Edward Smith, Jr., Smith Commercial Real EstateThis column is offered to help educate agents new to commercial and investment brokerage and serve as a review of basics for existing practitioners.
As you head towards the end of the year it’s time to reflect on how you did with your business goals for 2016. Did you fulfill your business plan and accomplish your goals? If your answer is yes, you had a great year. Or if no, a new question, why not? Self-assessment is not easy, but is necessary to success. Analyze your strengths and weaknesses and what you need to do to improve.
Where do you see yourself on December 31, 2017? How much commissions will you have earned? How will you accomplish that?
Some say real estate is a numbers game. Let’s look at the fundamentals; we need to close deals to get paid. Generally a significant amount of our commission goes to our brokerage firm, and we probably do 60%-70% of our business co-broking, splitting our fee with another firm. Examine your market, what are the average sales price, average rent and terms on leases, and project the gross commissions for each. Now figure out the splits and project your net average commission on a typical sale or lease. Based upon how much money you want to earn next year, calculate how many sales and leases you need to do.
If you want to close 12 transactions how many listings do you need to get? What is your closing ratio; do half of your listings sell or lease? If so you need 24 listings next year, plan on obtaining 2 a month. How many listing presentations do you need to go on to get an exclusive listing; one out of two a 50% listing ratio? So to get our 24 listings we need to go on 48 listing presentations, four a month, one a week. How many people do we need to meet each year? Statistics tell us that 1 out of 10 people who tell us they want to buy or lease real estate actually do so. If we want to do 12 transactions that means we need to find 120 qualified buyers or tenants. Statistics also tell us that if we meet 15 new people; one of them will be interested in doing a real estate transaction this year.
So to find 120 qualified clients we need to contact 1,800 people. Wow! This sounds staggering; but if we break this number down it’s 150 a month, 37.5 a week, 7or 8 people a day.
Our business plan is starting to take shape, (based on closing 12 deals) each week we need to do at least one presentation and meet 37 people. We now know our financial goal for the year, the number of required transactions, and what needs to be done to accomplish that each month. Write out your plan so you can follow your weekly progress.
Let’s look at some ways to meet people. Send out five letters a day, reminding folks from your sphere of influence list, current customer and prior customer lists that you are in the commercial and investment real estate business. Ask them if they know anyone else that you could help.
Follow this up with a phone call a week later, asking for referrals. Also advise them you will be sending out an email “newsletter” with community news and obtain their email address. That’s 1,200 people contacted a year (five letters with five follow up calls each day, 25 a week, 100 a month).
Plus the redundancy of contacting them each month thereafter with your e-newsletter; which will end with: “Did you think of anyone I can be of service to?”
Visit two buildings a day in “your” town, speak with the owner or tenant. (10 a week, 40 a month, 480 contacts a year. Call two FSBO’s a day, that 10 a week, 40 a month, 480 a year. With just these three techniques you are already contacting over 2,000 people a year.
Prospect at least an hour a day to build your commercial business and to accomplish your business plan and your goals.
Edward Smith, Jr., CREI, ITI, CIC, GREEN, MICP, CNE, is a commercial real estate consultant, instructor and broker at Smith Commercial Real Estate, Sandy Hook, CT.
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