Are you missing opportunities right in front of you? Are you focusing on the wrong things? What if you could make more money just by asking better questions? It’s easy to get caught up in the hectic day-to-day of our business, and we often aren’t leveraging the data we have readily available to better position ourselves for success.
I’m here to help you take a quantitative approach to your business, so you can maximize your time and make more money. This step by step guide gives you a foundation for thinking more strategically about how you operate.
ANALYZING YOUR BUSINESS
To truly understand your business, just look to the past.
- What have you excelled at?
- Where are your best sources of business?
- Where is there room for growth?
STEP 1: Source of Business, Spend and Income by Transaction
This step will help you get a quantitative perspective on how much business you did last year and whether or not you are on track this year, in addition to quantifying where and who your business is coming from and helping you gauge exactly how much you earn and how much you are giving up in negotiations.
ACTION: Pull your full transaction history for both this year and the last. You can pull MRED transactions by date. If you had any off-market deals (including rentals and outbound referrals), your company tracks those internally, so a simple request can often get you all the information you need.
Compile data on whether you represented the buyer or seller, the source of the lead, your commission, your split, what you spent or gave up and ultimately, your net income.
Here are the questions we need to answer:
- How much business do you actually do?
- Where does your business come from?
- Who is your biggest referral source?
- What are you actually earning?
- What are you giving away?
See Sample Transaction Entry below and download it here
Step 2: Annual Analysis
The goal for this step is to assess a few things:
- Whether you are balanced, listing-heavy or buyer-focused. You can take it a step further and look at your average commission for both buy and sell sides. Are you happy with that number?
- TIP: If you want more listings, consider contacting cancelled and expired listings or prospecting with FSBOs. Want more buyers? Host and sit open houses!
- Your average sale price and volume. You can increase your income by charging a higher commission, participating in more transactions or raising your average price point. Use this data for goal setting for next year!
- The impact outbound referrals and rental deals are having on your bottom line.
- TIP: No referral income? You are missing out! Whether referring deals to other agents in nearby markets or helping clients find the best REALTOR® out of state, position yourself as the source for all things real estate. Build your network by attending local, state, & national events.
Step 3: Tracking Progress
By compiling all this data, we are able to not only look at last year’s numbers, but also how on- or off-track you are this year.
ACTION: Put the annual analysis side by side.
- How do your year-to-date sales compare to last year’s?
- How have the number of deals changed?
- Has your buyer/seller mix changed?
- Are there any other trends you note?
If there is a variance, drill down to see what has changed. Whether you are working with fewer clients, have seen a spike in your average price point, or are charging a different commission, the numbers will shed light on the root of the change. If you keep tracking this data, you can start to see shifts year over year.
With fluctuations in the market, expansion of your network and increases in your marketing budget, you will be able to plan ahead, and pivot as needed.
MAKING MONEY: MEASURING YOUR SUCCESS
Step 4: What You Earn
Throwing in 500 dollars to get the deal done adds up quickly – especially if your split is calculated off gross commission. Additionally, covering a few hundred dollars in company fees that were your client’s responsibility to pay or accepting a negotiated down commission makes a big difference when you add it up at the end of the year.
ACTION: Do the math and ask yourself whether you are giving too much away for the great work you do.
- How much are you leaving on the table?
- What are you going to change to put and keep more money in your pocket?
Commission discussions are always a challenge. Some companies have policies on minimum commissions, whether they be percentages or flat rates, and you want to abide by your company’s policy. Some brokers choose to discount because they are chasing higher volume while others charge more because they justify it with the services they offer and the success they bring. When you calculate your stats, you will have more fodder for articulating why you are worth what you charge.
Step 5: What You Spend and Where
Spending money is not always a bad thing, if it is strategic. Unfortunately, many of us fall prey to SOS — shiny object syndrome — and signup for software, lead generators and fancy CRMs that we aren’t using. Look back to your sources of transaction and see if you are getting the return on investment (ROI) to justify the expense. If not, decide whether you can commit to more time to make it worthwhile, or whether it’s time to eliminate the expense or reduce the cost by switching plans or providers.
ACTION: Think about what you spend on your clients between gifts, livery service, photography, signs, brochures, etc. If you don’t know off-hand, start making a list of all the expenses you typically incur for a client. Do the same for your sphere of influence (SOI): past clients, friends and top referrers who you take for coffee, bring to a baseball game, invite to a wine tasting, etc. This is money well spent, and if you aren’t budgeting for your SOI, put one together and develop a plan to reach out to these people more frequently!
- What services do you offer your clients?
- How much do you spend on an average listing?
- How much do you spend on a buyer client?
- What are you paying for that you aren’t using?
- What is the ROI for your paid leads?
Step 6: Setting Your Goals
It is never too late to define your goals and create a business plan. Some people are driven by income alone, and others by what the additional money allows them to do, whether this is traveling, supporting a family or relieving financial pressure. In order to set goals, use the data you have to create a plan that will work!
ACTION: The first step to reaching your goals is to write them down.
- How much do you want to earn this year?
- TIP: If your average price is X, then you need to sell Y homes.
- Based on your current buyer/seller mix, average price point and average commission, how many sold listings will you need to reach your goal? How many buy-side deals?
- What percentage of your listings sell?
- What percentage of your buyer clients purchase?
- How many listings will you need to take to reach your goal?
- How many per month?
- How many buyer clients do you need to work with? How many per month?
MANAGING YOUR TIME
Step 7: Where You Spend Your Time
Most of us don’t fully realize how we spend our time.
ACTION: Record and track three of your days — everything from emails and showings, to binge-watching TV and playing Candy Crush, to crushing it at the gym.
- How many hours a week do you work on average?
- How many weeks do you take off (vacation, holidays, etc.)?
- What is your income per hour?
- TIP: Divide your net income by the # of weeks you work and then by the # of hours per week ex. ($100,000/50 weeks)/40 hours per week = $50/hour
- What are you going to change to increase your income per hour?
- Based on your journaling, what’s one thing you want to stop doing?
- What activities do you do to generate business?
- How much time do you spend each week on lead generation?
Step 8: Implementing Systems & Time-blocking
It is always better to work smarter than harder. Your time is valuable! From using a CRM to tracking your expenses, you can implement systems to make your life easier and help save you time. A tried and true tactic for staying on-track involves time blocking. Often, we get caught up emailing, putting out fires and doing administrative tasks. You can earn more money by dedicating more time to prospecting, but this will only work if you set aside time to work on your business. Incorporate activities like lunch meetings, calling your SOI quarterly and hosting client appreciation events to maximize your weeks. Your transaction log also asks if you’ve added someone to your CRM – a helpful reminder to add past clients!
ACTION: Evaluate the processes and systems you have in place.
- Do you have a CRM and how frequently do you want to update it?
- What systems do you use to track your expenses?
- TIP: You can get a discount on Quickbooks via NAR’s Member Benefits.
- What activities will help you generate more business?
- How much time each week do you want to set aside for growing your business?
MATH FOR MARKETING
Step 9: Knowing Your Stats
To justify what you charge and convince clients to work with you, stats always help. Look back at your MLS data to calculate key stats. You can dice and slice it several different ways to demonstrate your expertise at a price point, within a building or subdivision, or your negotiating prowess. Hone in on what makes you the strongest. If you are newer to the business or had a rough go, ask your company about their stats.
ACTION: Examine at your MLS data for the following:
- What is your average # of listing days on market (DOM)?
- What is your average list to sale percentage? ex. listed at 300k, sells for 270k = 90% list to sale
- How many price changes do you average?
- On the buy side, what is the average percentage you negotiate off list price?
- What is the average days on market and percent of sale to list price in the market?
- TIP: Calculate this by MLS area, buildings, price point, etc.
- What is your market-share (as an individual, team or company)?
Step 10: Finding and Leveraging Opportunity through Digital Marketing
Your digital presence is top priority as it is how most consumers will first get to know you.
ACTION: Buff up your marketing plan and dedicate weekly time in your schedule to tackle it. Build a testimonial request into your process after each closing. To build a base, reach out to
your past clients about submitting a testimonial on just one site (I recommend Zillow or realtor.com®). Let them know how much you appreciate them taking a few moments to write one.
- When is the last time you updated your online profiles?
- realtor.com® – Start here to get a FREE profile!
- Your company website
- How many testimonials do you currently have on Zillow, realtor.com® and LinkedIn?
- How many testimonials do you want to have by the end of the year?
- What areas of your profile can be enhanced?
- What digital marketing elements do you want to incorporate into your business (ex. video, Adwerx, etc.)?
Now you have the right questions to ask and the tools you need to leverage data to help you grow your business in the weeks and months to come.