I was going to write this blog about an article published in last Sunday’s Seattle Times regarding upward pressure on agent commissions. This is a vibrant topic for discussion in today’s market, especially as inventory and active listing times are up for homes in communities across the nation. Sellers are finding that, as competition increases and the days of multiple offer scenarios recede into the nostalgic past, enticing agents representing buyers with an increase in their commission is yielding results. A conversation about commission is hugely important, albeit loaded and I am not about to cross any anti-trust lines by endorsing one strategy above another. I’ve made a conscious decision to be a full service broker, yet believe there is room for any number of commission-based business models in our industry.
There is one aspect of this discussion I do wish to address in today’s blog, quality vs. quantity. In an effort to promote his upcoming seminar on the powers of attraction and manifestation, a very successful local agent-turned-investor spoke at our office this morning. (He and I had competed for listing business early in my real estate career.) Now retired and focusing on property development and motivational speaking, his sales volume history is impressive by any measure, over one hundred transactions per year, an amassed fortune of twenty million dollars and the ability to give it back through seminars and good public works. Much of what was said impressed me, so much so I intend to participate in the seminar to further expand my thinking and goals. There was, however, one remarkable statistic he shared with us. In the one hundred transactions per year he generated, on average only four were repeat clients or referrals. His business was operating at a four percent referral rate.
I subscribe to the principle that a referral business is dependable, manageable, likely to yield quicker more certain results and less stressful. My continuing goal is to create raving fans, clients who are so satisfied with my service they will not only refer me to their friends and family, they’ll do so vigorously. As I increase the odds of referrals so, too, the odds of successful and trouble-free transactions climb. Who do your clients refer to you? Typically people like them. So, it holds true that if you’ve been successful with a certain personality or demographic type and your referrals are coming from that pool, then your network should build exponentially. I believe this rules applies in any small business endeavor. For instance, I am very loyal to my dry cleaner because of how I am treated every time I drop something off; courteously, with respect and warmth. It follows then that I refer them to my circle. My wife is a great advocate for one manicure salon on a street of many in our neighborhood. Why? Because of the loyal relationship she and the business’ owner have built over the years.
Before retiring, our morning’s speaker was a man with millions in the bank, yet exhausted and looking for a gentler path to success, freely admitting that a referral-based business was the saner way. Any real estate agent closing one hundred transactions per year is doing something phenomenally well. It’s important, then, to decide how and with what effort you intend to achieve that goal. Ask yourself the question, is it easier to pick up the phone ten thousand times to generate a thousand leads to yield one hundred transactions or would you rather have a few dozen raving fans each generating several referrals a year for you? You do the math.
We’ll talk about effective approaches to building and managing your referral network in coming blogs and, as always, your thoughts are welcomed and encouraged.