I’ve met with a number of Real Estate Agents and Broker’s the past few months and I’m not surprised they view Social Media as a waste of time. Don’t get me wrong, I have found a few that get it, they have taken the risk and setup virtual offices and even opened accounts with FaceBook & Twitter. Some use these Social networks well and some just say they use them effectively, my research here in Canada reveals that most aren’t practicing what they preach.
I’ve made recommendations and suggested radical approaches to how an agent prospects and wastes a huge amount of time with tire kickers at open house events. They look at me with those puppy eyes and say I couldn’t do that, I don’t know how, that sounds like too much work. I think it’s harder the way they do things now, but they’re stuck! If you’re an agent or a broker that’s been in the industry longer than 10 years, you may have a tougher time making the paradigm shift. I’m not saying you can’t or don’t have the ability, but I am saying if you don’t, life is going to get very interesting when the new tech savvy up and comers produce at a high level with a very different kind of effort. How will you compete and survive?
Let me give you an example of one thing you could do and have fun doing it. I’ll look at the old school traditional agent first, then the new tech savvy agent.
Old School Agent
The old school agent would sit on the phone rounding up prospects for hours on end, then would set up 4 or 5 walk abouts and even a few open house events two weekends in a row. A lot of time and effort goes into this type of selling, hard work is important but with today’s technology why would you do this? Organizing and worrying about how may or may not show up, worse yet, having to go and pick them to ensure you do have a prospect. Getting flier’s out and setting up sign’s, the list goes on. The advertising costs can be staggering too, time spent networking, convincing people they should come and see this house and so on.
The New Tech Savvy Agent
The new tech savvy agent sits at the desk and decides which homes to work on this week, then prepares how they would sell the dream of the home on video. This agent goes out and buys a Flip MinoHD Camcorder 2nd Generation (Amazon Link) hooks up to the net, logs into their UStream.TV account, walks through the house and broadcasts it LIVE! They walk through the home and share how this home could be plus records the whole event, then puts the recorded video on UStream and his or her Blog and other locations for prospects to view at their leisure. The tech savvy agents then jump on Social Network’s that feed multiple Social networks all at once with this new home to look at via video.
This new agent let’s the prospect qualify themselves and let’s them contact him or her when they’re ready, this agent is thinking about the prospect not themselves.
As you can see the new tech savvy agent takes a different risk, invests their time giving what prospects want and then makes it ridiculously easy for them. The prospect that calls the new tech savvy agent back just qualified themselves, less work than the old school way of handling the same task. This is just one opportunity to start making the shift to Real Estate Selling with Social Media, if you don’t take baby steps now and don’t learn how to do some of these techie things. I have to wonder if Real Estate Brokers won’t become obsolete, Broker / Owners at some point will figure out they can handle inventory in a less complicated way. By the way, people complicate things not flip cams and iPhones.
Are Real Estate Agents Obsolete? Maybe not yet, and maybe not all, but more than you think.
In July I wrote an article for you called, ” Your Break Even Point “. The premise was to help you calculate that number and for you to have a better understanding as to why you might be loosing money everyday and not know why. Your business depends on you knowing! I mean it’s not something real obvious because it’s kind of hidden, if you don’t have the right indicators in front of you everyday you won’t see it. Hopefully you were able to figure out what those indicators might be and you are monitoring them daily. I’ll assume you’ve done that because next I want to walk you through an advertising slash marketing concept with you.
Years ago when I was selling Radio Advertising we used a thing called Return On Investment Selling, it was an education and very interesting. The program was to show how you would be able to pay for a new ad campaign and make money too! Yep, pay for the advertising and make your desired ROI, sounds to good to be true right? Well….yes & no. Let me lay out a scenario and we’ll walk through this together, I think you will find it most interesting.
I’ll change the names and places to protect the innocent, just kidding. I’m going to take you through a simple Growth Objectives equation and an Investment Analysis so you can understand the number at the end when I’m finished. Oh, and the Forward Slash ( / ) means Divide By in my equations if I don’t use the ÷ Symbol, I thought I should clear that up right upfront 🙂
Let’s pick a market, let’s say you are in the furniture business and the Market Potential was say 5 Million Dollars. That means 5 Million Dollars in business is being done in the Market your business operates in. Lets keep it simple and say you have a present Gross Sales figure of $500,000. That means you have a 10% market share. But you want to realize a growth objective of $100,000 out of your market, what kind of additional penetration do you need to achieve your goal? You would need 2.2% more, here’s how I figured it out:
100,000 ÷ 5,000,000 – 500,000 = 100,000 ÷ 4,500,000 = .022 x 100 = 2.2 (actually 2.222222)
If you’re struggling with the equation, get your calculator out and punch it up. It works.
So now we know the Penetration needed to reach a $100,000 Growth Objective in your Furniture market. Next I’ll break down how many customers or prospects it will take per day to achieve your goal of One Hundred Thousand Dollars.
To make this equation work we will need to know a few things first before it will work. We need to know what the average customer worth is in your store, how much each customer spends in your store. We also need to know what your closing ratio is, a great way to see how well your sales staff produces I might add.
For the purposes of this exercise I’ll use an average customer worth of $1,000 and a closing ratio of 40%. That will keep the numbers easy to work with. The equation is somewhat simple, I’ll try to lay it out that way.
$100,000 / $1,000 = 100
Growth Objective / Avg. Customer Worth = Additional Customers Needed
100 / 40% = 250
Additional Cust. Needed / Closing Ratio = Additional Prospects Needed
250 / 312 = .08
Additional Prospects Needed / # of Selling Days (Days Open) = # of Prospects per day
Is the number of prospects needed realistic? Yes No
This is only part of the equation, this merely tells you how many prospects per day you would need above and beyond you current customer base over the course of one year or 312 business days.
OK, we now know what the daily number is, but it still doesn’t tell us what the additional Gross Profit is going to be. Well, if your Growth Objective is $100,000 we now need to multiply it by the Average Gross Margin. Let’s use a simple number and one that might be realistic, let’s use 25%. Using our numbers from above this is how the equations looks:
$100,000 x 25% = $25,000
Growth Objective x Avg. Gross Margin = Additional Gross Profit
So in order to achieve the additional gross profit of $25,000 you were going to need to make $100,000 more (above and beyond) in business over the next year. We figured out how many new prospects / customers it would take to hit that number (0.8 per day) and we felt it was realistic. Now, what kind of ROI did you want to achieve, I’ll assume you wanted 100%! You want to make $100,000 in additional business which would give you an additional gross profit of $25,000 and you want a return of 100%, right?
The question begs to be asked…..HOW?
Well, obviously you would have to do something different than you have been doing to achieve that fine 10% market share. You want to grab 2.2% more of that market right? That means you have to do something above and beyond what you are already doing in your advertising efforts. You WILL have to put more advertising dollars into achieving your goal of 12.2% Market Penetration, your $100,000 Growth Objective and put the additional $25,000 Gross profit in your pocket.
The ROI I’m talking about is what you have to spend in additional advertising dollars to make it happen. You are probably asking yourself how you figure out how much to invest in advertising dollars. the Investment Analysis is quite simple. Here’s the equation:
Desired ROI is 100%
$25,000 / 1 + 1 = $12,500
Gross Profit / Desired ROI as a Decimal (1 + 1) = Maximum Additional Advertising Investment
25,000 ÷ 2
So, you want to get 100% of your advertising investment back, you will spend $12,500 in new advertising dollars plus make $12,500.
You will Invest $12,500 in additional advertising to realize the Growth Objective of $100,000 in additional revenues that will produce and directly impact your bottom line by an additional $25,000. Cool & achievable based on the above numbers.
The above is an over simplified view, achieving a market share growth of 2.2% on top of the already acquired 10% market share is not easy, the numbers don’t tell the whole story. Now you still have to go through the process of doing the creative, copy, layout and cross promotional stuff but now you an idea in advance the hill or mountain you may have to climb.
I hope this helps you when you get the notion to grab more market share, do your homework and crunch the numbers. You will have a much better picture and it will allow you to enjoy the process of achieving it. Keep this in mind the next time your advertising sales rep wants to up sell you. If you want more real gross profit you will invest to get it, it’s a fact of life. Just make sure it fits your goals, think with the end in mind and work hard to reach it.
Until next Time.