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First, a little introduction:
My name is Dirk Zeller, and I have been in real estate for nearly 20
years as an agent, investor, coach, and speaker. I am excited about this
new column for REALTOR® magazine, which I’m branding “Build Your Own
Business,” or BYOB for short. My goal with this series is to coach you
on strategies, tactics, skills, and disciplines that have helped my
clients succeed.
Now let's get down to business.
What we are experiencing right now, both in the real estate
marketplace and economically is unprecedented. We certainly are not
alone in this respect. I have been the featured speaker of sales
conferences in Australia, New Zealand, China, Canada, Mexico, and Dubai
since the market started its shift, and serious challenges exist in all
of those places and beyond.
There is one glaring, universal challenge facing real estate pros,
both in the United States and overseas, and it’s not what you think.
The primary problem is not sellers, buyers, foreclosures, negative
equity, short sales, the media, or other practitioners. Those are all
the symptoms, not the disease. The disease is an imbalance in
lead-generation strategies.
Following the Leads
Here is one interesting fact: Last year in the
United States more than 4.9 million transactions took place—that,
according to the National Association of REALTORS®, is the 11th
best year on record!
Let me share a few more numbers.
According to NAR, 43 percent of the buyers came from a referral, and
11 percent were repeat clients. While only 38 percent of the sellers
came from referral, 26 percent came from repeat business.
Whenever I share those stats with real estate pros, most of them miss
the real importance of the numbers. They say, “Fifty-four percent of the
buyers came from repeat or referral…that’s great!”
But my response is always, “That means 46 percent, or almost half the
potential buyers are available for any agent to work with in the
marketplace. What are you proactively doing to tap into this group?”
In this marketplace, we have to create more leads and expand our lead
sources. Yet most real estate pros are too reliant on past clients and
referrals, and have little lead generation beyond that resource.
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Now, before you think I’m anti-referral, I want to say
that referrals and repeats are the most important part of your business.
My belief is that it shouldn’t be the only segment of your business,
though, as some claim. While the all-referral concept sounds appealing,
it’s a poor business strategy.
In today’s environment—with reduced transactions and
fewer opportunities for repeat business—can you afford to hook your
wagon to referrals alone? No.
A strong business does not sell its products and
services to one entity or group. It has a broad line of products,
services or customers.
Start a Lead Triad
In my book, The
Champion Real Estate Agent (McGraw-Hill,
2006), I coined the term “lead triad", which refers to having three
sources of leads that generate a minimum of 15 percent of your
commission revenue. Any lead generation source could qualify: You could
have open houses, Web prospects, expireds, FSBOs, orphan clients, REOs,
farming, or past client/sphere of influence categories—the list really
is endless.
Let’s say you’re generating 60 percent of your revenue
from past clients/sphere of influence, 22 percent from farming, and 18
percent from open houses. You would have a stable lead triad and a
stable business.
By following this model, you can establish a system to
create leads that is systematic, proven, and replicable. If one of your
sources is negatively affected by a major marketplace change, you can
focus more on another source quickly, efficiently, and effectively to
maintain and increase business. You won’t have to try out new
strategies, attacking the steepest part of the learning curve through
trial and error.
I urge you to review your transaction sources in the
last 12 months. Look at the breakdown of your business. Do you have a
lead triad?
If you don’t, resolve to add one source—and only one
source—to your business mix in the next six months. It will take that
long to monitor, test, and adjust your strategy and tactics and
determine the return on investment. And make sure this new source is one
that you will be willing to work over an extended period of time, rather
than just during a lead crisis or market change.
Diversify Your Business
To build your own business, you must look at numbers,
odds, conversion ratios, lead volume, sources, and strategies to build a
long-term sustainable model of success for yourself. Part of that
involves creating a broader lead-generation plan to ensure that you
don’t have all of your eggs in one basket.
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