone. But a lack of proper planning is one of the most common reasons new businesses fail -- and it's worth noting that the majority of new real estate businesses fail before they get going.

So while it's great to be excited and eager to begin your real estate business, you must also realize the importance of creating a solid business plan before you do anything.

Benefits of a Real Estate Business Plan

Creating a solid plan for your real estate business will no doubt take some effort on your part. But the benefits are well worth the effort. Here's a summary of what you get in return for developing a real estate business plan:

You will be forced to identify any strengths and weaknesses you might have in the beginning.
You will have to ask yourself a lot of questions in advance that can you headache and heartache down the road.
You will identify the things that make your real estate business unique, or the things you hope to pursue for that reason.
You will have a clearly laid out plan for moving your business forward.

Planning a Real Estate Business - 5 Key Components

Okay. So I've convinced you that you need to develop a real estate business plan before you go any further. Now you'll probably want to know what, exactly, needs to go into such a plan. There is no set rule as to the ingredients of a business plan, but most business startup experts agree on the following key components.

Business ownership information
Description of business
Market details
Management / leadership details
Financial / budgetary aspects of your business

Now let's look at these components of a real estate business plan in more detail.

1. Business Ownership
Who will own the business? What type of organization will it be (sole proprietorship, LLC, partnership, etc.)? Will you have employees or go it alone?

2. Description of Business
What kind of real estate services will you offer? Will you specialize on a particular niche? Where will you office? How many agents / employees will you have? What equipment do you need?

3. Market Details
What is your real estate market doing right now, and how will that affect your business? Who is your audience, and what exactly are they looking for in a real estate service provider? Who are your primary competitors, and how will you be different from them? Where will your real estate business fit into the market as a whole? What types of marketing will you pursue?

4. Business Management Details
Will you run the business alone or will you have help? If you will have other management, who are they and what qualifications do they need? How will you handle your accounting and customer service?

5. Financial / Budgetary Details
How much money do you need to get your real estate business started in the first month, the first six months, and the first year? Where will your funding come from? How much do you need to earn in the first year to at least break even? What kind of revenue do you project for the first year and future years? What are your sales goals and how do you plan to achieve them?

The Flexibility Factor

The primary purpose of your real estate business plan is to help you outline the way forward, with regard to financing, management, marketing, etc. But it's important to realize that no business ever follows its business plan to the letter. You have to be flexible and remember that a plan is just that -- a plan. It might need to be adjusted from time to time as circumstances arise.

For example, let's say you only plan to use two forms of marketing at first. But a month after starting your real estate business, you learn about another marketing channel that's perfect for you. Ignoring that new marketing channel because it's not listed in your business plan is obviously not the way to go. So be flexible, and be willing to alter your real estate business plan as needed to keep things moving onward and upward.

Don't Rely on Business Plan Software

I've noticed that there's a lot of business plan software out there designed to help people create their own business plans. That's great. But there's something you have to keep in mind. These types of software work on a template system, which would presuppose that all businesses function in similar ways. Obviously, we know this isn't the case.

Your real estate business will be different from others based on many factors, such as your budget, your business goals, your structure, etc. So a business plan created for some other real estate company may not be suited for your company. Bottom line -- if you use business plan software, just use it to outline the basic parts of your plan, and then customize it as needed after that. One size does not fit all.

Related Resources

Business Plan Outline (Foster College of Business Administration)

Business plans (Business Week Online)