The Law of Thirds
Okay, so it’s not a law, but it should be.
The law I’m proposing is:
You WILL NOT spend your whole commission check when you receive it.
If you have been following along on these blogs the past year, you’ve heard me tell you ad nauseam that you are the leader of a company. Sure, it might be a company — employee of one — but it won’t be forever.
As CEO of your real estate company, you need a CFO who is in charge of finances. Guess what, fella, you wear that hat, too. Congratulations on your recent promotion.
There are many of us who do not know a lot about finances, about P&L statements, or about how money should flow in and out of a company. For some, it’s actually pretty overwhelming to think about.
So, let’s not get overwhelmed off the top. Today, you will promote yourself to CFO and begin the following basic steps:
Understand the difference between revenue and income.
“For a business, income refers to net profit, i.e. what remains after expenses and taxes are subtracted from revenue. Revenue is the total amount of money the business receives from its customers for its products and services. For individuals, however, ‘income’ generally refers to the total wages, salaries, tips, rents, interest or dividend received for a specific time period.”Understand that your company revenue is NOT yours to spend, it belongs to the company.
From today forward you will split your commission check (revenue) into the following thirds:
The taxman
Your life expenses
A business float, and then when you’ve finished that, a marketing budget
I have sat with so many new agents over the last year. I will tell you that one of the biggest mistakes we’re making is not operating like a business. If you haven’t saved for Uncle Sam, he’s still coming to collect.
Once you owe someone money, the pressure of making another sale mounts. You cannot work on being a relationship, 100% referral real estate agent when all you can think about is how you’re going to pay the IRS. Just trust me on this one. The new car can wait. The new clothes can wait.
Okay, it’s not a law. But let it be an oath. Say it with me:
“I will not spend my commission check. I will view my finances like a CFO and allocate funds appropriately so as to not incur unnecessary debt. This allows me to concentrate on my client’s experience with focus and care.”
If you, as new in real estate, take away anything from this blog, I hope it’s this. If you don’t deal with your finances correctly off the top, you are setting yourself up for failure in the future. To get yourself out from under a mistake like this is a nightmare and so many real estate agents are forced to do it.
I’d love to hear your thoughts. Leave a comment below.
Until then, chin up, keep your feet moving … and burn the white flag.
sz
Copyright 2020 - Shelley Zavitz Realty