Cash Flow VS Profit

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As a Realtor, you’ll go through a lot of money during your career. There is the common saying “you’ve gotta spend money to make money” that everyone wishes didn’t exist, no matter how true it is.
Figuring out your cash flow and profit can keep your head in the game and your slow months less stressful. Let’s dive into both and hopefully you’ll leave here with a better understanding and can prevent needing to get that part time job in the winter.
PROFIT. A monetary surplus left after deductions. From a basic view, your entire net commission check is a profit. You could even go a step further and deduct your mortgage/office rent, car payment, and utilities from that to get your true profit, right? Well not exactly.
You also need to consider CASH FLOW. This is the money that is flowing in and out of your business. Quarterly taxes, monthly subscriptions, advertising, and marketing all need to be planned for. They don’t seem so bad when you’re hot and hitting your selling goals. But what about when the market is slow? That is the unfortunate factor about real estate; the inevitable peaks and valleys.
Predicting your sale activity is tough, but mapping out your estimated yearly business expenses and averaging what you’ll need each month to stay in the black can prevent headaches and stress between October and March. And on those busy summer months when your “profit” is soaring new heights, don’t forget about that cash flow six months down the road. Because you might risk filling out an application to Home Depot to pay for those monthly business expenses.
Need more help? Contact your accountant or find one that specializes in real estate. Then call me and we can have a confidential chat over coffee or lunch to see what changes you could be doing to get more profit in 2020.
Hopefully, none of this applies to you. But in case you know a colleague who might need this reminder, please feel free to do them a favor and pass this on.. it could help them stay in the game when the next “soft cycle” visits us again.
Wishing you a great cash flow,
Fred

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