This post is targeted to newer agents but also may be of interest to more seasoned agents who are not meeting their income goals:
It is the time of year when real estate agents are thinking about and setting goals for the New Year. Have you set your 2016 income goals yet?
Do you even know how? Most rookie agents do not have a clue and, if the seasoned agents know how, many don't do it! Most agents just "wing it" and go with whatever the year gives them.
Let me take you through a series of steps that can help you confidently set your income goal... and actually achieve it.
When I talk about income goals, I always think of "Net". Net is the number of dollars you have left after expenses. That's really all that counts because that's what YOU have left for your personal expenses.
For the benefit of us non-math majors (like me), I'm going to use very achievable numbers that shouldn't scare anyone away. EVERY market is different. Some have very high median prices, with high commission pay-outs, while others have a much lower median price, with lower commission pay-outs. Commissions are always negotiable so I can't identify any actual percentages. I'm just offering a formula so you can insert your own numbers, for accuracy.
So, let's get started and establish some basic formula numbers to work with:
Nationwide, real estate coaches have established that it takes an average of 40 contacts to create a "client". This means for every listing and/or buyer you want to work with, you will need to have 40 conversations. Your conversations can be targeted based on the type of client you want. Perhaps, as you become more confident and competent in your career, this number will be less. For now, though, let's go with 40.
A while back, I ran a survey through the Q&A section of ActiveRain to see what percentage of their gross income agents are spending on expenses to run their business. The answers ranged from 20% - 30% of the gross income went toward expenses. In the interest of being conservative on achieving net goals, I am going to use the higher 30% number for the step-by-step process.
I don't have any idea what the average agent commission check is in your market, but it doesn't matter. You can plug your own numbers in to the formula. As I said before, commissions are always negotiable and prices vary dramatically so pick a number you feel confident is a reasonable average in your market and niche.
* Let's say you want to net $100,000 per year.
* Your gross income would need to be $142,000 per year
($100,000 is 70% of $142,000)
* I'm going to use an average commission check as $7500
(I realize this is very low in some markets, but quite high in others)
* The average agent can't claim to work 365 days a year, so let's use 10 months (20 days per month)
Now...
* To Gross $142,000 at $7500 per sale, you will need to make 19 sales per year
* 19 sales divided by 10 months = 1.9 sales per month
* 1.9 sales x 40 contact per sale - 76 contacts per month
* 76 contacts per month divided by 20 days = 3.8 contacts per day
(round up to 4 contact. And, by the way, this additional .2 contacts
per day will compute to 40 per year. 1 extra client. Can you say... BONUS?)
Can you see how easy the formula is? Can you honestly tell me you can't have 4 real estate conversations per day? Keep in mind, though, a real estate conversation with a peer doesn't count. They are vying for the same business you are!
That's the simple way to calculate how to identify how to generate a specific amount of money. The details to accomplish this is a bit more complicated... but that's a topic for another post.
Food for thought... or should I say the appetizer?
Your for success,
Carol
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