If there’s one constant in the world of real estate, it’s that there will always be companies trying to sell you leads. I like to tell my agents, “Leads should be your gravy, not your mashed potatoes.” In non-food terms, that means you shouldn’t build your entire business on something that’s meant to be a small portion.
That goes doubly for brokerages. I have seen countless companies pour tens, if not hundreds of thousands of dollars into lead generation in an effort to feed their agents. The main problem is that they either don’t track them, don’t monetize them, or just plain don’t know how much they are paying for them.
As the market continues its shift, agents and brokerages are scrambling to fill to revenue void in their business. The days of the “push-button sale” are gone. Now, we have to exert an actual effort to get clients and close a deal. Here are some things to remember when considering paid lead generation for your brokerage or team.
I have vetted over 60 leads sources. Let my hours of demos, frustrating failures, and moderate successes provide you with small nuggets of useful advice.
Don’t be fooled by cost-per-lead
Most lead gen companies will try to focus on the Cost-Per-Lead (CPL) to lull you into a false sense of comfort with the amount of money you have to spend. They will have you thinking, “Wow! $500 is cheap for a listing. Sign me up!” The problem is that $500 isn’t getting you a listing, it’s for a listing lead. Most people don’t take the math any further to discover how much one listing will cost them.
- How many leads does it take for an appointment?
- How many appointments do you need for a listing?
- How many listings make it to the closing table?
These same questions are used when coaching agents for prospecting. Instead of making phone calls, the subject is buying leads. The math is the same, but one is much more expensive than the other. With national lead conversion rates averaging around 1%, you better be amazing to make a profit on $500 per lead.
Conversion is the name of the game
Big shocker… lead generation isn’t a gimme. It can take a lot of effort to take a raw “top of the funnel” lead all the way to the closing table.
Some companies will tell you the leads they sell convert as high as 10%. It’s entirely possible that someone out there has a high level of skill but claims like that should have the classic disclaimer, “Results not typical.”
The quality of leads can vary wildly from source-to-source. Take my simple advice. When calculating the profits from lead generation, don’t use more than a 2% conversion rate in the assumption. If you can turn a profit on your portion of the deal at that level, you should proceed.
Run the numbers
So many people get dazzled by big numbers and don’t stop to whip out the calculator. I had a recent chat with an agent who was touting all the money she made with a certain lead generation company. She was paying $1,500 per month for leads and insisted that it was a money maker. She wasn’t wrong but the amount of profit surprised her.
As it turns out, she had closed six transactions on those leads. After splits and expenses, her take home was about $700 per month. While it’s not peanuts, as a major source of business, it’s not a windfall. This is why we tell our agents not to make this too large a part of their business plan.
Accountability is key
Whether you are managing a team or lead generation group or taking a run at this game alone, accountability should be the cornerstone of your strategy. The commercialization of lead generation has led to an extremely competitive marketplace. Add to that the fact that tech-savvy consumers are not willing to wait for the information they requested.
Speed to lead requires almost instantaneous reaction time. Compound all those factors with low inventory and rising rates, and you have the perfect storm. Better bring your ‘A game.’
Be willing to hold others or yourself accountable to making the calls and creating an aggressive follow up plan. If that doesn’t sound like your style, maybe this isn’t for you.
This article was originally featured on RealTrends.com, written by the same author.