Remarginalizing Your Business
Today I want to talk to you about remarginalizing your business and share a few concepts with you to help you get your mind wrapped around this powerful, money-saving idea.
To start this off I want to give you a quote from Bear Bryant who, during his time, was the winningest head football coach at Alabama, the Crimson Tide. He said, “offense sells tickets, defense wins championships”. So when you think about what offenses in our world that’s revenue gross commission income, right? But our defense is expense management. It’s holding your expenses accountable to a result. Just like in basketball, football, or any sport, the defense isn’t always super sexy and it’s not something that everybody enjoys watching or doing.
What I want to show you is a simple method to get yourself to follow through on this. Understand first that just like in exercise we try to “out-revenue” our problems meaning if you’re going to get physically fit you are not going to out-exercise a bad diet. You can’t “revenue” your way out of poor expense management. If you’re attempting to do that just understand that’s a fool’s errand and eventually you will either give up or you’re going to get burnt out. Take this message to heart.
On the 15th of every month, I want you to block off two to three hours that you call “remarginalizing”. If you do this and follow the steps below, you will be excellent at defense and go on to win the Championship.
Keep and Cut
When the market shifts you’re going to be ready to go instead of just getting started.
What I have seen over the years is that when looking at the expense to run their business, people typically only put those costs in one of two simple categories: things that we’re going to keep and things were going to cut. But if you go on reading you’re going to see a broader perspective on this. We can’t argue that there are expenses that you will have to keep. Those are the things that are super important to profit, the things that you can’t cut. Then some expenses are sitting out there that are nickel-and-diming your money away. Using our worksheet below along with the Replace, Offset, Negotiate method, you’ll develop a deeper insight into your finances and begin to see the areas of your business that you don’t often look at when seeking to remarginalize our business. So let’s break it down.
Remember that we now have this time block on the 15th of the month? This is when you’re going to look at our expenses, the services we’re using, and the companies that we’re paying money to and ask yourself a simple question: is there another product or service that is similar to this that can deliver the same result or a better result at a lesser price? Cell phones are a perfect example of this. In most cases, you might be living in an area where Verizon is your carrier and you need to look at going to T-Mobile or AT&T.
I believe this is the biggest opportunity for mega-agents simply by asking the question, “who else can help us pay for this”? So if you’re buying leads to Realtor.com, Boomtown, command, or whatever else, then asking a lender to split that cost with you 50/50 (make sure you’re RESPA compliant) is a great way to offset some of those costs if you’re doing a Reverse Bold 100, where people are calling in. Asking a lender, home inspector, or title company to split the cost of the gift with you could help you immensely.
Let’s use the cell phone example: you can call them up and say “hey, I think I’m getting ready to switch to another company, what can you do to keep my business?” My favorite script on this, no matter what you’re looking at doing, whether you plan to cut the expense or not, is calling a company up and say, “I just want you to know we’ve been looking at our budget and while we love your product or service, I don’t know if can justify this expense. I wanted to see if there was anything that you could do before we make this decision”. I think you’d be amazed at what people can ultimately come up with what creativity they have at their disposal to keep you.
The Growing Impact
That’s two fewer homes that you have to sell to generate the profit that cutting out $500
Sometimes people will tell you that you have to cut 10% when you just don’t have room to cut 10%. There’s simply not enough fat to cut. What I recommend is a 2 to 3% reduction or remarginalization every single month. Over time that will add up. Now, here’s the impact: if you’re running at a 40% profit margin and you find $500 that is taken out of your expense detail, meaning you don’t have to pay that expense anymore, that’s like earning $1,250. You take 40% divided into 500, that’s 1,250. See, when you cut expenses it falls directly into profit. It does have to pass through the cost of sale. When you look at that 1,250 that’s $1,200 that you don’t have to bring in to net that $500 you cut out. If you take that over 12 months that’s $15,000 in revenue that you don’t have to bring in. If your average sales price is $250K and your average commission is $7,500, well that’s two fewer homes that you have to sell to generate the profit that cutting out $500 with a 40% profit ultimately brings you. So don’t discount this. Make sure that you do take the time-block it out sit down, look at your expenses use the Replace, Offset, Negotiate process, and a 2 to 3% remarginalization every single month.
Do this, be excellent at defense and win the Championship. I promise you that over time when the market shifts you’re going to be ready to go instead of just getting started. I trust that you’ll take it and use it. See you next time