Category: Management

How To Do It: Step 7 – Track Results

(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?

How To Do It: Step 6 – Accountability

(This is an elaboration of ‘How to Rule the (Real Estate) World in 10 Easy Steps‘)

One of the hardest things  self-employed people must do is to hold themselves accountable.  We’d all like to believe we’re ‘self-starters,’ but the truth is:  that’s a rare individual.  You, as an entrepreneur and business owner, may even have difficulty at times getting yourself to do the things you know you need to do.  That’s why coaching can be so effective.  Just knowing you’re going to have to report to someone else provides enough push to get most of us in motion.

As a broker in control of your business, you have to take on this coaching role with your staff.  Having clear job descriptions and well defined expectations is essential for everyone on your team and that, by itself, should be enough to keep your administrative staff on track.  But salespeople need a little more coaching.  Let’s start with expectations (I’m going to lay them out right now;.  You may choose to alter them and that’s ok, but I believe this is fair and reasonable):

Minimum standard of production for buyer agents:  6 closed sides in the previous 3 months (That’s 2 per month and really, if they can’t do that, they’re probably costing you too much in fumbled leads and lost business).  New agents get the first 3 months to ramp up, so we begin to hold them accountable at the end of their 6th month, for months 4, 5 and 6.  It’s a rolling 3 months, so each month we add a month and drop off the oldest month.  We do the three month look-back at the end of each month, and the first period in which they fall below 6, they are reminded of their commitment and offered increased coaching.  Two months in a row and they must commit to a remedial program designed by the broker (design should be easy:  I’d simply go back to Science to Sales).  Three months in a row and they are de-hired.

Using the three month look-back allows for the peaks and valleys that are typical of a productive agent’s career and considers production over a longer period.  If they fall below the line three months in a row, that’s a pretty good indication of their capability.

Expectations and minimum standards are a good start toward accountability, but there’s more to it than that.  Saying we expect a number of closed sides is great but you can’t manage ‘closed sides.’  You can’t make them happen.  They are an event, not an activity   You manage activities — the activities that lead to closed sides.  So part of your office culture should be an activity planning/commitment and accountability process.  Each buyer agent should commit to a certain number of activities every day and then report what they actually did.  This way, if they fall below the production expectation, we have something to go back to that might show us why.

Here’s a picture of the activity tracking sheet John Powell uses with each of his buyer agents.

And here’s a summary sheet he uses for an at-a-glance assessment of his entire sales team.

Step 7!

Both of these are available in the Download Library under ‘National Sales Meeting,’  ‘July 28, 2010’.  They are called ‘Tracking Sheets.’    You’ll note that each agent commits to a certain number of activities and then reports how many they actually did.

As broker/owner of a marketing oriented company, you also want to keep careful track of how each of your buyer agents are doing with leads.  In a perfect world, your admin answers every call and routes buyer leads to your team of buyer agents.  It’s the admin who logs the call and gives you a basis to go back to your agents and ask, ‘what happened to this one?’ and ‘did you do a Buyer Data Sheet on this one?’  The metrics you want to track are:  How many leads each agent received, how many resulted in a complete Buyer Data Sheet with contact information, how many Buyer Data Sheets resulted in appointments, and how many appointments resulted in sales.  This information becomes a management tool.  It will help you spot the one who needs more work on taking control of incoming calls and completing Buyer Data Sheets.  It will help you spot the one who can gather information but can’t seem to get an appointment.  It will also help you spot the one who works lots of leads but only closes a few.  It’s all about identifying areas for improvement and then working on them.

So, you get your entire office functioning in a culture of clear expectations, firm commitments and accountability . . . all’s right with the world, true?  Maybe.  But what about you?  Who’s holding you accountable?  Just like the best agent you’ve ever had, you at least need someone to run your ideas by, someone to remind you what you said you wanted to accomplish and get you back on track.  You could pay a coach — there are dozens out there and many swear by the results they get.  But I think you would be better served by staying in-house and getting involved in a structured coaching program at Help-U-Sell.  John, Ron McCoy, Jack Bailey and I are here and would welcome the opportunity to help you plot and scheme.  All it takes is a call . . .

And now, for Step 7!

How To Do It: Step 5 – Staffing

(This is an elaboration of ‘How To Rule The (Real Estate) World In 10 Steps“)

You have taken a lot of listings.  Your Listing market share is growing.  The public is starting to recognize your identifiers and understand your offer.  Your phone is ringing with potential buyers.  You are literally as busy as you can possibly be – there is no time left to do more.  It’s time to hire.

I believe your first hire should be a highly organized assistant.  You want this person to take over everything that does not involve direct buyer and seller interaction (beyond telephone inquiries).  That means working with the MLS, with Help-U-Sell, with all of your websites.   It means getting all of the paperwork done and keeping all of the logs, leads and files organized.  It probably means keeping your schedule and keeping you on track.

A license is essential — this person will be handling buyer and seller inquiries.

Look for someone who has experience managing a mountain of detail and working with customers primarily on the phone.  Mortgage processors are good candidates as are Transaction Coordinators.

Teach this person how you want things set up.  Let them figure out parts you haven’t considered.  Spend serious time role playing buyer and seller inquiries with them.  Bear in mind that at some point you’ll hire more office help and may have each member of the team specialize in something.  This first hire may eventually be your Transaction Coordinator or you Client Coordinator (the person who handles all in-bound calls and manages all of the buyers and sellers).

At the same time, start looking for a Buyer  Agent.  Note:  the assumption here is that you have listings, your phone is ringing and you’re capturing Buyer leads and storing them in a Buyer Pool Book.  The Buyer Pool Book is essential because it gives the great opportunity you have tangible form.  It’s real, it’s physical.  Your potential recruit can see it, touch it, consider what life with it would be like.

You have a great offer for the consumer – that’s why everything’s working so well.  You need to also have a great offer for the agent, one that’s better than what anyone else is offering.  Here are the key ingredients of that offer:

No prospecting for listings.  You will handle all of the FSBOs and Expireds, the door knocking and mailing.

No pressure to get listings.  All you want them to do it take care of the Buyer Leads you’re creating.

No listing management headaches.  No angry seller calls, no withdrawn listings, no pressure to communicate with sellers.

Razor sharp focus on one simple aspect of the business:  taking a buyer lead and converting it to a sale . . . then going back and doing it again and again.

They’ll have no marketing expense, no desk fee, none of the bills traditional agents have to pay.

Yes, you’re going to pay them a lower split than your competitors, but you’re going to eliminate a huge chunk of the job description the other guys will burden them with.  You’re also not going to ask them to go out and drum up business.  That’s the job of your marketing.  They’re going to come in, choose a lead, convert it, and then come back and do it again and again.

You should start practicing today to demonstrate why 50% with you is better than, say,  80% with your competitor.  You do it on paper with a calculator.  Take the average gross commission on a closed side in your area, multiply it by the agent’s anticipated annual production (National average is less than 6 closed sides a year), apply your competitor’s split to the total and then deduct all of the fees and expenses the agent will have to pay.  Now, take your average commission per closed buyer side and multiply it by your minimum standard (which should probably be 2 closed sides a month). Apply the split you’re offering and deduct any expenses they might have with you — they should be minimal but might include E&O on each deal or REALTOR dues.  You should be able to demonstrate a big positive benefit in your favor.  They’ll have a focused, manageable job description, will do more business, will worry less and will  make much more.

When we talk with traditional brokers about Help-U-Sell, one of the things they can’t conceive is how we’re able to charge less and make more.  We have to put a pencil to it and show them how we deliver more dollars to the bottom line on a set fee listing than they do on the same listing at 6%.  You have to do the same thing with a potential agent.  Show them how splitting for less with you will delivers more dollars to their pocket than splitting for more with your competitor.

Then pull out the Buyer Pool book.  Tell the recruit what it is and how it gets filled.  Thumb through it and talk about a couple of the buyer leads that are inside.  Describe how they’ll use it to stay constantly busy.  You have a minimum standard of production, but with leads like this and no worries about the other side of the business, they ought to be able to double that.

Finally, show them Science to Sales.  It’s going to be their blueprint to success.  Truth is, after a couple of weeks in S2S, they’ll know more than 80% of the agents in the marketplace, and knowledge is power.

Hiring agents for Help-U-Sell can be challenging.  You probably won’t be able to get a traditional agent with more than 18 months in the business to hear your message.  Really – something happens after a year of having the traditional model pounded into them.  A tough layer of thick skin forms over the ear drum and they just don’t hear you . . . and they don’t get it.  You may hire this agent but more times than not you’ll learn that they can’t make it in your world.  They’re already spoiled.

You’ll have the greatest success with an energetic new licensee you can raise up in the family.

This does not mean you should not pursue experienced agents . . . just target them carefully.  Look for ones with a year in the business, give or take a few months.  You’re looking for good people who are becoming disillusioned.  It happens around this time.  They came into real estate looking for a dream job and are starting to understand that the traditional business is a bit of a nightmare.  They’ve probably amassed a sizable bill in their time in the biz and have little to show for their efforts but frustration.  This is an experienced agent who can hear you and who can still ‘get it.’

And regardless of time in the business, talk with any co-op agent you think is workable.

Your Buyer Pool Book will dictate when you add another and another buyer agent.  Now that you have an assistant, you should be able to capture more leads and the Book should be growing.  When it’s big enough to support more than one, hire again . . . and again.

An important shift happens when you start to hire.  Up to now your focus has been on taking listings, doing deals, surviving (and getting by on little sleep).  None of that changes.  What changes is your image of the role you have in this company you’re building.  Previously you were a deal-doer.  Now you are a lead generator.  You still do deals, you still do most of what you were doing before.  But now you recognize that the success of your operation depends on your ability to keep leads flowing to the competent buyer agents you have on the team.

One final note about recruiting.  I’ve talked a lot about how to ‘sell’ Help-U-Sell to a potential recruit.  You have to be able to do this.  But remember: the interview is not a selling situation.  It’s not a listing appointment where you want to convince the other person to choose you.  It’s an educational situation.  You’re going to educate your potential recruit about your business  model and if it appeals to them, they will make the decision to join you.  Please don’t do what your traditional counterparts do, which is to beg. In their world the recruit is the ultimate symbol of success.  It’s not about selling real estate for them, it’s about how many people they can convince to come work for them.  You’re different.  You are absolutely about selling real estate and you’re hiring so that you’ll be able to do more.  If the candidate is not obviously right for the job, you’re not going to hire.  If the candidate can’t see the value in your program, that’s ok – and you’ll part as friends.  But you won’t hire.  The recruit isn’t the prize in our business he or she is in the traditional office.  For us, the recruit is help, enabling us to list and sell more real estate.

OK?  Now on to‘How To Rule The (Real Estate) World In 10 Steps

(Un) Balance Sheet

Imagine an Ordinary (Traditional) Real Estate Office:  Acme Realty . . .

Average Sale Price:  $300,000

Average Commission per closed side:  3% ($9,000)

20 agents averaging 1/2 a closed side per month (some do more most do less — and the ‘average’ is way above what’s typical today)

Average Agent Commission Split:  70%

Expenses:

  • Rent:  $5,000
  • Utilities: $500
  • Office Equipment:  $500
  • Supplies:  $500
  • Admin:  $4,000
  • Management:  $7,000 (Most Brokers do this job 24/7 and never budget for it . . . which is voodoo economics to the max)
  • Dues:  $300
  • Conventions and Training:  $500
  • Insurance:  $300
  • Marketing:  $5,000
  • Total:  $23,600/ month

Production:

10 closed sides/month X $9,000 GCI per closed side = $90,000 GCI/month

Less 8% Franchise Royalty + Mass Ad Fund:  $7,200 (and you’d be crazy to start a business today without a recognized brand and support)

Less 70% to Agents:  $57,960

Net Operating Income (Company Dollar):  $24,840

Less Expenses: $23,600

Net Profit, Before Taxes:  $1,240 = 1.37% . . . which could easily be wiped out if the copy machine breaks or one of the closings falls through.

Is there any question that the ‘Ordinary’ real estate business is broken???

Is Proper Pricing Less Important Today?

Pricing is the topic for today’s training session at 11 Pacific Time. It’s always been a favorite of mine. You see, I learned early on in my career as a Salesperson that the best marketing I could do for my sellers was to convince them to price their home as close to market value as possible. All the marketing you might do, all the fantastic, cutting edge promotion you might undertake, is meaningless if the property is overpriced. Excessive marketing does not make a home worth more. I know: it’s a simple concept, one that is pretty obvious. But it’s striking how many sellers don’t realize it.

(I recently watched Maria Powell doing a listing presentation. At one point she said to the seller, ‘I’m sorry. I really wish I could make your home be worth $400,000. But I can’t. The best I can do is about $370,000 — that’s what the Market Analysis shows.’ )

I have always been a strong advocate of NOT taking overpriced listings. I look back 5 years ago and see that overpriced listings took longer to sell and therefore gobbled up more of an office’s precious marketing dollars. Truth is: every day you have an active listing on the market, it costs you money. And that’s just the tip of the iceberg. Think about the aggravation of dealing with an unrealistic seller wanting to know why you haven’t sold her (overpriced) house yet. And what about your reputation? So what if you have the best deal in town if your listings sit and sit and sit, unsold.

I always urged brokers and salespeople to fight the good fight, do everything they can to get the seller to acknowledge reality and then, if a realistic price cannot be agreed upon, to get up and walk. Don’t take the listing.

Today, I have to modify that stance just a bit.

It is still clearly in the seller’s best interest to price the property properly and we’re all about taking good care of our sellers (and buyers), urging them to do what’s best for them. But ultimately, what’s in the best interest of the Broker?

Every week we ask top producers where their buyer closings come from. Over and over they say the same thing: sign calls, ad calls, Internet leads, Open Houses . . . in almost every case, the buyer comes to us because of our listing inventory. So it’s clearly in the Broker’s best interest (as well as the best interest of ALL the sellers whose homes we have listed) for the office to have as many listings as possible. Listings are the net we cast into the marketplace to capture buyers.

So, what’s really wrong with taking an occasional overpriced listing? Even an overpriced listing will generate calls, right?

Here’s my new point of view:

If you’ve fought the good fight, if you’ve made as compelling a case as you possibly can and the seller still wants to overprice (that’s overprice, not grossly overprice), I think you might take that listing if:

  • You make it very clear you think it’s too high. By being clear when you take the listing, you eliminate the call two months down the road wondering why you haven’t sold the property.
  • You set a date four to six weeks in the future to revisit the pricing issue.
  • You ask every agent who tours or shows the property what they think of the price and you share that with the seller.
  • You give the Seller a Listingbook account or sign them up for some other ‘First to Know’ program so they can see what other homes are selling in the neighborhood, how the competition is priced, etc.

As an agent years ago, I found it helpful to put my unrealistic sellers in the car and take them out to see the competition.  They usually came back with a new appreciation for reality, especially if some of the competition were shiny new homes with flashy models.

Today, success in real estate is all about the buyer.  Can you attract buyer inquiries and convert them into prospects and then into sales?  Anything you can do to attract buyers is beneficial and nothing attracts them better than listings.

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