Real estate team leaders—let me ask you a question. Does your P&L show a profit, but if you stepped out of production, your business would lose money?
You’re doing deals, closing business—but something feels off. You’re working way too much, yet you still can’t seem to break free from that production grind.
Well, I’ve got news for you: You're probably not as profitable as you think. Here’s why.
Most CPAs or bookkeepers—they’re good, right? But they don’t understand the real estate industry the way you and I do. So they look at your numbers and say, “Congrats! You’re profitable!” But here’s the reality: They’re looking at the wrong numbers. So you think you're crushing it when really... you're stuck in production, doing deals just to keep the business afloat. Sound familiar?
Here’s the key to unlocking the real health of your business.
It’s called your ‘Adjusted Net Profit Margin.’ This is the most critical number that tells you whether your business is actually profitable or if you're just working to stay afloat. Now—let's break it down step by step.
Step 1: Determine your COS on team member deals. (The percentage you pay out to the agents)
Look at your P&L and find the total dollar amount you paid out to all agents in commissions over the last 12 months—this is your agent Cost of Sale (or Cost of Goods Sold, COGS). Next, find the total GCI (Gross Commission Income) from those same agent deals. Not from your personal deals—only from the deals your agents did. Then, take the amount you paid your agents and divide that by the total GCI from their deals.
For example, if you paid $452,000 in agent commissions, and the total GCI was $985,000, you would take $452k ÷ $985k and get 46%. In this example, you’re paying agents 46% of every dollar from deals they did.
Step 2: Apply that COS margin to your own personal GCI.
Now, find how much GCI you did from your own production as the team leader and apply the same COS percentage to it. For example, let’s say you, as the team leader, generated $658,000 in GCI from your own personal sales. From the previous example, you’d take the team's COS of 46% and apply it to the $658,000 you generated, giving you $303,000.
Step 3: Subtract that dollar amount from your current NET profit dollar.
Simply subtract the dollar amount you just calculated from whatever your current P&L shows as your net profit. This is your true net profit amount.
Keep in mind, if your P&L isn't set up using our real estate-specific chart of accounts (download ours for FREE here), then these calculations could be inaccurate.
Now—this is the key. What does your P&L say your NET profit is after you subtract that amount? If you end up with a negative number, guess what, you’re not actually running a profitable business.
Why? Because your personal production is required just to keep the business running. If that's the case, you need to fix your model now.
Step 4: Determine your Adjusted Net Profit Margin.
If you end up with a positive adjusted net profit dollar amount, then take that number and divide it by your total company GCI (the top-line revenue of your entire team, before splits, before broker costs, before referral fees... the true top-line number). Now, you’ve got your Adjusted Net Profit Margin.
This is the true metric of whether you’re running a profitable business—or if you’re just treading water. And this is the number that every single real estate team leader needs to understand if they want to get out of production and build a real business.
Let me make this crystal clear: If you’re not tracking your Adjusted Net Profit Margin, you’re flying blind. You’re working hard, closing deals, but you don’t actually know if the business is profitable—or just profitable on paper while you’re drowning in work.
So take 10 minutes today, run these numbers, and find out the real health of your business. It could be the difference between scaling or staying stuck forever.
Need help? Book a free financial strategy session with us today, and we'll help you find your Adjusted Net Profit Margin.
Bottom line: Knowing your Adjusted Net Profit Margin is critical to understanding the true health of your business. Stop guessing. Start knowing. Get clear, make better decisions, and get the heck out of production—so you can actually build a business, not just buy yourself a job.
Now get to work. And remember—keep it SIMPLE!
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