Strategic business planning helps you set realistic goals, so you know in what direction you (or your team) are going, as well as why, and how. It helps you make the best choices so you stay on track and meet deadlines. When unexpected situations arise, your plan helps you know what to do. Realtor Brad Smith remarks “If we have a bad day we use the “market is down” excuse. With a plan I stay positive and if the market changes 4%, I work harder to sell four more houses” and stay on track. Business planning software, such as Symplifi provides the system to define and maintain your direction.
Strategic business planning is effective in the short term, as applied to an individual transaction, but even more vital for the long term. It allows you to effectively determine the direction and scope you want to take over the next several years.
There are two great ways to initiate action plans; one is with a SWOT analysis (Strengths, Weaknesses, Threats and Opportunities). The second is a tool to understand trends that may affect your ability to sell in the marketplace. It is called the Forces of Competition analysis.
SWOT
This tool analyzes key issues relevant to your business and helps you:
* Evaluate where you are and where you want to be;
* Gain insight into your strengths and weaknesses;
* Identify external forces that influence your success
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Strength |
Opportunities |
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Weakness |
Threats |
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For example, you may be a well known realtor with strong name recognition (strength), but have low technology skills, which keep you from maximizing the use of helpful software. The SWOT analysis will reveal what low technology skills are costing you, so you can determine a remedy.
An example of an opportunity is identifying and emerging market in your area and specializing in it early on – such as condo sales. The SWOT will help you analyze if you are well positioned to tap into this new market. An example of a threat would be a deep-pocketed broker entering your market, with plans to launch a media campaign to boost name recognition. The SWOT will help you respond to this. See the example above for a sample SWOT.
Forces of Competition
The second way to think about action planning is to recognize the trends and forces at work in your marketplace. These forces form the basis for the assumptions you use to create your strategic plan. There are five forces identified for any industry: For the real estate industry they are:
l Bargaining power of buyers and sellers. If inventory is high, the number of buyers decreases. This is a buyer’s market and buyers have the bargaining power. If inventory is low and there are a lot of buyers, it is a seller’s market and sellers have the bargaining power.
l New entrants in the market. An example is alternative flat fee brokers. Also, the entrance of virtual and discount broker services, although small now, may be a trend worth watching.
l Threats of Realtor substitutes. Example: For
l The bargaining power of suppliers. These are transaction parties, such as title or mortgage companies or software suppliers – such as Zillow, which now provides home seekers with evaluations and comparables.
l Rivalry among competing firms. These can be seen by the number of realtors switching organizations or through advertising.
Brad Smith, RE/
Real estate professionals must be aware of these forces to create a successful business plan. Being aware of them can give you a competitive advantage in that you can foresee the future much better than others.
With this understanding you can apply innovative ideas. For example, in 1995 the first signs of real estate Internet marketing and lead capture became evident. If you had that knowledge then, would it have influenced the path you took 10 years ago? Would you have become more technically savvy earlier, if you knew your buyers would expected it?
