Running Your Own Business Part 4 - Building Your Client Base

The Principles of Running Your Own Business – Part 4 – Building Client Base

In the previous two articles, we took a look at two elements of having a successful business, namely, Keeping Revenue Up and Controlling Expenses. Let's now take a look at the third, and equally as important principle, that not only contributes to the first two but also maintains long-term profitability - GOODWILL.

PRINCIPLE 3 – GOODWILL: Build and Maintain a Client Base

Those of you that have been involved in selling a business will know that one of the assets that will be taken into consideration when determining a business' worth is known as GOODWILL. Goodwill always determines if a company is deep rooted and well established in comparison to a "fly by night" operation without deep roots. It represents the established, satisfied client base, that does repeat business and, who in turn, refer others to the business because of their good experience with that business. In Real Estate, it is most often referred to as "the client base".

Over the years, I have sometimes categorized Real Estate Salespeople into one of two categories, based on the way they approach their business. You have either (a) the “One Night Stand” Realtor or (b) the “Relationship Building” Realtor. Let me explain the difference.

The "One Night Stand" Realtor is very committed to prospecting. They work very hard and are committed to working hard at prospecting for the rest of their Real Estate career. The reason is that they are always looking to "get lucky" and find someone who is ready to buy or sell a home now. If the prospect is not ready to do business now, they move on to greener pastures and some other Realtor will end up making the sale to that prospect sometime in the future. There is no plan in place to maintain contact until the client is ready to do business. This type of Realtor relies on their personality to get business. The challenge is that most people tend not commit to a Realtor until they know, like and trust that Realtor, a relationship that has to be earned. Some salespeople can do reasonably well using this approach, but they will always have to maintain a high level of prospecting activity which can be expensive, time consuming and exhausting, sometimes leaving no relief. It does not lend itself to an extended career, and there is never a GOODWILL factor built into their business.

In contrast, the Realtor who focuses on the “Relationship Building” approach is prepared to invest time into a Realtor-Client relationship and look for reward not only now, but in the future. There is a level of service provided that will bring repeat business and earn them referral business. It is extremely hard to disconnect this Realtor from their Client. These Salespeople do not ask the question "Are you thinking of buying or selling your home?" when approaching a potential client. Instead, they may ask "Are you from this area?" or “Do you own a home?" This may be followed by "Have you thought of moving in the future?" What they are doing is prospecting for future business. They will then take the opportunity to start a relationship that will earn business later on. With the client’s permission, they will maintain regular contact, not only until business results, but until either they or their client leaves the area. The focus is developing and maintaining their client base, adding GOODWILL to their business.

In coaching new Salespeople into productivity, I always had them focus more on client building than prospecting. I would look to see 10 people added to their client base each month. At the end of their first 12 months in business, the goal would be to have a client base of 120 people and this base would be contacted on a regular, systematic basis, made easier by the availability of e-mail and the Internet. They were then "in business" with a base for business. If the average person moves once in 5 years, out of these 120, approximately 24 would move each year and that meant an average of 2 would move each month. Now, if you were the Realtor of first choice, you could expect 2 transactions a month from your client base alone. If a transaction end was worth $3000 you could expect a return of $6000 per month just from your client base. It is worth the investment and once these people get to know you, like you and trust you, you do not need to spend big advertising dollars to get their attention. A good, well-managed client base, or sphere of influence, is the best way of reducing the high cost of advertising thus improving you bottom line and minimizing the ups and downs that are givens with a Real Estate career.

The question is... what type of Salesperson do you want to be? The choice is yours.

Coach