Running Your Own Business Part 5 - Building Your Client Base Part II

The Principles of Running Your Own Business – Part 5 – Managing Client Base Part II

In the last article, we placed emphasis on the need to establish a Client Base to ensure future business and long term success. Indeed, it's the only way to escape the roller-coaster ride, the unpredictable ups and downs, that come with a career in Real Estate. But once you establish a Client Base, it is important to maintain that Base. So this month, let’s look at managing that Client Base.

PRINCIPLE 4 – Managing a Client Base

Another advantage to establishing a Client Base is that it brings the cost of advertising under control, especially the cost of your Image Advertising. Image Advertising or self promotion is, in effect, trying to convince people who do not know you to take a chance on you with their real estate plans. It needs to be high quality and high impact, and this usually comes with a high cost. However, when you have a Client Base, this type of advertising is usually not required. They already know you, like you and trust you… so much so that they will refer their friends and relatives to you!

The main challenge with a Client Base, or sphere of influence, is to maintain regular contact with them. This can be achieved by consistently providing valuable Real Estate related information. Generally, this will include information that directly affects the value and enjoyment of their home. After all, your prospects home is probably their biggest investment! All of this information should come to them in the form of a Newsletter from their trusted and well informed Real Estate Agent – you!

The Newsletter:

Whenever you select a prospecting tool for your Client Base, you will need to promote the advantages that come to them with having their name on your mail or e-mail list. Firstly, always ask them for their permission to provide them with Real Estate information that might not otherwise be available to them. Privacy regulations require that you obtain permission.

Your Newsletter should be personalized as your Newsletter. You can give it a name of your choice. The secret to successful Client Base prospecting is not to provide too much information and keep longer intervals between mail outs. As once-a-month tends to be too frequent, it is generally better to schedule bi-monthly or quarterly releases, and limit each to a couple of easy to read pages.

Content is not hard to find. Most Real Estate Boards or Associations provide Realtors with good statistical information on a regular basis. These include the current market activity, price trends, and also market trends. They usually even provide graphs to support the stats. This information can be passed on to your Client Base. They will see it as valuable information and you will get all the credit. You can also include other information such as recent decisions and updates made by city councils and administration, mainly business that relates to Real Estate such as proposed zoning changes, proposed developments and property taxation issues. Add your comments and opinions, if you wish. Keep your eyes and ears open. There’s content available everywhere and you'll soon be recognized as an authority on Real Estate in your market.

One word of advice, refrain from including personal information. You do not need to impress them with your own sales and listings statistics. The Newsletter space is for their benefit, not yours. Try to exclude the cute things like jokes and recipes. This should essentially be a business communication.

You will, of course, incur some costs for printing and distribution, but you will get the best and most lasting return on your dollar. You will not be forgotten the next day!

Try this and see if it works for you. I've seen it work for others.

Successful marketing to you!

Coach

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

Running Your Own Business Part 3 - Costs

In the previous column, we discussed maintaining and improving production. This week, let's take a look at the second principle - Controlling Costs - in order to obtain a solid bottom line of profitability.

PRINCIPLE 2 - Controlling Costs

Controlling costs is not an easy exercise, especially when the costs of services keep increasing. It is not a temporary inconvenience but rather, a permanent, built-in discipline.

First, we have to differentiate between controllable and uncontrollable expenses.

Uncontrollable expenses, or fixed costs, are a known factor, appear on a recurring, regular basis and are an unavoidable cost of doing business. They do not represent the same challenge as do the controllable expenses.

For a real estate Agent, controllable costs include advertising, promotions, donations, supplies, entertainment and communications. Of these, the most significant cost is usually advertising. So let's give advertising some special attention.

There are basically two parts to advertising:

  A. Advertising the product (i.e. the listing)
  B. Advertising yourself and your services, sometimes known as "Image" advertising.

Advertising the Listing

When you list a property, your client will expect that you give their property adequate market exposure. In actual fact, true market value can only be established after "adequate exposure" to potential buyers. Exposure is another word for advertising. A prudent seller will want to know how you intend to attract buyers to their home. The commission rate you suggest will influence their marketing expectations. It's not reasonable to offer top marketing at a reduced commission, nor is it equitable to expect a handsome reward and not provide a detailed marketing plan, preferably in writing. A marketing plan should include how you plan to reach the local market as well as the extended market. Since the buyer may not be a local person, you will need to establish the effectiveness of your referral service and Internet presence as an integral part of bringing buyers to you. The degree to which you can demonstrate value for money with a good marketing presentation will influence your revenue and enhance your bottom line by enabling you to justify a good mark up. The advantage of a good Internet presence with a well posted website is that the extended market can be reached at greatly reduced cost. However, you do need to be able to demonstrate to your client how your plan will work for them, in order for them to appreciate its significance. Your local advertising costs can be reduced once the client is aware of the bigger picture.

Promotional or "Image" Advertising

I am often surprised at the amount of personal advertising that is done by Agents. It sometimes seems as if more importance is attached to building an image than to marketing the actual product itself. Clients sometimes wonder why the picture of the Agent is so large and the picture of the property is so small! I sometimes suspect that image advertising is more a matter of "keeping up with the Jones" and maintaining a presence in the real estate community rather than to impress and attract clients. Image advertising is important where you are trying to impress strangers and you are building your business. It is a possible indication that you have not "arrived" yet. You see, once you have established your client base you no longer need to impress with your image. They already know you, like you and trust you. To escape the high cost image trap, focus on a sphere of influence and build it as quickly as possible and advertising directly to them. Prospecting should be for your sphere of influence rather than for buyers and sellers. Listing and sales should be a product of your sphere of influence and not in the reverse order. Once any business has established goodwill their clients do the advertising for them. This approach can significantly reduce your advertising costs.

Next time we will look at the "Goodwill" factor in profitability.

Good, and less expensive, marketing to you!

Coach

Next week: Part 4 - Building Your Client Base

Running Your Own Business Part 2 - Revenue

As promised in my last column, I will begin to address the three important principles of running your real estate career as a successful business in order for you to achieve a solid bottom line.

PRINCIPLE 1 – Keep Revenue Up

First, I want to make it clear that revenue goals can be achieved in two ways...

  (a) Maintain and improve production
  (b) Maintain and improve mark-up

Improving production is easier said than done, especially if you are already working 14-hour days and trying desperately to balance work time with quality family time and recreational time.

Do I have good news for you! Did you know that it is possible to improve revenue without having to make more sales? This can be done by observing an age old fundamental business principle that, in my days as manager of a large department store, was drummed into my head over and over again – "IMPROVE YOUR MARK-UP" or "CONTROL YOUR REDUCTIONS". It became indelibly imprinted on my mind, and I put it into practice in my real estate career. Unfortunately, this key principle is not observed by most real estate agents today.

Sometimes we are misled by sales volume. It is possible to have good volume BUT not profitable volume. This usually results when additional volume is achieved by reducing price or, in the case of real estate, cutting commission. It is a trap that is so easy to fall into. It is especially damaging in poor market conditions and in the face of stiff competition. You must guard against it with determination!

I'm sure that you have observed Salespeople who have excellent MLS stats but are not popular with their banker! Any salesperson can sell "sale" or "reduced" merchandise. However, it takes a quality and skilled salesperson to sell value for money that justifies a full commission.

SO WHAT MAKES THE DIFFERENCE?

When your competition is doing business for less reward, you are left with two options. You have to prove that your service is worth the difference or, if you are not able to do that effectively, you have to join them.

It is all a matter of marketing skills. Good marketing always has been, and always will be, the "name of the game". People will always choose to pay the price for good service. If this was not true, why are there so many Mercedes automobiles on the road? Why do you have to make reservations for good restaurants? You have to know your strengths, especially your unique strengths. You have to explain the benefits of your service. You have to be able to say… "Measure me and then measure others against the measurement that I provide you with". There should be no contest. Price becomes an issue only when there's inadequate marketing. If the normal service you provide is...

  (a) Put it on MLS
  (b) Put an ad in the paper.
  (c) Do an occasional open house.

...you are probably offering no more service than the discount house. It is your responsibility to establish that you are over and above the norm. Your income will be directly proportionate to your ability to market your special features of service and their benefit to your client. What is your marketing presentation like? Is it well groomed and polished? Are you confident that when you do a presentation you will come away with a commitment? You can not "wing" it and resort to cutting your reward – you will just increase the clients doubt.

Next we will take a look at the second important part in establishing a healthy bottom line and that is… controlling expenses.

Good marketing to you!

Coach

Next week: Part 3 - Costs

Running Your Own Business As a Licensed Real Estate Professional

Part 1 - Key Concepts

Over the past decade, the Real Estate industry has experienced a number of dramatic changes. One of the most significant changes seen is that the responsibility to develop your effectiveness, business base and profitability as a Salesperson, has, to a large extent, been passed from the Broker office to you. Simultaneously, the services that were once available through an affiliation with a National Franchise organization have diminished. As a result, you, the Salesperson, have been left to manage your own business, and to implement the skills necessary to ensure an extended and successful real estate career.

Another significant change is the status of "Independent Contractor" that evolved from the 100% Commission System. This requires that you, the Salesperson, not the Broker office, have control of the commissions earned. Many salespeople have opted for this arrangement and pay the Broker office a fee for the various services offered. As a result, the Salespersons revenue has improved, which is great! However, the down-side is that your individual costs have escalated to such an extent, that it is now difficult to make a profit and stay in business long-term, unless sound business principles are implemented and followed.

My observation of Realtors through years of coaching within the real estate industry, have shown that energy, enthusiasm and expectation are often in place, but the principles of good business control are often erratic and poorly implemented. I am sure that you know of a Realtor who has had high volume sales but has still faced bankruptcy. By contrast, some Realtors are known for more moderate production and yet last forever! It's all a matter of how you manage your opportunity to do business and achieve a good bottom line profit.

Achieving this bottom line is not a matter of luck. It is the application of 3 important practices...

  (a) Keep Revenue up.
  (b) Control Costs.
  (c) Build and maintain a client base.

Sounds simple? It's not. In Part 2, we will begin looking at these three key areas of practice. Stay tuned!

Coach

Next week: Part 2 - Revenue

Coach's Newest Series...

Coach's Newest Training Program, Running Your Own Business as a Licensed Real Estate Professional, begins Monday March 29th—see you then.