Today, I want to talk to you about our Keller Williams economic model, which helps you plan all the activities you need to do to net the income you want to make.
When I talk to new agents, all of them say they want to make six figures. Let’s say you’re a new agent who wants to net $100,000. If you hit $100,000, you’ve exceeded the $2 million production cap at our office. Now, $21,000 goes to our office. I'd mark that as an expense because you’re going to pay it and wind up with 100% of your commissions at some point in this theoretical year.
You will also incur other expenses during the year for things like licensing costs and marketing. Let’s assume you have around $10,000 in expenses. That means you would need $131,000 in GCI to net your $100,000. The average commission is 3%, so you would need to do about $4.4 million in transactions.
Let’s say your average price was $250,000. That means you need 18 closings to reach your goal. For the sake of these numbers, I’m not going to include any lease money and instead, focus on listings and buyers. Brand new agents may want to focus on buyers, but you should aim for a 50/50 split on buyers and sellers. That means you want to shoot for 9 closings on each side.
Even in this good market, anticipate some pending sales will fall out. Maybe the buyer can’t qualify, or the appraisal doesn’t come out. Plan for 10% to 15% to fall out, so try to get 10 deals on each side to pending.
Before you get to pending, you need clients that agree to work with you. On the listing side, about 80% of listings will make it to pending. That means you need 13 listings. On the buyer side, only 60% of buyers will make it to a pending sale. That means you need to get 17 buyer agreements.
In order to get those listings and buyer agreements, you need to set appointments and buyer consultations. If you’re brand new, you might only convert 50% of your appointments or consultations into actual listings or buyer agreements. That means you should set 26 listing appointments and 34 buyer consultations. These are the steps you need to take to reach your net income goal.
All told, that’s 60 appointments you need to go on in a year. Don’t wait until the end of the year, or they won’t close until the next year. Frontload those appointments in the first 10 months of the year, and go on 6 appointments a month. Even with bad conversion rates, you will hit that net goal of $100,000.
In order to get these appointments, you need leads and nurtures. A lead is ready to do business in the next few weeks, while a nurture won’t be ready to do anything for another 12 months. Maybe only 1 in 10 leads follow through and set appointments. That means you need 260 leads for listings and 340 buyer leads. Now, this might seem overwhelming, but these are worst-case scenario numbers. As you track your numbers, you will know what you need to hit your goal.
Finally, in order to get those leads, you need to focus on contacts. Again, let’s assume that only 1 out of 10 contacts will go on an appointment. You will need 2,600 seller contacts and 3,400 buyers. That means you need to make 150 contacts a week. Those 150 contacts will take awhile. You may spend 15 to 20 hours a week on that, which is one reason why it’s so hard to be part-time in real estate.
Again, these are worst-case scenario numbers. As you keep working through these steps, you will get better at conversion. You may only need to call 50 people a week to get that $100,000.
Our goal is to get you into production within the first 30 days of business. These are the steps you need to take to reach your own net income goals.
If you have any questions, give me a call or send me an email. I would be happy to help you!
