The Three Key Areas of Your Economic Model

together a basic and proven real estate agent Economic Model that you can trust to help you achieve your maximum potential.

The Economic Model we propose is about approaching your economics and this business in a manner that works for any real estate sales business, from a one-person sales operation to a large, dynamic team. Big Models work for everyone and lead to Big Goals. In fact, the model advocated here has no known limits.

THE THREE KEY AREASOF YOUR ECONOMIC MODEL

There are three critical areas of focus in your Economic Model. First, you need to focus on knowing the key numbers you must hit. Understanding how the different aspects of your business interact to produce financial results is essential to making sound decisions. Then you’ll have to focus on the number of appointments you must make, the driving numbers in your Economic Model, and the conversion rates you must achieve, the key variable in the equation. Let’s quickly touch on all three.

1. Focus on the Numbers You Must Hit

The greatest thing your Economic Model will tell you is what numbers you must hit in order to net the income you want to receive. The formula shown in Figure 7 is simpler than you might have thought.

“We begin with the end in mind. We know the numbers we must hit and we never lose sight of them.” Millionaire Real Estate Agent Ashburn, VA Sales volume—$70 million

With a model like this, you can fill in performance numbers and see in a very clear way how high or lowChris Cormack

averages in one area affect the rest. Once you get a feel for the way the numbers interact, you can take the guesswork out of your planning and set specific goals in specific areas to achieve specific results.

The Basic Formula for the Economic Model of the Millionaire Real Estate Agent

For Sellers For Buyers

Seller Listing Appointments Buyer Listing Appointments x %Conversion Rate x % Conversion Rate

= Seller Listings Taken = Buyer Listings Taken x %Conversion Rate x % Conversion Rate

= Sellers Sold = Buyers Sold x Average Sales Price x Average Sales Price = Seller Sold Volume = Buyer Sold Volume x %Commission x % Commission = Gross Revenue from Sellers = Gross Revenue from Buyers

= Total Gross Revenue

– Expenses

= Net Income

Figure 7

2. Focus on Appointments

When you look at your economic model, you can clearly see that it has a beginning and an end. The end is the net income you will receive. What causes that net income starts with the beginning activity—appointments. These are appointments to make listing presentations to sellers and buyers. (Please note, we refer throughout this book to listing both sellers and buyers. Seller listings are multiple listing service agreements, and buyer listings are buyer agency representation agreements. We“list” both sellers and buyers.) “Every day, I try to work fifteen files and have three seller listing appointments.” Mike Mendoza Millionaire Real Estate Agent Phoenix, AZ Sales volume—$60 million

Pure and simple, if you don’t have the appointments, nothing else happens; therefore, they become a critical point of focus for your economic model. Appointments drive income. So target appointments first, get as many as you need, and go on from there.

3. Focus on Conversion Rates

Your economic model hammers home that you must focus on getting appointments to have any chance at all of earning income. It also makes clear that how many of these appointments you can convert to seller and buyer listing agreements and then convert to sales will determine just how much income you can actually earn. Given that you must turn appointments into tangible business, you could distill the Economic Model down to the following statement: Appointments converted to seller and buyer listings converted to sales equals gross income. Conversion rates are the key variables in your income equation.

If you step back and look at your Economic Model, something should stand out big and bold to you. Converting leads to appointments and converting appointments to listings are huge drivers of your economic

“We’ve discovered that the more we master our scripts and dialogues, the better our conversion rates are.” Gary and Nikki Ubaldini Millionaire Real Estate Agents Palm Harbor, FL success. They are both accomplished bya skilled presentation with a firm grasp of scripts and dialogues. If you can’t make a convincing presenta-

Sales volume—$28 million tion, deliver purposeful scripts, or engage in effective dialogues, you won’t be very successful, no matter how many leads you may have.

So now your economic model has given you another gift. It has highlighted the key skills you must learn to be successful in real estate sales— the skills to convert leads to appointments and the skills to convert those appointments to listings. Make no mistake, mastering your presentations, scripts, and dialogues is what will drive your conversion ratios.