Know Your Lead Gen ROI To Thrive In Any Market
Lead generation is the base of every real estate business, no matter the market. So, tracking the results of your lead generation different activities will show you which approach is key to unlocking growth. The best way to know how successful your lead generation activities are is by determining their profitability, or their return on investment (ROI).
You want to make sure the work you’re doing is working for you. When you hold your lead gen strategies accountable for providing a certain ROI, you will be able to make good decisions about which prospecting and marketing activities you should invest in. It will also help you cut out what’s not working and double down on what is. And if you find yourself in a shift, having a solid understanding of your ROI will help you switch into the right gear quickly and keep your business on track.
How To Track Your ROI
For every expense you encounter in your business, you should always ask the question, “What return do I expect to see?” Some people don’t track returns for each strategy they employ to get leads, and they may be spending money in all the wrong places and not even know it. When a shift happens and there is no room for the mismanagement of dollars, this could be more than just a minor problem—it could undo your business. Like Gary Keller says in Season 6 of Think Like a CEO, “You don’t want to let an uncertain economy create uncertain economics for you.” When you know your ROI, you can get ahead of the changing market and invest resources appropriately.
Before you can calculate your ROI, you’re going to need to do some work gathering your numbers. Here’s how you get that data:
1. Write out all the lead generation sources in your business.
2. Next to each lead generation source, itemize the associated expenses and add them up, so you know roughly what the lead source costs in total. Then, write the resulting Gross Commission Income (GCI) this source generates.
Now that you’ve got your lead gen sources ready to track, you can easily plug in numbers to get your ROI.
Now, for each lead generation source you identified, run it through the preceding formula.
1. Subtract the total lead generation expense from the income produced (or GCI).
2. Divide that number by the same lead generation expense.
3. Multiply your result by 100.
You now will have the percentage of return for the lead generation expenses. The higher the percentage, the better the return on your investment.
It’s crucial to run this ROI formula for each individual lead generation activity to get a high-level view of what money you are spending, what you are spending it on, and what is bringing in the highest return. This perspective will help you know which expenses to keep and which to cut.
Create A Plan Of Action
If you are a fairly new agent, you can use this ROI formula to develop a strong lead generation plan that you carry out consistently over time. In our research, we’ve discovered that most agents practice about four activities that generate most of their income. We call this the Rule of Four:
The Rule of Four shows that going deep on fewer lead generation activities, rather than trying everything everywhere all at once, will generate better results. When you know which four activities are working best for your business, you can look at your budget and create a map to get to your desired annual income.
New agents are not the only ones who should be closely and regularly tracking their lead gen ROI. If a shift happens, even the most seasoned agent will need to know their numbers and adjust their plans accordingly. They may need to do twice the amount of prospecting they are used to. Their budget constraints may be tighter, and the top four strategies that they had used for years could suddenly need to be replaced or reworked.
Like Gary says, the real estate business is highly causational. “Your business has a math formula that says we do these things that causes these things, which causes these things, which causes these things to all happen. And in the end, that's how we end up making money.” When you look down the pathway of money in real estate, it’s clear that your lead generation activities will affect the amount of money you make. When you use the ROI formula, you can see which lead gen strategies are affecting your bottom line and in what way. Then you can effectively choose what to focus on to help you turn a profit.
A constant wave of new lead generation methods, technologies, and systems crashes into our industry every year. With every new product comes with the same promise: Use this and it’ll take your business to the next level. Most of these products break that promise. Tracking your ROI is the only true way to get your numbers right and level up your business.
Because tracking your lead generation results and holding them accountable is so important to the continued success of your business, KellerINK is developing a downloadable resource to help you. What questions do you have about calculating ROI that we should address? Do you have any advice that you give your teams that could be useful for us to include? Let us know by emailing us at email@example.com.