Thursday, September 15, 2011

How to Handle a Market Downturn

Posted by Agents Realtors at 6:44 PM
AppId is over the quota
AppId is over the quota

Downturns in any business are tough to cope up with if there is a lack of foresight and proper planning to deal with such contingencies; real estate business is no exception. In order to survive during this challenging phase of business, you need to adopt several qualitative methods such as account auditing, expense tracking, cash-flow monitoring and investment management. These are the main crucial areas and if you have complete control over these, you can certainly withstand any kind of economic slump without incurring any big losses. Let us examine these methods more closely:

Audit Accounts Regularly: Since the real estate business is essentially a service based domain, most expenses and costs are fixed. Examples of fixed expenses include office rent and staff salaries. It is, however, important that you keep a track over all your earnings, outlays and cash-flow. You must ask your accountant to prepare a trading statement. Also, make sure to check all details yourself every month so that when there is a property market downturn, you don't feel lost. Keep tab on the accounts payable and receivable. Checking your accounts on a regular basis allows you to exercise better control over your business.

Check All Unnecessary Expenses: You should review the performance of your real estate professionals on a weekly basis. Since employees are paid for their efficiency and output, you need to keep their performance metrics handy. Non-core staff is nothing more than a burden on the company and business as a whole. At the same time, you need to maintain balance while hiring professionals. Do not go overboard when you need a talented team in your company. Focus on quality and not quantity. If there isn't any need for extra staff, avoid it because this is nothing but an unnecessary expense. You can actually outsource all non-core work on an "as needed" basis.

Reduce Capital Outlays: In anticipation of future benefits, companies often make capital investments. It's the kind of financial investment made in buying equipment and buildings. You can do this if your cash-flow is consistent and strong. Before making any investment, you first need to chalk out a plan and evaluate it from every possible angle. You need to weigh the potential profit or benefit against the investment. The proportion of the profit should be quite high compared to the capital outlay required.

Increase Cash-Flow: Encourage your vendors to use section 27 deposit release claims to get the deposit before the settlement. You will of course get your commission out of the deposit before you pay the remainder to the vendor. Also negotiate better payment conditions with your advertisers. They will be keen to keep your account so it is quite probable that they can give you longer payment conditions or a discount on "normal" payment.

Nils Oman is a real estate agent, a buyers advocate and a long term property investor. He has extensive business experience and has worked in many industries on several continents. Today he coaches Principals for Real Estate companies in the art of running a successful business and having a life at the same time! For a free eBooklet on how to supercharge your company and put it on Autopilot - go to our website http://www.coachingrealestateagents.com.au/

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