Real Estate Agents - Tips to Strengthen Your Cash Flow
TIPS TO STRENGTHEN YOUR CASH FLOW
Many real estate agents have had a strong start to the spring despite states’ various shelter-in-place orders. However, as the toll of the coronavirus begins to contract the economy, we want you to be ready for a slower second half to 2020.
Strategies to help maintain fiscal strength throughout 2020 and into 2021:
- Create a 6 Month Cash Flow Analysis: Take your revenue and expenses for the first 4 months of 2020 and multiply each by 3 to get full year projections. Then, reduce your revenue estimate by 15-20% while leaving your expenses the same. This will allow you to “stress test” your business assuming an economic downturn. Finally, take your current business cash balance and see how long you can cover any net loss (reduced revenue minus expenses) from your “stress test”. Make sure to update this analysis every 2-3 months to account for changes in your business.
- Monitor Credit Purchases: Look at your last three or four credit card bills and ask yourself, do you need to be spending this money? In a strong economy, it is easy to overlook expenses such as leasing a second luxury car or dining out a majority of the time. When the economy declines, it is important to have a tighter grip on your discretionary expenditures so you can invest in the most productive parts of your business, such as marketing to your niche or educating your referral network about how you can help their clients even in a time of crisis.
- Double Check Automatic Payments: Do you have your gym membership or a weekly dry-cleaning service set on autopay? Take some time to double check what you are set up to pay automatically because you may find that there are certain products or services you are not using right now. Stopping these payments can help conserve cash that can be reinvested into business growth activities such as analyzing your database to find your ideal clients.
- Spend Time Working with KW Command: If business begins to slow down, do not panic; spend some time familiarizing yourself with the resources Keller Williams has available to improve your business. Slow periods can be an opportunity for you to spend some time working on strengthening your communications with your target clients and referral network. Spending time analyzing your database to pinpoint your niche means that your marketing and advertising are that much more effective and can lead to increased growth regardless of the broader economic conditions.
- Contact Your CPA About Amendments to Net Operating Loss (NOL) and Excess Business Loss (EBL) Rules: Owners can offset 100% of their taxable income for 2018, 2019 and 2020 with NOL's incurred in those years. EBL limitations for 2018, 2019 and 2020 have also been removed for those who do not file as a C Corporation. If you find that your business is struggling in the second half of 2020, talk to your accountant to explore reducing or eliminating prior year(s) tax liability. It might result in a cash refund when you file your 2020 tax return.
- Conduct an Activities and Services Assessment: Are there areas of your business that are not essential to your core operations? Use our Activities and Services Analysis template to identify time-consuming, lower margin operations so you can focus your resources on your top producing areas. Set aside two hours for you and any agents who work with you to individually complete the questions and then discuss your analysis. This short exercise will help you make operational decisions that can save you money now and enable you to invest in operations with stronger growth prospects.