Single Most Important Metric For Real Estate Agent.
While working for one of the largest real estate teams in North America, as Director of Operations, I was assigned to develop Key Performance Indicators for the team. I knew it would be a challenge because I was not dealing with a typical sales team but real estate agents who were all entrepreneurs if you think about it.
Once I convinced the team, one of the first steps was setting up a google form that agents were supposed to fill out every day before the morning huddle to report their numbers. In this form, agents reported their daily number of contacts, the number of buyer and seller appointments booked and went on, buyers and sellers signed, conditional and firm deals.
From the above numbers, the only Key Metric I was tracking was individual agent's and overall team's conversion rates for appointments booked, went on and signed.
The appointment booked to contacts made conversion rate was not just telling me about how many contacts the agent had to make to set up an appointment but also about how well their scripts were. A higher conversion rate, of course, means the agent's script/pitch was good. And for appoints went to buyers/sellers signed was telling me about how their listing or buyer presentation was.
These are great metrics to track and improve one's performance. But, I quickly realized that something was still missing. We needed something that could give us a lot more insight, had to be a lot more meaningful, and something that, apart from just giving us an insight into the past performance, could also help us look into the future.
After spending a few days on this, I linked the agent's number of contacts to their G.C.I (Gross Commission Income). By this time, I had about five month's data to play around with. I took the total number of contacts an agent had made in a month and divided this with the Firm G.C.I of the agent in that particular month, this gave me the dollar amount an agent made per contact, and I called it "Magic Number." Every agent had a magic number depending on their performance. I used to calculate this every month and took the average of every month's Magic Number to calculate their overall performance.
Now you would ask, how is this so-called "Magic Number" so magically significant? The answer to this would be, Magic Number on its own gives an agent a simple score ($ per contact) that reflects their monthly performance on the thing that matters to them the most, which is Money. They can now look at this number for the months gone by and see how they had performed. Another thing (perhaps the most important) Magic Number helped is forecasting. Taking the average number of contacts an agent had made and merely multiplying it with the magic number would tell us how much GCI an agent would make in a particular month. Once we had a forecast, we could say to the agent to bump up their contacts if we felt the agent was falling off from the monthly GCI target.
Magic Number also helped in reverse-engineering the GCI target for the whole year/ quarter/ month. Merely taking the annual target and dividing it with the magic number gave us the number of contacts required to hit the target. For example, to hit the $1 Million GCI target with Magic Number $100 (means an agent made $100 per contact), the agent would need to make (1,000,000/100) 10,000 contacts in the whole year. We can now break the 10,000 to monthly and daily, which works out to 833 and 27 contacts, respectively.
This set of KPIs helped us almost double the production level in a few months and allowed us to forecast our G.C.I. We were able to stay on track, and during the rough time, we knew how many more contacts we had to make to be on the way to our annual goal.