# How to break down your income goals for the year (Realtors)

Real Estate Agent with Equity Real Estate

I just had a coaching session with a student of mine and we went over a few things, she is relatively new in the business and has had some difficulty deciding how much business she would like to do, she is pretty timid and afraid that she may be "thinking too big" (to which I replied, "there's no such thing") She hasn't done a whole lot of business so she has a really limited frame of reference as to what activities generate results for her.So it wasn't the simplest goal setting situation, but we made some solid headway and discoverd a few things that really helped to break down what she needed to do to achieve the results she is after.

1- How much do you want to earn?

Let's say you want to earn \$100,000 this year (isn't this the number everyone starts with?) for ease of numbers we'll say that the average commission in the area is \$4500 (in my area, it's about \$6,000 but you get the idea) so if you divide your income goal by the average commission you get a number, inn this case 22.22, that would be the number of transactions you need to complete to achieve your goal. For the ease of math in this illustration we will use 24 transactions a year as your goal.

2- How many transactions?

If you have a goal to complete say 24 transactions a year, you need to start out with how many per month that entails, in the easy math number we have chosen this means you need to average 2 transactions per month, which in turn means 1 transaction every 2.17 weeks.

3- Closing Ratio-

Just look at the number of listings or buyer contracts you had for the last 12 months(number "A", and then find the number of sales that actually resulted from the contracts (number "B"). Then you divide B by A and get your percentage, for example if A=25 and B=18 then B/A=72 so you would have a 72 percent closing ratio.

4- How do I get the clients?

Again some simple math can help here, and if you don't have enough numbers to draw from, or you haven't tracked your activity find someone in your office that can give you a ballpark. First you need to find out what the most effective methods are for you to get clients, for some it's working your SOI, for others it's FSBO's also Short Sales, Expireds, etc... the list goes on and on. Then you need to look at how many contacts it takes within the method to achieve a contract (either a listing or a buyer contract) say that for every 100 people you contact you get a contract. Now assuming we are working on the 72% ratio from above we know that to achieve 24 closed transactions you need to have 33 contracts (as 24 is 72% of 33) so to achieve 33 contracts you would need to contact 3300 people within the year, or roughly 66 people each week (allowing for 2 weeks off for vacation and holidays) which further breaks down to about 13 contacts daily (with a 5 day workweek). Which means 4.3 contacts per hour over a three hour period. Can you talk to 13 people in 3 hours? You bet you can!

Summary-

For our purposes here we have discovered that to achieve 24 transaction in a year based on our numbers you have to contact about 4 people an hour for 3 hours a day, that pretty much gives you 15 minutes for each contact, now your numbers may be lower or higher, but you get the idea, you can decide exactly how much you will earn based on how many poeple you speak with each day, while this is not an exact science you can definitely see how much you can grow your business by just knowing how many contacts you need to make each day, and let's say you shoot for 100K and only reach 92K, are you really going to be terribly upset and tell me this doesn't work? I highly doubt it.  Why not actually spend some time and discover your numbers, you will be very surprised at what you find, and also at how much business you are letting pass you by.

Keith

"A flatterer is a friend who is your inferior, or pretends to be so."

-Aristotle

David Ethridge
Sea Lion Real Estate - Long Beach, CA

Good info, Keith. Helps me get a handle on how much of time should be spent prospecting and making those contacts!

Nov 25, 2008 08:54 AM
Tony & Darcy Cannon
Aubrey and Associates Realty - Layton, UT
The C Team

Keith, Good info thanks for sharing it!

Nov 25, 2008 09:00 AM
Joyce Marsh
Joyce Marsh Real Estate LLC - Daytona Beach, FL
Joyce Marsh Homes

Thanks for sharing - good info and very helpful for newer agents

Nov 25, 2008 09:02 AM