One key goal of our businesses is profitability. After all, we can’t exist for the long-term without it. When homes are flying off the proverbial shelves, how we handle our money may not be obvious. However, when the market slows, our skill set around handling money becomes more apparent. We recently sat down with mega agent, Christina Welch, who has spent the better half of the last decade being hyper-focused on her team’s budget.

In business since 2006, she wasn’t always as money savvy as she is today. She remembers having a P&L that was constantly in the red. She decided to make changes to fix this problem. She began looking at her business’s numbers consistently, started cutting expenses where necessary, and got purposeful about where her team was spending money. Today, Christina’s team is currently the #1 team in Northeast Florida.

Christina’s advice is on managing business expenses is applicable to anyone, whether they have a full team or are a solo agent:

1. Keep track of the money going out of the business

First and foremost, know what your expenses are on a month-to-month basis. There are a lot of bright and shiny things that come your way when you’re running a real estate business. So keep track of the essential costs that are necessary for your business to operate. And then keep a running list of the things that you may want to consider purchasing or investing in. The key is not to make any impulse purchases. Ever.

Christina’s team tracks and looks at both what they consider to be “business essentials” and “under consideration” for their business consistently on the 1st and the 15th of every month. Everything is discussed before purchases are made. Not only does it keep expenses in check, but it also prevents buyer’s remorse when purchases that sounded good one week don’t look as great the next week.

2. Look at money going into the business.

When you know how much money you’re spending monthly, you can take your average commission and determine just how many transactions you need to have in order to first, breakeven, and next, be profitable. If you aren’t able to get out of the red, then you need to reduce your spending. Knowing your return on investment in the areas where you are allocating money in your business is an important aspect of this step. Evaluate if you are getting customers and a return from what you’re spending. Are your expenses helping you to close transactions and get closer to the breakeven point – and profitability?

A baseline of 24 closings is necessary for Christina’s team to breakeven each and every month. Anything above this amount is profit. Knowing this breakeven point allows them to pump the breaks when necessary and also allows them to focus on ways to grow the business.

3. Do test runs of new products before committing to the long term.

Before you commit to a long-term product or service, take it for a test drive. Christina’s team commits to a three-month test before they decide to add a new expense on a more permanent basis. Then, while they are in the testing phase, they look to see if the product or service helps their business by either leveraging a system they already have to make their jobs easier, aids in communication with their clients, or improves the customer service they are providing. If the product or service doesn’t improve their business in one of these three ways in those initial three months, it isn’t deemed to be a keeper.

4. Have an open book model.

Open books, where anyone on your team can see where the money is going and how it’s being used, can help hold you accountable to your business’s spending. It can also create a shared sense of responsibility over the bottom line.

Christina’s leadership team is aware of the numbers and the metrics they are responsible for. When they achieve their goals and profitability is reached, she has a team profit share. The team benefits from the business doing well, so they are invested in knowing the bottom line and in the overall financial success of the business.

It’s never too soon to start taking care of your business’s finances. If you are ready to get started but the thought of knowing what’s going out and coming into your business seems overwhelming, Christina suggests making sure your personal finances are separated from your business finances. This includes instituting separate bank accounts and credit cards. Once you’ve done this, you can begin to itemize your transactions and expenses – and enjoy your first step to financial responsibility from there!