Residential Real EstateUsing Key Performance Indicators to Supercharge Your Effectiveness
Key Performance Indicators are like the instrument panel in your car"s dashboard, but instead of telling you how your engine is operating and how fast you are going, a set of real estate KPIs will tell you how well you are doing today and give you a very accurate prediction of what the next three months will look like. KPIs give you an easy way to know how your real estate business is running and give you early warning signals about potential problems so that you can make adjustments before little difficulties become big problems.
Balancing Roles: Sales vs. Business Owner
Most agents focus primarily on tactical activities, such as taking a listing, setting up homes to show a buyer, following up on the logistics of getting a home closed, creating house flyers and all the other details involved in a real estate transaction. The problem is that even while you are performing these essential tasks, you may be neglecting a crucial responsibility.
Your job as the manager of your real estate business is to look into the future and make sure that your marketing plan, customer service systems and operational infrastructure are working effectively to ensure that you have a steady flow of future business and the systems to handle it effectively. This is the only way to avoid the peaks and valleys in real estate that most agents experience. The secret to seeing into the future is to set up the KPIs that help illustrate the relationship between what is going on today and how that effects what will happen in the future.
Most agents get the concept of KPIs at the 30,000 foot level, but cannot seem to follow them all the way down to ground-level action steps that bring it all to life and give them that all-important view into the future.
High-level KPIs are things like Listings Taken Last Month, Listings Sold Last Month, Purchase Contracts Written Last Month, Purchase Contracts Closed Last month. These KPIs are a good starting point. Think of them like your speedometer on your car that tells you how fast you are driving, but now you have to work backwards to create KPIs that give you insight into how your engine (business) is operating.
Tracking Your Lead-Generation Methodology
Think about what you are doing to create your listings. List your marketing activities such as direct mail, advertising, calling past clients, emails sent, whatever you do to generate listings. Now look back at the results and try to find the methods that produce a consistent ratio of results. I like things like Numbers of Mailings to Farm Area Per Month. Lets say you mail three marketing pieces a month to your farm of 1,500 people. That"s 4,500 mailings per month. Your records over the last 12 months show that, on average, each month you generate 25 calls per month in your farm that generate an average of five listings per month.
Now you can set up some KPIs for your farm.
KPI 1: Farm mailings per month
KPI 2: Calls from farm per month
KPI 3: Listings in farm
KPI 4: Total homes listed (in farm)
KPI 5: Market share in farm
KPI 6: Average time to sell
Like a Business Crystal Ball
This may seem like a lot of work to track, but once you have a system for it, it"s easy to do and it enables you to start seeing the big picture. After you do this for six months, some patterns will start jumping out at you. If you miss a mailing to your farm in one month, you will see that the number of calls coming in does not drop until the next month and the number of listings taken will usually not drop until the month after that. You will start to see and understand the time lag for your farm. You can also see trends.
If the total number of homes on the market each month is growing but your total listings stays the same or is growing at a slower pace, you know that you are losing market share and you need to find out why. Do you have a competitor? Is an existing agent finally competing with you with quality marketing? If you spot these types of trends early, you can respond quickly before you have lost a large amount of market share and are facing financial strain and stress that makes it harder to respond effectively.
Creating an Overview of Your Entire Business
You will need to go through and set up KPIs for each part of your business so that you can monitor how you are doing. This includes statistics like your customer service ratings, number of past client referrals each month, etc.
If you work backwards, you will focus on the key tasks that you need to do this month that will ensure your future months will be great. The problem is that unless we invest the time this month in tracking the things that impact our future, we will always fall victim to the trap of the urgency of today. This leads to a great month or two followed by a bad month or two and it creates a state of constant stress that leads to burn out. It takes the joy out of your business.
When you start managing your career through KPIs, you will love your life and your productivity will go through the roof. Best of all, you will have a sense of control and self-confidence about your career that you cannot find any other way.