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Decrease Attrition & Increase Income
A simple strategy for increasing your income in 2002 is to decrease your rate of attrition.
While most business plans focus on creating new customers and working with referrals, virtually no one addresses how to reduce one of the most expensive costs in the real estate business - attrition of past customers and clients. Attrition in the real estate industry falls into two broad categories. The first category is actual past customers/clients who have done business with you in the past and who no longer use your services. The second category includes individuals who have referred business to you in the past but no longer send you referrals. One of the major characteristics differentiating top producers from less productive agents is their past clients and referral resources continue to send them new business. Furthermore, the cost of continually finding new clients is substantially higher than working with people who have already had a positive experience with your services.
The cost of attrition is high. Losing only one out of five potential referral resources each year over 5 years will require you to replace 100% of your existing clients just to maintain your current rate of business. In contrast, if you cut your attrition rate in half, that's the same as adding new clients that you normally would have to generate from your prospecting activities.
To evaluate the cost of attrition to your business in 2001, begin by calculating the total number of closed transactions you have had for the last 36 months (or since you started in the business). In most cases, these are the people who have had a positive business experience with you and are your best source of referrals. As a rule, there are three primary times when you are most likely to receive a referral from a customer/client. The first is when they begin working with you, the second is when they place a property under contract, and the third is when they close. What percentage of them sent you a referral? What percentage did not? The percentage that did not is your "attrition" rate for your best source of referrals.
Following the same process, check your appointment calendar and your database for additional names of those who you would normally expect to send you referrals. What percentage sent you a referral in the last 12 months? What percentage did not? How many of those individuals have you dropped from your referral data base? Each of these represents where you are "bleeding dollars" through attrition.
How can you reduce the attrition in your business? Here are four simple steps.- The primary reason people fail to refer you business is inconsistent contact on your part. To stay in contact, call all of your past customers and clients at least once per quarter and see them in person at least twice per year. Use an email newsletter as well as giving them an "annual report" of what has sold in their area over the last 12 months.
- One of the most important ways agents lose business is failing to keep in contact with people who move out of the area. It's very common for people to move away and then return. Even if they don't return, they still have old friends and neighbors who could be a source of referrals. More importantly, if your company offers national relocation services, you can receive a referral fee for someone who lives across the country. Don't "write off" a past satisfied customer/client just because they are no longer in your immediate service area.
- Determine why those who have done business with you in the past (or who have referred to you in the past) are no longer making referrals. Were they dissatisfied with some aspect of how you handled their transaction? Critically examining the causes for "attrition" and taking specific steps to remedy the problems cited by past customers/clients can literally make you tens of thousands of dollars.
- Often our best sources of referrals simply forget to make the referral. The person intends to make the referral, but simply doesn't think of it at the time. To counteract this, make sure anyone who makes a referral to you receives a thank you note plus a small token of your appreciation (flowers, brownies, movie or sporting events tickets) as soon as you receive the referral, regardless of whether or not the referral ends up doing business with you. Keep the person who made the referral apprised of your progress and send them an additional thank you when the referral closes the transaction.
Remember, reducing "attrition" yields the same results as generating new clients. Putting it a little differently, reducing attrition means more business with less effort.
To contact Bernice Ross please email her at bernice@realestatecoach.com.
