I receive this question all the time from my agents and my answer never changes. It’s simple; there are three ways to make more money: do more deals, convert more deals that you are already working on from listings to closings and the third option is work on larger fees.
In today’s lessons from the street I would like to walk through and explore the thinking behind these three options.
Do more deals:
This is obviously the most common answer and the one that seems most straight forward, yes I would like to make more money, and obviously if I did more deals I would make more money. However, this actually becomes the area where the most upside lies for agents if they can figure it out. When you reach your maximum capacity for deal making you usually know, some agents can manage 10 deals a year while other can manage 25. At some point we will all max out our capability to process more deals and at some point you can just say I’m going to work harder. Once you are working at the maximum output, say 80 hours a week, you have to figure out how to continue to process more deals without stopping. There are two primary ways to do this; one is to create leverage points that would allow you to have more conversations faster. The other is to develop greater efficiencies in your business process, make your machine process faster. These answers are all found in the creation of a team to assist you in processing your work and moving beyond being a sole proprietor of your brokerage business.
Convert more of what you already work on:
This category revolves around the management of your clients expectations. A great exercise that I would encourage you to do is the following: Take an inventory of every assignment that you have worked on this year. Then count how many of those assignments converted into closings and how many turned into nothing. What is that percentage from assignment taken to assignment converted? If you increased that percentage by 10 percent, how much would your income go up? 20 percent, how much would it go up? Focusing your energy on converting more of what you are already working on can cause your earnings to significantly increase without having to do more work. The key here is understanding why assignments did not get completed. You worked with a client who wasn’t motivated to complete the transaction is the main reason deals don’t get done. If you can hone your ability to assess the clients motivation better, possibly say no to a few assignments that you would have stretched to take and do a better job of managing your client’s expectations on assignments that you do take, you can see huge growth in your personal earnings.
Work on larger fees:
This one boils down to two sub categories. Firstly, fight for extra fee on deals you will take anyways. If you did an average of 20 deals a year and you increased your fee by .25% per deal, you would see a meaningful increase in your income over the course of a year. So I encourage you to stand firm on your fees when negotiating in the market and remember, once you agree on a fee, it you only goes one way from there so you may as well start high. Additionally, I don’t believe I have ever lost a deal over a fee. It’s usually lack of relationship or track record, not your fee. Secondly, go after larger assignments. I wouldn’t abandon your core business, but certainly if you can migrate up the food chain, there are larger fees on larger deals and this is a real way for you to work the same hours but to make more money.
If you are committed to growing your business, I would encourage you to focus on projects that target all three areas that I have outlined above and don’t just focus on one. If you are able to move the dial in all three categories, you can experience exponential growth no matter what market cycle we are in.