Real estate is a numbers business, but what are the numbers you need to know to live the life you aspire to?
The first is your financial requirement. We’ve all chosen real estate sales as the path to fund the life we want to live, so there’s a certain financial requirement in our business. How much money is it going to take to fund your family’s needs and your aspirations beyond what it takes just to get by?
Once you have that number, you need to identify your average commission rate. If you ask the average agent what their average commission rate is, they’ll typically say 3%. But have you actually done the calculations? I’ve consulted with hundreds of agents over the years, and the average I see is actually about 2.25%.
After you calculate your average commission rate, you need to identify your average sale price. Don’t just guess—look at the numbers from your last 12 months. After you’ve figured out those two numbers, you can use them to calculate your next number: Your average commission.
Once you’ve determined that number, you’re almost there. Now you just need to divide your financial requirement by your average commission and you’ll have the most important number of all: The required number of transactions you’ll need to close in the next 12 months to fully fund the life you aspire to. We call this number your “transaction benchmark.” Although I’m not a big fan of tattoos, if you’re going to get some permanent ink, you might want to consider putting that number in a place where you’ll see it every single day.
Of course I’m kidding, but that number is that important, so figure out how many transactions you have to close this year to fund the life you aspire to.
If you have any questions about this topic or you’d like a no-cost, no-obligation consultation about your business, please feel free to get in touch with me. I’d be happy to help you.