Say No to Stranger “Lead-Gen” … and Thrive

Mike Cooke, Employing Broker Business Development

If you currently pay a monthly subscription to lead generators to get business from strangers, there is a better way! Master the art of generating your own business from your sphere-of-influence and you WILL thrive in this business.

With a couple of caveats (see the end of this post), you’re better off rejecting stranger leads and instead, spending time cultivating new clientele from your own database.

Why?

There is a fundamental and inescapable reality of the real estate brokerage business: You can only serve so many clients each year. Every “yes” you say to one potential client is a “no” you have to say to another.

Welcome to the concept of opportunity cost. Every potential client you consider working with should be evaluated in terms of opportunity cost.

If you work with Client A and have to pay out 30%, 35%, 40% or more of your commission when the deal closes, you have to ask yourself if you’d be better off spending that time developing Client B that does not require you to give up a big chunk of your earnings. Often, the answer is YES.

Let’s consider the type of stranger “lead-gen” activities that suck up a lot of your commission dollars:

Zillow, Realtor.com, etc … With real estate “portals” you spend hundreds or even thousands of dollars a month to get stranger leads. You then have to nurture them. The closing ratio is about 50 to 1. Meaning: you’ll spend time on 50 potential clients to get 1 closing. If you keep track of the value of your time + the money you spend over a year, divided by the GCI you receive from those deals, it would not be unusual to find that it costs you as much as 50% of your total revenue.  It’s equivalent to paying a referral fee of 50%.

Redfin, Movoto, Etc.: Leads from these sources require a straight-up referral fee for closed business rather than making you spend money with them each month. These referral fees run anywhere from 30% to 40% of your commission.

Relo”: Relocation firms keep increasing their required referral fees, typically north of 40% these days. Plus, they want you to fill out volumes of paperwork which is a time-suck and contributes nothing towards getting a good result for your client.

Brokerage Produced Leads: Your brokerage/company might generate leads and offer them to you as an agent at their company. Healthy fees are almost always required. 

If these sources are a substantial share of your yearly business, you could be paying out as much as a third of your commissions to third parties. This means you’d have to close 15 deals to put as much money in your pocket as you’d get from closing 10 deals that you’d generate from your own marketing efforts.

Ask yourself:

  • Would you rather make $150,000 by doing 15 deals or 10?
  • Would you rather do 15 deals and make $150,000 or $225,000?

Granted, you’ll spend some time and money, but you’ll make MORE money in LESS time if you master the art of generating your own business from people you know instead of relying on stranger leads generated by a third party. If done wisely, it can require very little investment.

Colorado Home Realty (CHR) is dedicated to supporting agents who want to work a “Sphere of Influence” based business model. We’re constantly testing and perfecting methods that allow agents to improve their dollar per hour productivity. 

Stop paying (directly and indirectly) for stranger leads and thrive by generating your own business from your own sphere of influence. If you like the idea of working less and making more, let’s talk.


Interested in learning more about partnering with Colorado Home Realty? Click here to read up on how we are helping our agents reach the top 1%.