Before you can take your business to the next level you have to know exactly where you are now and what needs to happen next. You gain this knowledge by tracking your numbers and then using them to project on the future. But you have to start where you are and learn about your current marketplace before you can visualize where you want to go and whether your expectations are reasonable.
There are three basic metrics for you to focus on:
• Average sale price
• Normal cap volume
• Fee percentage
Your current average sale price determines what your next step up should be. If your average sale now is $600,000 then your goal should be to sell at an average of $900,000 – representing a 50% increase in your fee. Knowing this number will help you determine how to reach it.
Volume is the measure of your yearly growth. If you are completing 20 transactions a year, then you should set a goal for 30. Beyond that you will need an assistant and a fresh plan to help you reach 60 transactions. From there you add another assistant to reach 90 a year. However, in order to continue your growth your marketplace has to be capable of providing enough properties for you to sell – and remember you have competition. So if your marketplace is not big enough to allow you to grow, then you have to expand into other markets that will.
Next, you want to be able to increase your fee, and that depends on how you are performing in the first two metrics. This is why you have to know and understand your numbers at all times. These numbers are interconnected, so what you do with one will affect all three as growth – or stagnation.
To realize growth you must know your marketplace well enough to project for the future. Tracking your numbers over time, and understanding what they mean, will give you a valuable intuition for trends and opportunities inside of your marketplace. That intuition is vital for you to be able to plan realistically for success in your upcoming year.
In viewing your marketplace trends, you will see that there is actually a primary and secondary marketplace. The primary marketplace is your foundation for stability as it is based upon your average sale price and should represent the bulk of your transactions. Then you have a secondary marketplace, which is less predictable, but offers the opportunity for commanding higher prices. The secondary marketplace is too volatile to build your business on, but doing some of your transactions there can help you step up to higher operating levels over time.
Negotiating your best possible fees requires critical knowledge of your marketplace and your numbers, and a real understanding of what exactly you are able to work with. You have to know how your competition is charging, and whether matching their fee percentage is truly helpful. Generally you should maintain your higher fee percentage by making sure your performance offers the greater value and can be proven to your clients statistically. Here is another place where knowing your numbers and being able to use them is vital.
Right now is a good time for you to review your numbers from 2014 and understand what happened in your business and in your marketplace over the past year. Use those numbers and that understanding to project on what you want to see happen in 2015, and determine what you can do to boost your growth this year.
And while you are planning your year, make sure you look into our Josh Phegan Membership, training events and coaching opportunities.
I hope you’ve enjoyed today’s Coaching Tip, and I look forward to seeing you here again next week.