February 18th - 2013

Winter's tale: When the money isn't coming in

If you’re used to a regular paycheque, working for commission can be a big adjustment.

If you’re used to a regular paycheque, working for commission can be a big adjustment.

Budget woesThe highs and lows of the real estate market can be difficult for new salespeople, particularly during lean seasons like the dead of winter. Two experienced REALTORS® who have weathered the storm share their views on managing in slow times.

Lean periods can hit when you least expect them, as well as at certain predictable times of year, says Wayne Gauld, a broker from Kenora, Ontario. New salespeople who receive a payout from those first commissions should resist the temptation to live beyond their means, he says.

“If you’re suddenly making big money, it’s tempting to spend big,” says Gauld. “I’ve seen new people have a good year and then blow the cash on an expensive holiday or fancy car. Then they get a $30,000 income tax bill and they aren’t prepared.”

A hefty income is not guaranteed, as any veteran of the field can attest. Gauld learned that lesson early in his career, and he tries to share his experiences with newcomers in his brokerage. It’s vital for REALTORS® to learn to survive the lean months, he says.

Spring is generally considered the most active season for home buyers and sellers, with deals often closing in summer. In fall and winter, families are often focused on work and  school, and hunkering down at home on those cold, dark days.

“I’ve been in the business for quite a while, and I’ve basically learned to draw a wage,” he says. “I regulate my income over the course of the year to plan for the leaner months.”

Gauld developed his system based on the previous year’s income to ensure that he has money coming in on a regular basis. “It took me a while to develop this approach,” he says. “Previously I was living off a line of credit and always playing catch-up.”

New salespeople often make the same mistake, he says. “If they spend too much at the start, they’re not being realistic in anticipating slow times and they won’t have funds to carry them through.”

Bill Johnston, a Toronto broker and former president of the Toronto Real Estate Board, says 30 years in the industry taught him to expect more challenges at this time of year.

“You’ve got to adapt,” he says. “The best way to survive the lean seasons is to cash in on the strong seasons. I’ve watched this over decades and it’s always the same.”

Hard work can minimize the effects of a lean season, says Johnston. The key is persistence in marketing yourself and constantly seeking new business, he says. No matter how excellent you are as a service provider, you still need clients. “If you prospect, you’ll do business. If you don’t, you’ll suffer hard times.”

“Businessman explaining forms to clientsYou can’t sit around waiting for the phone to ring,” he adds. “You’ve got to create business for yourself.” Johnston says. “My recommendation to a new salesperson is to get out and meet people, knock on doors, make phone calls, and talk to friends and family. If you don’t take the bull by the horns and get out there, people won’t call you.”

Both brokers agree that seasoned professionals have a role to play in helping to educate new salespeople. “For the younger people in our office, we invite professionals in to discuss the economies of real estate,” Gauld says. This occurs regularly at his brokerage, particularly after an influx of new talent. A money coach typically speaks to rookies about managing in the lean seasons and the benefits of regularly putting aside a percentage of funds.

Seasoned professionals share wisdom and experience to ensure that new salespeople manage their money well and have funds left at year’s end to pay their bills. “When they get a cheque, they need to understand that it’s never 100 per cent their own.”

Gauld puts away about 35 per cent of each cheque he receives.  “As an independent contractor, I’m responsible for my own income tax, HST and CPP.” Setting aside a little extra prepares him for quarterly income tax bills, leaner months and the expenses of the holiday season.

Veterans in the field can provide valuable advice to newcomers, says Johnston. Years of trying to drum up business during slow sales periods have yielded practical lessons about how to enable your business to not just survive but thrive.

“Talking to people is the first step,” says Johnston. “You never know where business will come from. Even people who are not your clients may generate other leads.”

Technology alone will not grow your business, advises Johnston. He believes that some REALTORS® focus too heavily on technology at the expense of other strategies. “It’s not as simple as e-mailing potential clients or expecting visitors to look at your website,” he says. “I get hundreds of e-mails a day and delete the vast majority without reading them.”

Prospective clients may do the same, he notes. “Sitting behind a computer is a foolish way to make a living in a business that relies so much on personal contact. You’ve got to meet people face to face.”

Johnston suggests getting involved in your community through charities or sports. They provide opportunities to meet new people, share information and to create links that may lead to new business.

Knocking on doors may seem archaic in the digital age but it still works, says Johnston. “Build this activity into your schedule and do it for two or three hours a couple of times a week.” Although you must be able to handle rejection, his experience suggests that people are kinder and less likely to reject someone face-to-face over someone who calls or emails.

“Most people are polite, and if you can get out during the week, you’re more likely to meet a retiree who has time to chat, who may be thinking about moving, or who knows someone else in that position.”

Prospecting is like going on a diet, says Johnston. Discipline and effort are required and will result in success if applied consistently over time. “Many people know what they have to do but don’t follow through. It’s hard work, but if you get out there, knock on doors and meet people, it will eventually pay off. Otherwise, you’re the author of your own misfortune.”

Tips to survive the lean seasons:

  • Make the first move -- Pick up the phone or knock on the door. Don’t wait for business to come to you.
  • Prospect for opportunities -- The person sitting next to you at the hockey rink or service club table could be your next customer, or even a lead generator. Networking is key.
  • Follow up on old leads -- Keep in touch with the people who have been your clients in the past. If you make the right impression, they will remember you.
  • Budget accordingly -- Put away a percentage of your profits so you’re not blindsided by income tax bills and slow periods.

Share your knowledge -- When you’re educating those new to the real estate business, you’re enhancing the reputation of the entire profession.

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