If you’re like most agents, or any type of salesperson for that matter, your income is unpredictable. You know what you made last year, last month and last week, but you have no idea how you’ll end the year. You may have an income goal, but you’re really just hoping to make as much as you can. The thing is, you can set your own salary. Whatever you want it to be, $100,000, $250,000 or even $1,000,000. The only question is, are you willing to put in the work to be able to earn that amount?
I’ll lay it all out for you. It’s really simple, and it works if you’re willing to commit to it. In order to stick with the required daily tasks for this, see my post The No BS Guide to Productivity. Whether you’re a brand new agent or a veteran, this system will work. The steps to coming up with the numbers to make this work are a bit different if you’re brand new, but the process is all the same (read through the process and see the section at the end regarding new agents).
Determine what you’re going to set as your annual salary. Don’t be conservative, or set it based on past years. You know what you want to earn each year. It’s the amount you dreamed about when you started in real estate.
You need to make two lists. The first list will be all of your closed deals over the past 12 months, along with the gross commission earned on each.
The second list is going to be all of the listings you had over the past 12 months. If you act primarily as a buyer’s agent, then you’ll make a list of all of your buyer clients over the past 12 months. If you list properties, don’t include your buyer clients. We don’t want to over complicate this.
Determine your average commission per deal. If you have one deal that was very small compared to the rest, or you have one deal big deal on your list that isn’t typical for you, remove that from the equation. You want the average to be a typical commission for you.
Divide your number of listings/buyer clients by the number of closed sales.
For example, you had 20 listings and closed 15 deals. 20/15 = 1.333
That’s the number of listings/ buyers you need to close one deal. Maybe you had more closings than listings, in which case you may need .75 listings to close a deal.
Divide your declared salary by your average commission.
For example, your declared salary is $200,000 and your average commission is $4,500. $200,000/$4,500 = 44.444
This is the number of deals you have to close to earn your salary for the year.
Multiple the number of listings/buyers you figured out that you needed to close one deal by the number of deals you need to close in a year.
From above examples. 1.333 x 44.444 = 59.24. We’ll call it 60.
Divide the number of listings you need by 12
From above examples. 60/12 = 5.
This is how many new listings you need each month to earn your salary.
Now it’s time to figure out your marketing. What are you currently doing? Mailers, cold calls, door knocking? You’ll have to calculate your response rate for what you’ve already done. If your direct mail response rate had been 2% and you’ve converted 20% of those, then you need to send out 1,250 mailers per month to get your five listings. However, I would use multiple avenues. Typically, your response rate from mailers will fluctuate as people begin to respond after receiving multiple mailers from you, then you burn out your recipients, then start the cycle over again. Mix in some cold calling. I know, I know, nobody likes cold calling and everyone avoids it like the plague. Don’t worry about doing a lot. Start out making 5 calls a day and work your way up to 10. That’s it, 10 calls. If you can make 10 calls a day you’ll get a new listing each week.
Anyway, the point is to plan your marketing according to your monthly listing requirement. Notice I’m not calling it a goal. We’re past goal setting here, this is a requirement. Similar to working 40 hours per week at a normal job. 40 hours isn’t a goal, that’s just the amount of time you’re required to work. Work less, get paid less. Put in some overtime and get paid more.
If you currently are unable to afford doing mailers, then stick with the cold calling until you’ve earned enough to start mailing.
Earlier I said this also works if you’re brand new. Obviously you won’t have these kind of statistics yet if you don’t have a full year of producing under your belt yet. If that’s the case, ask some people in your office to help you figure out what the average number of listings needed to close a sale is. I bet it’s pretty similar throughout the office. As far as the average commission, use the deals you’ve been working on, whether you’ve closed on any or not. Look at the average value of those deals to come up with an average commission projection. As you start closing deals you’ll most likely have to adjust your formula based on your results.
It’s a very simple, very obvious method. You may have been expecting something more profound and complex, but this is the foolproof method for setting your annual income. Just simple figuring out the numbers and seeing what you need to do on a monthly basis will make your new salary seem easily attainable, because it is! Set your daily required tasks and stick to the plan. You’ll wish you would have done it sooner!