Lone Wolf Business Tips: How to Read Your Financial Statements

Lone Wolf Business Tips is a series of business ideas and concepts that are designed to advise a manager or broker/owner on quick actions that can have a significant benefit in a real estate brokerage operation.

Your financial statement is the roadmap to your financial health. Read it like you were heading somewhere.

You don’t go on a trip without planning your route and tracking your progress. So why would you treat your company any different. Having accurate and timely financial statements is the key to financial health.

Knowing how you did six months later is useless. Planning, monitoring and utilizing is what counts.

So how do you plan? With a budget. And then when you print a financial statement, you are able to compare your actual results against what you budgeted. Budgeting is not a science but an art. And the financial statement tells you how accurate you were. A financial statement that allows you to see monthly numbers, year-to-date numbers and prior period numbers is critical to understanding where you have been and where you are going.

The financial statement needs to track information that is actionable. Too much detail just drowns you and too little doesn’t do a thing for you.

The first number that you need to be able to track is how much of each dollar coming in do you manage to keep. Whether you run your office as a traditional split operation or you use per deal fees and/or desk fees, what you need to keep your eye on is the gross revenue from your operations. No matter how you get it, that is what you have to operate your business with, paying your overhead and creating profit for yourself.

Understanding your true costs is just as important. It’s not important how much you spend to operate photocopiers or how much you charge the agent for photocopies, what is important is the difference. Same for advertising, office supplies, etc. Your financial statement needs to tell you the truth.

If you can’t read your financial statement, you don’t know how you are doing.

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