Many factors will determine the health of your business. Key numbers can tell you where you may be leaving money on the table. Let’s take a look at the key numbers for a healthy real estate business. Here are a few:
Listing Income as a Percentage of Gross Commission Income: What percentage of your income came from closed listings and what percentage came from closed buyers? While listings should always be your focus, if you are listing heavy (more than 55% for example) you may be missing out on buyer opportunities. A fully leveraged listing should get you a qualified buyer.
Let’s say 75% of your income came from closed listings and your total gross commission income was $500,000 for the year. That means $375,000 came from closed listings and $125,000 came from closed buyers. Had you captured every possible buyer you would have had a 50/50 business AND you would have earned an additional $250,000. Even if you do not want to work every buyer lead you generate, perhaps investing in a showing agent or buyer agent would be worth an additional quarter of a million dollars.
Listing Presentation/Listing Taken Conversion: Out of the last 10 listing presentations you went on, how many listings did you take? Knowing this conversion number is important so you can determine if your presentation is effective. Purposely raising your conversion number can have an incredible affect on your bottom line!
Listings Taken/Listings Sold Conversion: Listing a property has a cost associated with it. When listings don’t sell, it’s usually due to price. Check in on your conversion ratio here. Is it time to set up a systematic approach to price reductions?
Buyer Listings/Buyer Contracts Conversion: When a buyer hires you, how often to do they go to contract? Are you losing them to other agents, are they not truly qualified or motivated? If this is happening too often, what scripts can you utilize? Do you need to ask more questions? Do you perform a formal buyer consultation in your office? Will you start getting a Buyer Broker Agreement signed? This is a great conversion ratio to analyze and purposefully increase.
Gross Profit Percentage: What is your gross profit (the amount left after expenses and cost of sale)? For instance, if your expenses run 30% of your gross commission income and cost of sale is 30%, then your gross profit is 40%. It’s not about what you make, it’s about what you keep. Knowing this number and sticking to your budget is so important. Knowing this number will also help you make decisions such as team member compensation. Only by sticking to your expense and cost of sale budget will you get the gross profit amount you expect from your business.
Of course, there are many other key numbers to look at, and these are a good start if you are not currently analyzing your numbers. It’s important to realize that you cannot change what you don’t acknowledge… that’s why know your numbers is so important when your goal is increasing your business and your bottom line.
It’s never too late to start tracking this year’s numbers. Go back and look at these key numbers and start to track them for the year. Month by month, quarter by quarter you’ll be able to see which adjustments can create a powerfully abundant year for you.