Real estate brokerages are already dealing with razor thin margins and in the wake of the NAR settlement wondering how to make their profitability goals a reality. The folks at real estate research and consulting firm, T3 Sixty have identified seven key factors that impact profitability. We break them down below and outline how you can take action to reach your goals!
Profitability Factor #1: Agent Count
Sure, you want to have multiple agents and teams working to find new clients, win listings, and close deals but it’s not just a numbers game. How can you find the top performing agents that are growing their prospect base and capturing local market share? The key is to bring them to you!
Consider what strategies your brokerage is employing to recruit and retain top talent. Are you providing your agents and teams with the tools they need to compete and win? Are you offering technology innovations that are both practical and powerful? Are they tools people will *actually* use and not just drag down your balance sheet? From lead gen to AI-driven social media, CRM to transaction management, leveraging high-end technology and incorporating it into the very fabric of your business is essential to attracting and retaining top performers.
Profitability Factor #2: Units Sold
Only focusing on volume of leads or cost per lead (CPL) is a short-term effort that can’t bring a long-term business goal to life. To truly achieve profitability and create success that lasts, the focus should instead be on lead quality and your firm’s ability to convert as those factors deliver what everyone is after – an increase in sales.
Lucido Global is a perfect example. As one of the largest and most successful real estate teams in the world, the firm understands the role technology can play in optimizing the leads to conversion process. By leveraging the Lofty platform, including an AI Assistant to deliver quality leads to Lucido’s ISA team and SmartPlans to retarget leads that aren’t yet ready to buy, in just 90 days Lucido Global was able to garner 187% more agreements with an average price per agreement that was 34% higher than those on their previous CRM system. And they’re still going strong!
Profitability Factor #3: Average Sale Price
Effective marketing programs can increase demand for your listings, ultimately driving up the sale price. Creating that demand is a multipart effort that requires marketing consistency and precise targeting. Your IDX website serves as a foundation for this effort as it captures leads and provides valuable insight into which listings are hottest and who is ready to buy. From there AI and automation tools can take over streamlining elements of your qualification processes such as handling calls and prequalifying leads directly on your website. If your leads need more convincing strategy, marketing efforts can be the difference enabling you to stay top of mind with social media ads, listing promotions, and detailed home reports. More brand awareness means more competition for the listing and that leads to a better average sale price.
Profitability Factor #4: Average Commission Per Transaction Side
Following the NAR ruling that preserves the choices consumers have regarding real estate services and compensation, empowering your agents to effectively position their value throughout the transaction is critical. From search to settlement, consumers are looking for agents to guide them through the process as they make one of the biggest investments of their life! Empower your team to not only showcase their local market knowledge but demonstrate transparency with tools such as market reports and comparative market analysis (CMA). Data coupled with market expertise is a powerful value add.
But don’t stop at just one transaction. Encourage agents to build long-term repeatable business relationships. Leverage tools that help agents stay in touch with past buyers. This goes beyond sending “happy birthday” emails and carbon copy closing congratulations memos, but rather positioning your agent and firm as the go-to resource with any real estate need.
This long-term approach is a proven strategy. With consistent and targeted outreach delivered through Lofty’s platform, Lucido Global recently converted a four-year-old opportunity that had never responded previously, resulting in both a purchase and a sale opportunity that will generate $95,000 in commissions.
Profitability Factor #5: Retained Earnings/Company $
Align your go-to-market strategy, marketing, and technology with the consumer real estate lifecycle to ensure maximum opportunity creation and monetization is realized. This strategy can help grow and future-proof your brokerage even as consumer preferences change and concerns over commission structures evolve. For example, brokerages are increasingly looking to get in front of buyers long before they are ever able to purchase by engaging in the property management and rental space. This provides an opportunity to establish relationships early with future property buyers. The goal is to be the go-to resource for anything real estate and housing related from rental needs to first-time home buying, second home investments and downsizing.
Profitability Factor #6: Operating Expenses
One of the easiest ways to lower operating costs is to consolidate your tech stack. Consider a single, unified platform that is fully customizable so that it is flexible enough to map to your brokerage’s unique needs but also offers a proven way to modernize your operations. We’re talking about ways to automate marketing programs, streamline your sales process, and capture and convert more leads into transactions. Plus, you know that agents don’t want to spend time toggling back and forth between different applications or learning multiple different systems. Simplifying your technology environment can create less friction for your team, increase adoption rates (so that tech spend delivers ROI!), and provide agents with more time to do what they do best – build client relationships.
Profitability Factor #7: Return on Revenue/Net Profit
Speaking of ROI, maximizing your return from lead generation is a critical piece of the profitability puzzle. After all, if you’re going to invest a large percentage of your revenue into lead generation then you better have something to show for it! This is especially true in a dynamic market where inventory may be low, but costs are high. Competition to win business is fierce so optimizing your sales and marketing efforts and boosting lead generation performance should be a priority.
But where do you start? Consider a Pmax (or Performance Max) campaign. Work with a technology partner that can help you set clear campaign goals and design a dedicated landing page that is optimized around the campaign objectives. Spend time identifying necessary keywords and utm tags – you’ll need them for conversion tracking – and then develop ad formats and creative content specific to your target audience. Lucido Global followed this approach and was able to significantly improve lead quality while reducing CPL. By working with Lofty they achieved a 25% decrease in lead acquisition cost and a 68% decrease in cost per click, all while improving their appointment set rate to 30%.
Profitability doesn’t have to be a pipedream. By understanding the key factors that determine success and working with a technology partner that understands your goals and provides proven technology applications to help you get there, your firm can accelerate profitable growth. Learn more about how Lofty can help you propel your business forward at lofty.com