The vast majority of Realtors would like to make more money in their business. Yes, there are a few of you who have too much business and need to begin delegating to assistants and team members, but eventually markets will change, expenses will increase and the requirement to increase your revenue will come back.
Any basic marketing class will teach that there are only 3 ways key to increasing revenue and ultimately grow your business. Those 3 ways are:
- Increase how many clients you have.
- Increase the amount of each transaction.
- Increase how often your clients buy from you.
These 3 items are universal to every business and the commission based real estate business is no exception. Let’s look at each one independently as it applies to a Realtor’s business.
- Increase how many clients you have.
This is the most straight forward of the bunch. The more clients you have, the more transactions you will do. If each person in your market moves every 8 – 10 years, and you know your average sales price/commission, then you can easily calculate the value of your current database. The only wild card here is how well you keep in touch with your database and therefore, do they know, like and trust you?
For example:
100 quality clients in my database x $8,500 average commission / 9 years average tenure in a home = $94,444/year
200 quality clients in my database x $8,500 average commission / 9 years average tenure in a home = $188,889/year
How to Make it Work for You
Answer this question: Where can you find more people who will buy or sell real estate with you?
The list of options is exhaustive, however here are a few quick of the most proven ways to get this done:
Contact Your Database – Turn your low quality database contacts into quality clients, who know, like and trust you. Touch base with valuable content, tips, advice and personal connection.
Referral Systems – Find a reason for your current clients to introduce you to their network, or to send you referrals. Deliberately create opportunities to meet the people your client’s know.
Networking – Look for opportunities to get out and meet new people. This could be done by pursuing your hobbies with like-minded people, by saying “yes” to invites to get together with friends, chatting with people at your kids sporting events, attending actual networking events, or by hosting your own gathering.
Open Houses – Show up, be friendly, and offer to send guests more information on the neighborhood, sold prices, or anything else compelling that suits their needs.
Simple Online Ads – Take out an ad on social media, or Google. Direct it to a landing page or to a specific location on your website to make the ad specific and compelling.
Door Knocking – Not a favorite, but it works great. Just have a good reason to be knocking on the door, such as updating them on price changes in the market.
CIR REALTY has marketing services, scripts, templates and courses to make it easy to increase the number of clients you have.
- Increase the amount of each transaction
There are two typical ways to do this in real estate:
- Increase your average sale price; and
- Increase the amount of commission/fee you charge for your services
Selling more expensive homes allows you to spend virtually the same amount of time on a transaction, but get paid more. The same effect can happen when you increase the fee you charge for your services. Albeit that is less common and often overlooked.
How to Make it Work for You
To increase your average sale price, you need to find more affluent clients. Where to do they live? Where do they hang out? Two obvious answers to these questions are: in more affluent neighbourhoods and with other affluent people.
Many Realtors have an unjustified lack of confidence around working in higher price ranges. I assure you; people are just people.
Sit open houses, start farming, or hanging out in communities with higher price ranges and you will meet people who can afford to buy those homes. Eventually you will just be seen as someone who works in the area.
Another option is to identify some people in your current network who may be higher net worth individuals. Take them for coffee and ask for advice on where to meet more people like themselves. Or create a reason to meet their friends. Send an invite to golf and have them fill the other 4 spots. Invite them and a couple friends for a glass of wine and appetizers at a cool new spot in town.
Now, to increase the amount you charge, you have a few possibilities. First, remember that there is no such thing as a fixed commission rate and while there is often a rate most commonly charged in your marketplace, unless your brokerage has rules saying otherwise, no one says that you need to charge that rate.
While you can just arbitrarily start charging more, it is best to demonstrate more value in order to justify the difference in rates. Consider creating a menu of services. The base rate will be the common commission fee charged in your area, but the increased fee will be for the base services and more. Perhaps you include a move-out clean once they sell, coordinate movers, offer free staging consultations, extra marketing or something else that is seen as valuable to your clients.
- Increase how often your clients buy from you.
You can’t force someone to move, but you would be shocked at how often Realtors are able to increase the number of times a client works with them. What’s the secret? Well there are two common ones:
- Remain the “Trusted Advisor” for life
- Introduce them to investment real estate
How to Make it Work for You
First, you must ensure that your clients stay your clients forever. According to NAR, in 2021, 75% of home buyers said they would use their Realtor again, but only 19% of 2021 purchases made were with a Realtor whom they used in the past. The easiest thing you can do to increase the frequency of transactions is to keep in touch to remain the “trusted advisor” in the mind of your past clients.
You can’t control the number of people in your database who move away, have a family member get into the business, or who will no longer use you due to another external reason. You will lose about 15% of your database annually due to these factors, but you can control how well you stay top of mind with the rest of your contacts.
Also, to ensure your clients stay yours forever, you need to stay in the business. This is a huge reason why clients don’t work with their Realtor again; they are no longer licensed. For this, you need to keep generating new business each day to keep your pipeline full. Having a steady flow of transactions will fix a ton of other business issues that come up.
In addition to making sure your clients stay yours forever, the second thing you can do to increase the frequency of the transactions is to introduce them to investment real estate.
Do they have extra cash that they can diversify away from the stock markets? Do they have a child who might be going to college or university and they want another investment vehicle to save? Do they want true passive income in the future?
Regardless of the reason, real estate has produce more millionaires than any other investment vehicle.
For your calculations and presentation to your clients, focus on cash flow after maintenance, vacancy, and management expenses. Leave appreciation virtually flat for now or only include a small percentage. Also, look specifically at “buy and hold” strategies unless this person has specific renovation experience (for flips). If they need to put more money down to make the home cash flow, encourage them to do it. This will create a very sustainable investment strategy over the long-term versus paying cash into a property monthly.
A Combination of All 3 Strategies to Increase your Revenue – A Summary
Consider adding all 3 of these principles to your business:
- Increase how many clients you have.
- Increase the amount of each transaction.
- Increase how often your clients buy from you.
What can you do this week, to implement one of these strategies? What can you do next week to implement one of these 3 strategies? You only need incremental results applied across many of your transactions to produce massive results.
Enjoy the extra income!
