Brad Broberg is a freelance writer from Federal Way, Wash. A former newspaper reporter and editor, he writes about business, health care, and real estate. In addition to writing for REALTOR® Magazine, he's a contributor to HouseLogic.com and On Common Ground, both published by the NATIONAL ASSOCIATION OF REALTORS®.
Tracking What Works
Whether you use sophisticated software or a pen and pencil, it's essential to guage your brokerage's performace to set realistic business goals.
September 1, 2009
Last year, when Joy Tarbell reviewed a sales associate’s annual marketing plan, she did a double take. An essential component seemed to have been left out. "No direct mail?" she asked.
"Direct mail is what works for me," says Tarbell, CRB, CRS®, broker-owner of Joy Tarbell Realty in North Conway, N.H. "It was hard to believe that someone could skip it and be successful."
Hard to believe, but easy to confirm. All of Tarbell’s sales associates record their leads through a back-office system designed specifically for real estate professionals. Tarbell quickly ran a source-of-business report to analyze the associate’s leads. "Sure enough, it didn’t make sense for him to do direct mail," she says. His volume of closings from personal networking and referral strategies proved that his strategy was working.
There was a time when Tarbell would have had to guess to reach that conclusion. "When I started the company [in 1994], I didn’t have any methods for tracking results," she says. Today, using management software from Lucero Summit and metrics analysis tools from Terradatum, Tarbell can easily check the pulse of her business. She set up her system to generate several key reports each month. Her pet metric is a gross commission income report that tells her which practitioners are soaring and which are slumping. A pending closings report lets her know what’s in the pipeline, while an agent rankings report shows how her associates stack up against their competition.
Duke Kuehn, who runs Pacific NW Consulting Services in Tacoma, Wash., can’t imagine running a real estate office or any other business without a commitment to tracking results through performance metrics.
"These are like the instruments on your car dashboard," says Kuehn, who specializes in helping commercial real estate companies become more profitable. "You can drive without any instruments, but you’d run into all sorts of problems."
Yet, performance data—whether it comes from a speedometer or a spreadsheet—are useful only when acted upon. "Some people collect data because they think it’s cool, but the information just sits on a shelf," Kuehn says. "You need to use it to improve performance and set goals."
For your efforts to be worthwhile, you also must create benchmarks that put data into context. "You need points of comparison," Kuehn says. For example, if an associate converts one out of 20 cold calls into a listing, there’s no way for a broker to know if that’s good, bad, or average unless that number can be compared with the associate’s past performance or with that of other associates.
Choose Metrics That Matter
With the array of technology available today, the ability to track results is not the problem. The real challenge is deciding what to track.
The difficulty of getting deals done in the current market motivated Scott Bader to find out how well his sales associates work with salespeople from competing offices. "If you make it easy for other people to sell your listing, that’s going to show up [in the bottom line]," says Bader, CRB, CRS®, broker-owner of Coldwell Banker Door County Horizons near Green Bay, Wis.
He started tracking deals that his associates close in tandem with other practitioners using productivity software from Real Estate Real Easy and online tools from Coldwell Banker. He also monitors listings taken, listings sold, average sales price, and average commission—data that helps his associates set goals. "If you want to make $50,000 a year, you need to know how many homes you’ll have to sell," Bader said.
Verl Workman, a Salt Lake City broker and real estate consultant, has had success using business tracking software from Lone Wolf Real Estate Technologies to monitor associates’ progress on new leads. The system can automatically transfer leads from one saleperson to the next if the original salesperson isn’t following through. "One of the biggest problems brokers have today is they get all these leads, hand them off to agents, and never track them," says Workman, cofounder of Pinnacle Quest Consulting. "If agents aren’t willing to enter the data in our system and track their work, they shouldn’t get the leads."
Workman also suggests using visitor data from online listing platforms to track consumer interest in properties. Virtual tour provider Obeo records the number of people who tour each room of an online listing, providing a level of detail that "gives me more information to have an intelligent conservation with a client," Workman says. He recently used such data to convince a seller to bump the buyer agent’s commission from 3 percent to 4 percent to spark more showings.
While performance metrics are an invaluable business tool, there is such a thing as excessive measuring. The power of today’s technology makes it tempting to go overboard. "You want to hit the sweet spot," Kuehn says. "You want to collect just the right amount of data."
Matt Deasy, CRB, broker-owner of Windermere Real Estate East in Bellevue, Wash., tracks two sweet spots the old-fashioned way—with pencil and paper. "The main thing I track is really simple stuff; we don’t even need software for it," he says. For example, this spring, the company set a short-term goal for associates to average one deal per month over a three-month period.
The other metric that keeps Deasy’s pencil busy is median income per salesperson. It’s his way of ensuring that practitioners are staying productive. "One of the biggest problems in this industry is too many brokers keeping people who do two deals or fewer a year. It ultimately hurts the long-term professional," he says.
No matter what else brokers track, they need to monitor their market share, says Brad Hanks, CRB, e-PRO®, broker-associate with RE/MAX Alliance in Lone Tree, Colo. If you focus only on your own numbers, you won’t know if your company is experiencing real change or simply letting the market pump up your stats, says Hanks, who uses online tools from Trendgraphix.
In the end, the tracking tool you choose isn’t as important as your attitude toward business metrics, Kuehn says. "When people begin, they get all caught up in the methodology," he says. "What it really comes down to is a commitment to do the measurement and especially a commitment to pay attention to the measurement."
5 Metrics That Matter
Verl Workman, a Salt Lake City broker and real estate consultant, suggests brokers track the following performance metrics:
- Prospecting time. Salespeople ought to spend three hours a day prospecting. "If they do that, they’ll [increase sales], the broker will start making money, and everybody will be happy," Workman said.
- Lead sources. Besides tracking where leads come from, brokers should track how quickly associates respond. "If it’s an Internet lead, I want to respond to them while they’re still at their computer," Workman said. "The first contact usually gets the business. It needs to be made within minutes. And if it’s an hour, you’re not even a player." Workman recommends software from Lone Wolf to track this metric as well as the following one.
- Appointment results. "I want to know the percentage of leads that turn into appointments and the number of appointments that lead to contracts and the number of contracts that lead to closings," Workman said.
- Cost per lead. Plotted against the value of the lead in terms of closings and revenue generated, this metric quantifies the amount a broker must spend to generate more business.
- Every expense. "You should be able to pull a profit-and-loss statement every day," Workman said. "Every butt in a seat needs to be a profit center." He suggests QuickBooks or Microsoft Money software.