The end of a year is a contemplative time for everyone, with New Years Resolutions abounding. It is a natural time for a review of the past year and goal setting for the coming year: the good, the bad and the ugly. For my business, one thing was certain: without a strong advertising budget, I would have no leads. A great agent learns to convert a lead to a client.

Expenses were extremely high and net income was unimpressive. This is reality for many new businesses, not just real estate and I am no exception, real estate apprentice 2004 or not.

Over the past several weeks, as 2006 drew to a close, we began drawing up plans for 2007: updating our business plan, developing an operating budget, a marketing budget, goals for revenue and sales, and a marketing plan for our niche market, active adults and senior real estate. All of this, while working with buyers and sellers, and organizing the holidays! That would explain my absence in the world of blogging. Time was at a premium and these items were critical to my business -"? there is no one to delegate to!

At the same time, we entered year 3 of our business. The good news: we survived the first two years in the business, where the new agent failure rate is astronomically high! There is no bad news. Only opportunity.

The financial challenge for the new agent is to accurately predict cash flow against expenses and continue to have a supply of working capital that allows you to generate leads. Let's break this down:

' *"? "?Cash flow is dependent on commission. Commission is dependent on closings. Closings are dependent upon contracts. Contracts are dependent upon clients. Clients are dependent upon leads. Lead generation is the key to the business. Gary Keller, CEO of Keller Williams, says that listings are the key to business volume (clients). This is a tough reality for the new agent ' to have the opportunity to do a listing presentation and then be given the contract to handle the seller's largest investment.

' *"? Working Capital: most resources say that an agent needs at least 3 months of reserves to handle the uncertainty of cash flow in the real estate business. This is true. My team had 14 contract terminations last year, and according to sources that I review, a 20-30% failure rate is NORMAL! The amount of work that an agent does and never gets paid for is unbelievable to anyone except another agent. That has been the hardest lesson of all for me in 2006. And, that is one explanation for the new agent failure rate -"? few people are financially prepared for the cash flow reality of a new real estate business. I have to address working capital this year for our business. I plan to meet with my broker to go over so ideas for how to finance the business.

All of the gurus say "it is a numbers game":

You need a marketing budget to generate leads. You need approximately 100 leads to generate one client. Based on your goals, you then need to factor in a contract termination rate based on your internal data, broker recommendation, or the 20-30 rate that is considered normal in the market.

Bottom line, in order to run the business, you need a plan and you need to know your numbers. This is a daunting undertaking. We use a combination of Excel and word. Or, consider investing in the technology offered at: www.createaplan.com. (See Allen Wright's blogs for more information!)

A new agent works their sphere of influence. If your sphere of influence is limited or depleted, what do you do? The marketing experts at Hobbs Herder (www.hobbsherder.com) suggest that every agent needs a personal brand, a niche market, and a plan to ATTRACT clients to you. Those strategies will continue to be the basis of our business plan for 2007.

We all know the saying "no margin, no mission". You have to know your numbers, but you can choose to have the faith to look past them and know that you have entered into this industry to make a difference in people's lives.

Good luck in 2007!

Kendra