How to Use the Branch P&L Model to Confidently Grow Your Mortgage Brokerage

February 21, 2023
Financial Storytelling

As the mortgage industry becomes increasingly competitive, it is more important than ever for brokers to adopt new strategies and tools to grow their businesses.

A branch P&L (Profit and Loss) model is one tool that growing brokerages quickly implement to track costs better, understand their income, and grow efficiently.

A Profit and Loss is a financial statement that lists the revenue and expenses of a business. It's used to efficiently understand the amount of income a business generates compared to its expenses.

Viewing your profit and loss segmented by location is common for businesses with multiple branches. This model can help mortgage brokers identify which branches are the most profitable and which may need improvement.

To use a branch P&L model effectively, mortgage brokers should follow these steps: set clear goals, determine which locations to track, gather financial data, analyze the data, and develop a plan.

Set Clear Goals

Before creating a branch P&L model, mortgage brokers should set clear goals for their business.

Are you trying to increase revenue? Identify and reduce expenses? Expand into a new market?

Clarifying your goals and expectations for how your branches would perform will allow you to evaluate their performance with your criteria in mind.

Identify a goal revenue or break-even operating figure to identify what you'll need to keep each branch open, how branches will share or separate expenses, and clearly define how your branches will operate.

Determine Which Locations to Include

Mortgage brokers should decide which branches or locations to include in the model. This could include all branches or just a select few.

You may choose to identify and open brokerage branches in different states where your business is licensed to originate, or you may choose to separate and track revenue and expenses for all locations.

Either way, defining the expectations for how you'd like to track the financial activity between branches can help bring more clarity and confidence to your operation.

Gather Financial Data

Once the branches have been identified, mortgage brokers should gather financial data for each location.

Multi-location accounting can be expensive to track. In order to effectively track each location's revenue and expenses, you'll need an operational accounting system that can help you breakdown the transactions flowing through each location.

To build the financial infrastructure to support your branch P&L model, leverage software to help gather your data quickly and easily.

Spend management platforms like Expensify or Divvy allow you to issue cards to relevant employees to track their spending easily.

Online banking platforms like Relay allow you to create several accounts divided by location to easily track your financial investment and the revenue and expenses at each branch.

Accounting systems like QuickBooks Online can help you create a financial ecosystem where your data can be categorized based on the department, location, or branch you're trying to track.

The financial infrastructure required to operate a branch P&L model for mortgage brokers confidently is complex. Working with a skilled accountant or bookkeeping team to build an accounting system that not only tracks all of your financial data but brings clarity to your decision-making across all branches is essential.

Analyze the Data

After the financial data has been gathered, mortgage brokers should analyze the data to identify trends and patterns. This can help them identify which branches are the most profitable and which may need improvement.

It's essential to review a statement of profit and loss by branch every month and work with an expert accounting team to ensure that your data is accurate and gives you the proper insights into your business.

Without the proper financial foundation, analyzing your data is next to impossible.

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Develop a Plan

Once you've been collecting data and analyzing it for long enough, it's important to develop a plan of action for your business. This could include closing unprofitable branches, expanding profitable branches, or implementing new marketing strategies to attract more clients.

Starting with the goals that you laid out when implementing the branch P&L model, your plan should create new goals based on the data that your business is now creating.

In summary, a branch P&L model can be particularly effective for mortgage brokers because of the nature of their business. Mortgage brokers often have multiple branches, and each branch may have different levels of profitability. Using a branch P&L model, mortgage brokers can better understand which branches are the most profitable and which may need improvement.

In addition to identifying areas for growth, a branch P&L model can also help mortgage brokers make better financial decisions. By tracking revenue and expenses at the branch level, mortgage brokers can make more informed decisions about where to allocate resources and how to use their budget best.

Another benefit of using a branch P&L model is that it can help mortgage brokers identify the most profitable products and services. For example, suppose a particular branch is generating a high level of revenue from VA loans in particular. A mortgage broker may want to incentivize that product at other branches or implement a marketing strategy targeting veterans.

Finally, a branch P&L model can help mortgage brokers identify areas where they may be able to reduce expenses. For example, if a branch has high overhead costs, the mortgage broker may want to explore ways to reduce those costs or consider closing the branch altogether.

In conclusion, a branch P&L model can be a valuable tool for mortgage brokers looking to grow their business.

By using this model to track revenue and expenses at the branch level, mortgage brokers can identify areas for growth and make better financial decisions. While implementing a branch P&L model may require some initial investment of time and resources, the long-term benefits of this approach can be substantial.

Working with an accounting team to help your brokerage set up and track the financial data that your business is generating can be extremely helpful in ensuring that your business is achieving its goals and growing profitably!

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Jeremy Millar
Written by:
Jeremy Millar

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