What does it cost?
We ask that question a lot but I have a twist I want you to consider. Do you ever ask what does an opportunity cost? Opportunity cost is defined as the loss of a potential gain from another alternative being chosen.
I talk about the inefficiency of cold calling a lot. I lump in calling expired listings and FSBO into that number as well since the resulting business comes at about the same ratio.
Most times the cost of an opportunity is real money but for our discussion, let’s just talk about time. You only have so much time to invest every day and you need to focus on the greatest chance of a result.
If you have just 1 hour a day to dedicate to lead generation, how do you spend it? Working by referral is a system that focuses on your database and earning referrals. It is not word of mouth.
Check out the chart below. It comes from the National Association of Realtors and I first saw it last week in a book called Ninja Selling.
Conversion Ratios (Source: National Association of Realtors)
Cold direct mail ……………………………………. 2,000:1
Cold internet lead generation ………………… 1,600:1
Cold phone solicitation (illegal)…………………. 500:1
Door knocking…………………………………………. 100:1
Personal contact with friends……………………… 50:1
Ad calls……………………………………………………….. 25:1
Sign calls…………………………………………………….. 20:1
Open houses……………………………………………….. 15:1
Walk-ins……………………………………………………… 10:1
Past buyers…………………………………………………… 9:1
Past sellers……………………………………………………. 4:1
Referrals………………………………………………………. 3:2
I’d point you to a couple of stats. Personal Contact with friends is 50:1 and I’d say that is a good representation of word of mouth. That’s passive and happens because of another’s actions. It’s not something you can increase by your actions.
Past buyers, past sellers, and referrals are obviously the heavier producing activities and if you have 1 hour you need to focus efforts there first. Those are the folks in your database (or they should be). You have to have a system of staying touch to remain top of mind.
And because everyone knows a dozen real estate agents, if they are not thinking of you, it’s lost business.
If you want to learn what we taught our new agents, I have an offer for you. Sign up for a free 10-day video course and we’ll get you started right new. It will teach you how to ask good questions, set up your systems for referral and stop making cold calls.
Click this button and we’ll send you an invitation.
PS – We’re also about to launch a 90-day course that will teach you how to build a business focused on referrals and do it from day one. Doing this one course can save you a year or more of trial and error as well as a ton of money.
It can be your first 90 days if you’re just starting or your next 90 days if you’ve been in business a while but not happy with how it’s going. This course will cover all we learned when we started out but took about a year and lots of money to get right. Sign up now, start the 10 days course and we’ll let you know when the new 90-day course is ready. You’ll get a complete outline of the topics to be covered right away.