(This is Part 3 of a three-part series. See Part 1: Will next housing bust kill my business? and Part 2: 8 ways to keep real estate biz afloat.)
Ninety percent of all businesses fail because they lack a business plan. If you’re just scraping by now, a real estate recession can end your career unless you have a survival plan.
Eventually you will face a buyers’ market where there is too much inventory and too few buyers. To survive the next real estate recession, you will need a plan. The five steps below can help you survive both buyers’ and sellers’ markets.
1. “Work on” your business
One of the key points in the attraction principle is having clarity about what you want to attract. Michael Gerber in his book the “E-Myth Revisited” discusses the importance of “working on” your business rather than always “working in” your business. “Working on” your business, means taking time to analyze market conditions, evaluate your marketing efforts, and making adjustments to capitalize on market fluctuations. It also means writing down a plan. Most agents spend their time “working in” their business. In other words, they spend their time delivering real estate services but seldom take time to complete a detailed plan (i.e. “work on”). Because they lack a plan, they have no clear strategy for coping with changing market dynamics. This lack of clarity means they are constantly reacting to market changes rather than responding rationally. In contrast, the agent who creates a business plan to cope with a shift from working with sellers to working with buyers will have a much greater likelihood of surviving the shift.
To “work on” your business, take at least one hour each week to analyze what activities are creating profits, what activities are not generating revenue, and where your market is experiencing the most sales. Based upon your evaluation, plan to devote at least 50 percent of your time to the top three revenue-generating activities. In addition, focus your efforts in the market segments experiencing the greatest activities. For example, if the high-end market is quiet and the first-time-buyer market is active, start prospecting for first-time-buyer properties. If a given subdivision has plenty of open house traffic, hold open houses there, even if it’s another agent’s listing. The key is to adapt to market conditions and maximize the probability you will generate leads.
2. Write it down!
Research has consistently demonstrated the power of writing down your goals. Having a business plan in your head seldom works. In fact, many agents create a written plan at the beginning of the year and never give it a glance. Instead, make your business plan a living document. Imagine it as your GPS system guiding you to where you need to go each week. If you turn off the system, you may reach your goal, but you are much more likely to become lost. For the system to work, you have to follow the directions. If you veer off course, the plan becomes the guide for steering your business back in the right direction.
3. Lead generation is the name of the game
To sell four houses per month, you must generate 12 high-quality leads. (As a rule of thumb, about 1 out of 3 solid leads ends up closing a transaction with us.) Generating 12 high-quality leads may require reaching as many as 1,200 people per week if you only convert 1 percent to 2 percent of the contacts you make. At the end of each week, evaluate whether you have hit your lead generation goal. If not, clear your schedule and door knock or call your sphere until you hit your target. Better yet, make lead generation your top priority the first thing each morning. Do nothing else until you hit your lead generation goals each day. Completing this one simple step will determine whether your business prospers or fails.
4. Ask for “high probability referrals”
In a slowing market, solid referrals are more difficult to obtain. Target your prospecting to groups with the highest probability of creating a closed transaction. Since the first-time-buyer market may be your best source of business, use this script to locate potential first time buyers:
“Do you know anyone who is currently renting who may be interested in lowering their monthly payments? With the current low interest rates, many renters can actually buy a home for what they’re paying in rent.”
5. Be flexible!
You must constantly monitor your results and the changing market. If you don’t adjust your lead generation activities as the market shifts, you will spend hundreds of wasted hours and thousands of dollars producing zero results.
You can survive a real estate recession provided you plan ahead, focus on consistent lead generation, and adjust your business plan to fit the changing market.
Bernice Ross is an owner of Realestatecoach.com and can be reached at bernice@realestatecoach.com.
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