(This is an elaboration of ‘How to Rule the (Real Estate) World in 10 Easy Steps‘)
Now that you have listings, consumer awareness, leads and people to handle them, you can begin to track your true Market Share. Up to now you’ve focused on a different metric: Listing Market Share. You wanted to have more than your share of listings and you wanted your inventory to always be expanding. But true Market Share is about counting the income producing side of the business, closings. Since each sale has two sides, a listing side and a selling side, and since you may capture 1 or 2 sides in any transaction you close, we count closed sides to determine Market Share.
It’s simple really. Start by defining your arena: what is the geographical area in which you want to have the greatest impact? That’s your target market. Determine the period you want to measure: previous 12 months, last full year, last Quarter, Year-to-Date, whatever makes sense. Now count the closed sides that occurred during that period in your target market. Now divide the total sides your office had in your target market over the same period by the first figure. If you had 10 closed sides in April and the target market produced 100 closed sides, you had .10 or 10% Market Share.
There are nuances in calculating Market Share today. You really ought to separate out REOs, whether you’re getting those listings or not. It’s a different market with different parameters and expectations. I think you might want to figure a closed sides market share based on REO properties only, especially if they account for a sizable portion of your market. But keep that separate from you more general market share analysis. You might further segment your market share analysis by sub-diving equity sales and short sales. You may discover that you have a 10% closed sides market share and that 35% of your closed sides were from short sales while only 20% of the closed sides in the target market were short sales. This could be a good thing if you’re working to distinguish yourself as the short sale specialist in the area.
Moving forward, check your market share three ways: monthly, quarterly and Year to Date. Record your results and keep a running record so that you can discern the trend. You want to see steady, gradual increases in your share.
All that is very important and frankly, a little boring. No, not boring . . . a little less exciting. But tracking your metrics and managing your business by the numbers is exciting. Here are some ideas:
Look for a marketing angle to your Key Performance Indicators. There are a handful of production stats on which you will almost always outperform your MLS. These nuggets become very powerful when presented in marketing pieces and listing consultations. You might discover, for example, that:
Your average sale price is 97% of your average listing price where the MLS is 92%. That extra 5% is something to crow about.
Your average days on market is 87 where the MLS is 102. (There are two ways to look at this: listing date to pending date and listing date to close date. Pick the one that looks best for you)
Your per person production is 2.58 closed sides a month where the average in the MLS is .3
85% of your listings eventually sell where it’s only 67% in the MLS.
Can you see how these statistical facts could be very impressive? And really, if you’ll start tracking and comparing, you’ll find you almost always beat the MLS. By the way, there may be other comparative metrics you might track and use, AND don’t forget to keep a running total of the dollars you’ve saved sellers (over a traditional commission).
Use KPI to identify areas in which you want to set goals and then track your results. For example:
If you determine your average buyer agent takes six house showings to produce an accepted offer, set a goal to get to 5.5 in six months. Think about that. How would you go about doing it? Training? Requiring more previewing? Having a contest? I knew a great agent in another life who set a goal on this metric every year. The year we talked she had just gone from 6 showings to 5 and she believed it was a reflection of how well she listened to her buyers and how well she knew her market.
You may determine that 20% of your transactions are in-house and therefore, 2 sided. Maybe you decide you’d like to see 30% in six months. How would you go about doing that? Bonuses for selling company listings? Working harder to get your listings priced right from day one? Increasing your showing fee or becoming a little more firm about when you will charge one?
Maybe your team is getting a buyer data sheet and contact information on 6 out of every 10 buyer inquiries. Maybe you want to move that up to 7 out of 10 in three months. What would you do? I’m sure you’d do training and lots more role play on the incoming call, but what else? Maybe a contest – once a month each person fielding buyer calls gets one chance to win for each Buyer Data Sheet he or she gets during the month. First prize could be an Ipod or an elegant dinner for two or whatever!
I knew an amazing real estate consultant years ago. He was actually an industrial psychologist who had gotten involved with one of the franchises early on and became a guide and mentor for the entire organization. His name was Dr. Dick McKenna, and one of the things I remember him saying when he’d talk about tracking metrics and KPI was:
‘You have to massage your numbers until they throb!’
Ready for Step 8?