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The Income Based Approach to Real Estate Marketing

By NPMGAdmin

by Rebecca Chandler

Money (Photo credit: 401(K) 2013)

Thinking about next year’s budget? The Income Based Approach to Real Estate Marketing will help you make fact based decisions around your marketing investments through a four step analysis and the tool kit to help you through the process.

  1. How much do you want to make?
  2. How many homes do you need to sell to generate that income?
  3. How many leads do you need to sell that number of homes?
  4. What marketing sources deliver the quantity and quality of leads needed to sell that number of homes?

Step 1 – Determine how much money you want to make next year. Consider this goal and write it down. Written goals are more likely to be achieved, so writing it down and making a plan to achieve the goal will help you attain it.

Step 2 – Calculate how many homes you need to sell to generate that income. The downloadable spreadsheet at the bottom of this post can help you determine that, by using the average sales price of your listings, calculating your average commission net of any broker split. It also gives you the opportunity to plan your marketing investment based on a percentage of your income.

For example, if you wanted to make over $100,000 next year, at an average sales price of $238,000, you would need to close 2 deals per month, assuming a 2.4% average commission side net of the broker split. Your gross income would be $137,088. If you estimated your marketing expenses at 10%, you would invest $13,708 annually or $1,142 monthly.

Step 3 – Based on your conversion rate, add up the total leads you need to convert to sales to reach your income goal. Leads are not created equally. Some are better quality. Some are early in the process and require more nurturing, and some will just not pan out, for various reasons. It’s not an exact science, but, if you track your lead sources and conversion rates, you can determine a probable conversion ratio based on the lead source.

Overall, if you think you convert 10% of the leads you receive, you would need 240 leads annually (20 per month) to convert to 24 sales – considering your leads are of good quality

Step 4 – Track the real costs and results of your marketing tools. Some investments in marketing tools are evident. You know the amount of the check you write to the vendor each month. Consider some vendors, like The Real Estate Book, have advertising packages that include multiple tools such as print advertising, mobile websites, text codes, QR codes, direct mail, and social media – in one package, for one price. You should spread the total cost across all the lead sources for accurate tracking.

Others that you may consider free are really not free. For example, the time you spend on Facebook or blogging should be considered. What is your time worth? Think of your desired income and calculate your hourly rate. You can use this as a comparison when you consider cost per lead and conversion rate.

As you track the leads you receive from each marketing source, also track the conversion, so you know which convert at the highest rate. As you track your cost per lead, your budget may allow you to gain good (enough) leads to work that convert at an acceptable rate vs. really cheap leads that convert poorly or very expensive ones that convert at a higher rate. Tracking these allows you to dial up and down your marketing investments for the best results.

To help you with the calculations, we’ve created this EXCEL Spreadsheet Template. Download it here.

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