How to write a business plan for a real estate agency?

Creating a business plan for a real estate agency is an essential process for any entrepreneur. It serves as a roadmap that outlines the necessary steps to be taken to start or grow the business, the resources required, and the anticipated financial outcomes. It should be crafted with method and confidence.

This guide is designed to provide you with the tools and knowledge necessary for creating a real estate agency business plan, covering why it is so important both when starting up and running an established business, what should be included in your plan, how it should be structured, what tools should be used to save time and avoid errors, and other helpful tips.

We have a lot to cover, so let's get to it!

Why write a business plan for a real estate agency?

Understanding the document's scope and goals will help you easily grasp its structure and content. Before diving into the specifics of the plan, let's take a moment to explore the key reasons why having a real estate agency business plan is so crucial.

To have a clear roadmap to grow the business

It's rarely business as usual for small businesses. The economy follows cycles where years of growth are followed by recessions, and the business environment is always changing with new technologies, new regulations, new competitors, and new consumer behaviours appearing all the time...

In this context, running a business without a clear roadmap is like driving blindfolded: it's dangerous at best. That's why writing a business plan for a real estate agency is essential to create successful and sustainable businesses.

To write an effective business plan, you will need to take stock of where you are (if you are already in business) and where you want the business to go in the next three to five years.

Once you know where you want your real estate agency to be, you'll have to identify:

• what resources (human, equipment, and capital) are needed to get there,
• at what pace the business needs to progress to get there in time,
• and what risks you'll face along the way.

Going through this process regularly is beneficial, both for startups and existing companies, as it helps make informed decisions about how best to allocate resources to ensure the long-term success of the business.

To get visibility on future cash flows

If your small real estate agency runs out of cash: it's game over. That's why we often say "cash is king", and it's crucial to have a clear view of your real estate agency's future cash flows.

So, how can you achieve this? It's simple - you need to have an up-to-date financial forecast.

The good news is that your real estate agency business plan already includes a financial forecast (which we'll discuss further in this guide). Your task is to ensure it stays current.

To accomplish this, it's essential to regularly compare your actual financial performance with what was planned in your financial forecast. Based on your business's current trajectory, you can make adjustments to the forecast.

By diligently monitoring your real estate agency's financial health, you'll be able to spot potential financial issues, like unexpected cash shortfalls, early on and take corrective actions. Moreover, this practice will enable you to recognize and capitalize on growth opportunities, such as excess cash flow enabling you to expand to new locations.

To secure financing

Whether you are a startup or an existing business, writing a detailed real estate agency business plan is essential when seeking financing from banks or investors.

This makes sense given what we've just seen: financiers want to ensure you have a clear roadmap and visibility on your future cash flows.

Banks will use the information included in the plan to assess your borrowing capacity (how much debt your business can support) and your ability to repay the loan before deciding whether they will extend credit to your business and on what terms.

Similarly, investors will review your plan carefully to assess if their investment can generate an attractive return on investment.

To do so, they will be looking for evidence that your real estate agency has the potential for healthy growth, profitability, and cash flow generation over time.

Now that you understand why it is important to create a business plan for a real estate agency, let's take a look at what information is needed to create one.

What information is needed to create a business plan for a real estate agency?

Writing a real estate agency business plan requires research so that you can project sales, investments and cost accurately in your financial forecast.

In this section, we cover three key pieces of information you should gather before drafting your business plan!

Carrying out market research for a real estate agency

Carrying out market research before writing a business plan for a real estate agency is essential to ensure that the financial projections are accurate and realistic.

Market research helps you gain insight into your target customer base, competitors, pricing strategies and other key factors which can have an impact on the commercial success of your business.

In particular, it is useful in forecasting revenue as it provides valuable data regarding potential customers’ spending habits and preferences.

You may discover that potential buyers are looking for properties in different locations than they have in the past. For example, they may be more interested in smaller towns or rural areas, rather than larger cities. Additionally, you might find that buyers are looking for different features in a property than they have in the past. For example, they could be more interested in properties with energy efficient features or modern amenities.

This information can then be used to create more accurate financial projections which will help investors make informed decisions about investing in your real estate agency.

Developing the sales and marketing plan for a real estate agency

Budgeting sales and marketing expenses is essential before creating a real estate agency business plan.

A comprehensive sales and marketing plan should provide an accurate projection of what actions need to be implemented to acquire and retain customers, how many people are needed to carry out these initiatives, and how much needs to be spent on promotions, advertising, and other aspects.

This helps ensure that the right amount of resources is allocated to these activities in order to hit the sales and growth objectives forecasted in your business plan.

The staffing and capital expenditure requirements of a real estate agency

Whether you are starting or expanding a real estate agency, it is important to have a clear plan for recruitment and capital expenditures (investment in equipment and real estate) in order to ensure the success of the business.

Both the recruitment and investment plans need to be coherent with the timing and level of growth planned in your forecast, and require appropriate funding.

A real estate agency might incur staffing costs such as salaries for real estate agents, administrative staff, marketing personnel, and receptionists. They might also incur costs for equipment such as computers, phones, furniture, and marketing materials. Additionally, they might need to pay for website hosting, software subscriptions, and other digital services.

In order to create a realistic financial forecast, you will also need to consider the other operating expenses associated with running the business on a day-to-day basis (insurance, bookkeeping, etc.). 

Once you have all the necessary information to create a business plan for your real estate agency, it is time to start creating your financial forecast.

What goes into your real estate agency's financial forecast?

The financial forecast of your real estate agency will enable you to assess the profitability potential of your business in the coming years and how much capital is required to fund the actions planned in the business plan.

The four key outputs of a financial forecast for a real estate agency are:

• The profit and loss (P&L) statement,
• The projected balance sheet,
• The cash flow forecast,
• And the sources and uses table.

Let's take a closer look at each of these.

The projected P&L statement

The projected P&L statement for a real estate agency shows how much revenue and profits your business is expected to generate in the future.

Ideally, your real estate agency's P&L statement should show:

• Healthy growth - above inflation level
• Improving or stable profit margins
• Positive net profit

Expectations will vary based on the stage of your business. A startup will be expected to grow faster than an established real estate agency. And similarly, an established company should showcase a higher level of profitability than a new venture.

The forecasted balance sheet of your real estate agency

The projected balance sheet of your real estate agency will enable the reader of your business plan to assess the overall financial health of your business.

It shows three elements: assets, liabilities and equity:

• Assets: are productive resources owned by the business, such as equipment, cash, and accounts receivable (money owed by clients).
• Liabilities: are debts owed to creditors, lenders, and other entities, such as accounts payable (money owed to suppliers).
• Equity: includes the sums invested by the shareholders or business owners and the profits and losses accumulated by the business to date (which are called retained earnings). It is a proxy for the value of the owner's stake in the business.

Analysing your real estate agency projected balance sheet provides an understanding of your real estate agency's working capital structure, investment and financing policies.

In particular, the readers of your plan can compare the level of financial debt on the balance sheet to the equity value to measure the level of financial risk (equity doesn't need to be reimbursed, while financial debt must be repaid, making it riskier).

They can also use your balance sheet to assess your real estate agency's liquidity and solvency:

• A liquidity analysis: focuses on whether or not your business has sufficient cash and short-term assets to cover its liabilities due in the next 12 months.
• A solvency analysis: takes and longer view to assess whether or not your business has the capacity to repay its debts over the medium-term.

The cash flow forecast

A projected cash flow statement for a real estate agency is used to show how much cash the business is generating or consuming.

The cash flow forecast is usually organized by nature to show three key metrics:

• The operating cash flow: do the core business activities generate or consume cash?
• The investing cash flow: how much is the business investing in long-term assets (this is usually compared to the level of fixed assets on the balance sheet to assess whether the business is regularly maintaining and renewing its equipment)?
• The financing cash flow: is the business raising new financing or repaying financiers (debt repayment, dividends)?

As we discussed earlier, cash is king and keeping an eye on future cash flows an imperative for running a successful business. Therefore, you can expect the reader of your real estate agency business plan to pay close attention to your cash flow forecast.

Also, note that it is customary to provide both yearly and monthly cash flow forecasts in a business plan - so that the reader can analyze seasonal variation and ensure the real estate agency is appropriately funded.

The initial financing plan

The initial financing plan - also called a sources and uses table - is an important tool when starting a real estate agency.

It shows where the money needed to set up the business will come from (sources) and how it will be allocated (uses).

Having this table helps understand what costs are involved in setting up the real estate agency, how the risks are distributed between the shareholders and the lenders, and what will be the starting cash position (which needs to be sufficient to sustain operations until the business breaks even).

Now that the financial forecast of a real estate agency business plan is understood, let's focus on what goes into the written part of the plan.

The written part of a real estate agency business plan

The written part of the business plan is where you will explain what your business does and how it operates, what your target market is, whom you compete against, and what strategy you will put in place to seize the commercial opportunity you've identified.

Having this context is key for the reader to form a view on whether or not they believe that your plan is achievable and the numbers in your forecast realistic.

The written part of a real estate agency business plan is composed of 7 main sections:

1. The executive summary
2. The presentation of the company
3. The products and services
4. The market analysis
5. The strategy
6. The operations
7. The financial plan

Let's go through the content of each section in more detail!

1. The executive summary

In your real estate agency's business plan, the first section is the executive summary — a captivating overview of your plan that aims to pique the reader's interest and leave them eager to learn more about your business.

When crafting the executive summary, start with an introduction to your business, including its name, concept, location, how long it has been running, and what sets it apart. Briefly mention the products and services you plan to offer and your target customer profile.

Following that, provide an overview of the addressable market for your real estate agency, current trends, and potential growth opportunities.

Next, include a summary of key financial figures like projected revenues, profits, and cash flows.

Finally, in the "ask" section, detail any funding requirements you may have.

2. The presentation of the company

In your real estate agency business plan, the second section should focus on the structure and ownership, location, and management team of your company.

In the structure and ownership part, you'll provide an overview of the business's legal structure, details about the owners, and their respective investments and ownership shares. This clarity is crucial, especially if you're seeking financing, as it helps the reader understand which legal entity will receive the funds and who controls the business.

Moving on to the location part, you'll offer an overview of the company's premises and their surroundings. Explain why this particular location is of interest, highlighting factors like catchment area, accessibility, and nearby amenities.

When describing the location of your real estate agency, you could emphasize the potential for growth that the area holds. It may be a relatively small market, but it could be well-positioned for future development. The area could also have a strong local economy, with a variety of businesses and services nearby. Additionally, the area could have access to good public transportation, allowing for easy access to potential customers.

Finally, you should introduce your management team. Describe each member's role, background, and experience.

Don't forget to emphasize any past successes achieved by the management team and how long they've been working together. Demonstrating their track record and teamwork will help potential lenders or investors gain confidence in their leadership and ability to execute the business plan.

3. The products and services section

The products and services section of your real estate agency business plan should include a detailed description of what your company sells to its customers. 

For example, your real estate agency might offer services such as residential and commercial property sales and leasing, mortgage and refinancing assistance, and property management services. These services ensure that customers can find the right property for their needs, obtain financing, and manage their investment with confidence. Through a comprehensive portfolio of services, customers can rely on your real estate agency to help guide them through the entire process of purchasing and managing a property.

The reader will want to understand what makes your real estate agency unique from other businesses in this competitive market.

When drafting this section, you should be precise about the categories of products or services you sell, the clients you are targeting and the channels that you are targeting them through. 

4. The market analysis

When presenting your market analysis in your real estate agency business plan, you should detail the customers' demographics and segmentation, target market, competition, barriers to entry, and any regulations that may apply.

The goal of this section is to help the reader understand how big and attractive your market is, and demonstrate that you have a solid understanding of the industry.

You should start with the demographics and segmentation subsection, which gives an overview of the addressable market for your real estate agency, the main trends in the marketplace, and introduces the different customer segments and their preferences in terms of purchasing habits and budgets.

The target market section should follow and zoom on the customer segments your real estate agency is targeting, and explain how your products and services meet the specific needs of these customers.

For example, your target market might include young professionals. These customers might be looking to buy their first home and need advice on navigating the real estate market. They may also be interested in learning about mortgage options and other financial services to help them achieve their goals.

Then comes the competition subsection, where you should introduce your main competitors and explain what differentiates you from them.

Finally, you should finish your market analysis by giving an overview of the main regulations applicable to your real estate agency.

5. The strategy section

When crafting the strategy section of your business plan for your real estate agency, it's important to cover several key aspects, including your competitive edge, pricing strategy, sales & marketing plan, milestones, and risks and mitigants.

In the competitive edge subsection, clearly explain what sets your company apart from competitors. This is particularly critical if you're a startup, as you'll be trying to establish your presence in the marketplace among entrenched players.

The pricing strategy subsection should demonstrate how you aim to maintain profitability while offering competitive prices to your customers.

For the sales & marketing plan, outline how you plan to reach and acquire new customers, as well as retain existing ones through loyalty programs or special offers.

In the milestones subsection, detail what your company has achieved thus far and outline your primary objectives for the coming years by including specific dates for expected progress. This ensures everyone involved has clear expectations.

Lastly, in the risks and mitigants subsection, list the main risks that could potentially impact the execution of your plan. Explain the measures you've taken to minimize these risks. This is vital for investors or lenders to feel confident in supporting your venture - try to proactively address any objection they might have.

Your real estate agency faces a number of risks. For example, you may face the risk of financial loss due to tenant default. Tenants may fail to pay their rent on time, leaving you with a loss of income. Additionally, your real estate agency may face the risk of fraud. Fraudulent transactions could occur through the use of stolen credit cards or other fraudulent activities, resulting in a financial loss for your agency.

6. The operations section

In your business plan, it's also essential to provide a detailed overview of the operations of your real estate agency.

Start by covering your team, highlighting key roles and your recruitment plan to support the expected growth. Outline the qualifications and experience required for each role and your intended recruitment methods, whether through job boards, referrals, or headhunters.

Next, clearly state your real estate agency's operating hours, allowing the reader to assess staffing levels adequately. Additionally, mention any plans for varying opening times during peak seasons and how you'll handle customer queries outside normal operating hours.

Then, shift your focus to the key assets and intellectual property (IP) necessary for your business. If you rely on licenses, trademarks, physical structures like equipment or property, or lease agreements, make sure to include them in this section.

You may have key assets and IP such as real estate listings and customer information. These listings might include properties for sale, rent, or lease, and may include details such as pricing, location, and photos. Customer information could include names, addresses, contact details, and details about the properties they are interested in.

Lastly, include a list of suppliers you plan to work with, detailing their services and main commercial terms, such as price, payment terms, and contract duration. Investors are interested in understanding why you've chosen specific suppliers, which may be due to higher-quality products or established relationships from previous ventures.

7. The presentation of the financial plan

The financial plan section is where we will present the financial forecast we talked about earlier in this guide.

Now that you have a clear idea of what goes in your real estate agency business plan, let's look at the solutions you can use to draft yours.

What tool should I use to write my real estate agency's business plan?

In this section, we will be reviewing the two main solutions for creating a real estate agency business plan:

• Using specialized online business plan software,
• Outsourcing the plan to the business plan writer.

Using an online business plan software for your real estate agency's business plan

The modern and most efficient way to write a real estate agency business plan is to use business plan software.

There are several advantages to using specialized software:

• You can easily create your financial forecast by letting the software take care of the financial calculations for you without errors
• You are guided through the writing process by detailed instructions and examples for each part of the plan
• You can access a library of dozens of complete business plan samples and templates for inspiration
• You get a professional business plan, formatted and ready to be sent to your bank or investors
• You can easily track your actual financial performance against your financial forecast
• You can create scenarios to stress test your forecast's main assumptions
• You can easily update your forecast as time goes by to maintain visibility on future cash flows
• You have a friendly support team on standby to assist you when you are stuck

If you're interested in using this type of solution, you can try The Business Plan Shop for free by signing up here.

Hiring a business plan writer to write your real estate agency's business plan

Outsourcing your real estate agency business plan to a business plan writer can also be a viable option.

These writers possess valuable experience in crafting business plans and creating accurate financial forecasts. Additionally, enlisting their services can save you precious time, enabling you to concentrate on the day-to-day operations of your business.

It's important to be mindful, though, that hiring business plan writers comes with a cost. You'll be paying not just for their time but also for the software they use, and their profit margin.

Based on experience, a complete business plan usually requires a budget of at least £1.5k ($2.0k) excluding tax, and more if revisions are needed after initial meetings with lenders or investors - changes often arise following these discussions.

When seeking investment, be cautious about spending too much on consulting fees. Investors prefer their funds to contribute directly to business growth. Thus, the amount you spend on business plan writing services and other consulting services should be negligible compared to the amount you raise.

Another aspect to consider is that while you'll receive the output of the business plan, you usually won't own the actual document. It will be saved in the consultant's business plan software, which will make updating the plan challenging without retaining the consultant on a retainer.

Given these factors, it's essential to carefully weigh the pros and cons of outsourcing your real estate agency business plan to a business plan writer and decide what best suits your business's unique needs.

Why not create your real estate agency's business plan using Word or Excel?

Using Microsoft Excel and Word (or their Google, Apple, or open-source equivalents) to write a real estate agency business plan is not advisable. Allow me to explain the reasons.

Firstly, creating an accurate and error-free financial forecast on Excel or any spreadsheet demands technical expertise in accounting principles and financial modelling. Without a degree in finance and accounting and significant financial modelling experience, it's unlikely that the reader will fully trust your numbers.

Secondly, relying on spreadsheets is inefficient. While it may have been the go-to option in the past, technology has evolved, and software now performs such tasks much faster and more accurately.

The second reason is that it is inefficient. Building forecasts on spreadsheets was the only option in the early 2000s, nowadays technology has advanced and software can do it much faster and much more accurately.

And with the rise of AI, software is also becoming smarter at helping us detect mistakes in our forecasts and helping us analyse the numbers to make better decisions.

Moreover, software offers ease in comparing actuals versus forecasts and maintaining up-to-date forecasts for clear visibility on future cash flows, as we discussed earlier in this guide. Such tasks are cumbersome when using spreadsheets.

Now, let's address the written part of your real estate agency business plan. While it may be less prone to errors, using software can significantly boost productivity. Word processors lack instructions and examples for each section of your business plan. They also won't automatically update your numbers when changes occur in your forecast, and they lack automated formatting capabilities.

In summary, while some entrepreneurs may consider Word or Excel for their business plan, it's far from the best or most efficient solution when compared to specialized software.

Takeaways

1. Having an up-to-date business plan is key to maintaining visibility on your future cash flows.
2. A business plan has 2 parts: a financial forecast highlighting the expected growth, profitability and cash generation of the business; and a written part which provides the context needed to interpret and assess the quality of the forecast.
3. Using business plan software is the modern way of writing and maintaining business plans.

We hope that this guide helped you to better understand how to write the business plan for a real estate agency. If you still have questions, do not hesitate to contact us.

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• Business plan and pitch deck: how do they differ?
• How to write a business plan for a supplier
• How to write an internal business plan
• Business plan myths

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