Every day you leave your house, you walk into an arena to compete with 2 million other realtors for the same client pool.
With such a sizable number of alternatives, any slip up on your end makes it harder for you to get a share of the $166.9 billion at stake by the end of 2020. As a result, you need to ensure you can deliver from the first customer contact.
You need to develop and track key performance indicators (KPIs) to understand how your business is doing and where you need to improve. Here is a deep dive into real estate KPI metrics and which ones you should track.
Understanding Key Performance Indicators
A key performance indicator is a value you can measure, which represents how business is achieving its essential business goals. You can use KPIs at different levels of your business to track both high and low-level performance as needed.
When you are setting up KPIs, you need to identify the outcome you desire as a business. You then will need to go one step further to decide why that outcome matters as that defines why the target should matter to you.
Setting KPIs should also include understanding the ways through which you can influence the outcome. Alongside this, you will also need to designate the parties responsible for achieving the desired result.
Elements of Effective KPI Metrics
The data you receive while measuring the progress to your objectives is only as good as the metric you keep your eye on. Here are some essential things you should consider as you design your KPIs to make them useful.
Is the KPI you’ve set easy for people to understand? If your team can’t make sense of what they are supposed to keep an eye on, they will fail at it. Even if you are a sole entrepreneur, you still need to understand the KPI for you to work with it properly.
Therefore, a good KPI has to be one that is easy to grasp. That’s because the metric has only one job, and that is to empower you to make decisions and not prompt more questions.
The KPI you set needs to make sense to the specific plan your business or team is pursuing. When your KPI is relevant, you will have the right people in charge of making decisions being involved with achieving the desired outcome.
For your KPI to work, it needs to come from your overall business goal. With that in place, the objectives for the firm won’t be clashing with the KPI, as that causes them to undermine each other’s effectiveness.
A KPI that will drive your business forward is one where you have a clear path to how you can achieve the outcome you are looking for. Unless this feature is part of your KPI, you won’t make any tangible progress.
To this end, you should set a KPI that is achievable to avoid getting discouraged. The more realistic your KPI, the more enthusiasm you will have to hit it.
If you are starting on your KPI journey, then begin by setting small targets to hit.
As you achieve each successive outcome, it will boost your morale and set you up to succeed in the next one. Increase the size of each successive KPI up until you have the ideal measure you feel can move your firm forward.
As obvious this sounds, it is quite easy to forget that whatever KPI you set needs to be easily measurable. As such, you will have to steer clear of generalized goals as these won’t help you come up with measurable KPIs.
Look for a solid purpose that calls for quantitative and qualitative measures, to help you come up with a KPI you can easily measure.
You need to be continually motivated to focus on the KPI you have set if you are to achieve your goal. While the desired outcome ought to be reward enough, human nature dictates that you need incentives along the way to get there.
Decide on specific milestone rewards that can help you look forward to hitting the mark along the way to your desired outcome.
If you are working as part of a team, such rewards should be proportional to other rewards within the organization for them to trigger the right level of motivation.
KPI Metrics Every Realtor Must Track
KPIs are essential in determining the level of growth when you want to become a sought after realtor. Let’s take a closer look at some critical KPIs you should always keep in mind while in the real estate business.
1. Expenses and Revenue
One of the most critical tips you can get as a realtor is that your business must be sustainable. In simple terms, you can’t achieve success if your business can’t make more than it spends
In light of this, you need to keep an extremely close eye on your costs and revenues.
When you track your revenue streams, it helps you identify the areas in which your business does well. Maybe you score a lot of first-time buyers, and by focusing on this niche, you can generate outsize results. You can only know what strengths to build upon when you identify them.
Likewise, keeping an eye on where your money is going can help make your firm efficient. You need KPIs to help you bring more money in as well as help you optimize your outflows to improve your firm.
2. Lead Generation
You need to know the number of people you are bringing into your sales pipeline. That’s the only way you can control how well you achieve your revenue targets.
Keep track of team leaders or individuals that you talk to, and not just attempt to talk to.
An essential KPI in lead generation is the number of referrals that are coming in. When a current or past client refers you to someone they know, it not only counts to your lead generation KPI but also your customer satisfaction.
3. Broker/Buyer Agreements
The more people you have signing you as their broker or buying representative, the healthier your sales funnel. Through this metric, you better understand your value proposition and how strong it is in the market.
You should also track the number of rejections for buyer/broker agreements to determine if this strategy is working for you or not. Whenever a client declines signing such a deal with you, you should find out why and note that down as part of assessing this metric.
Such data can then help you better shape the KPIs for such exclusive agreements that make your work more efficient.
4. Occupancy Rates
For realtors doubling up as property managers, knowing the trend behind tenant occupation is mission-critical. For example, urban areas should at least hit 95% to 96% tenancy rates at any given point, while suburban and rural areas do lesser numbers.
If your occupancy KPI doesn’t factor this in, you will underperform. Understanding your occupancy rates can also make your pitch to a new client compelling.
5. Tenant Turnover
Another critical issue you have to track as a realtor managing property is how long it takes before a tenant moves. Unless you are dealing with rent-controlled property, tenant turnover is inevitable.
In the urban market, a healthy tenant turnover rate is 12 to 24 months. For rural or suburban areas, getting 24 to 48 months is healthy.
Your metrics here should make it easy for you to notice if you are mismanaging the property or not. Furthermore, the parameters you set should include factors that contribute to tenants staying there for you to understand their living experience better.
6. Number of Listings
The number of listings you rack up as a realtor is directly proportional to your marketing efforts. Therefore, you need to know how well you are selling your business by the number of properties you can list.
Since real estate agents nowadays use several marketing tools, you also want to understand the success rate of each channel. Using a customer relationship management system, you can study each listing and the data attached to it.
Tracking this KPI will also give you visibility into how you acquired the listing, and the channel’s success rate to help you optimize your marketing.
7. Website Performance
The modern realtor relies heavily on their website to generate leads. However, only quality leads are useful; therefore, you need to track your site's performance to optimize the level of lead generation continually.
Part of the metrics to include in this KPI is the number of visitors to your site and where they come from. You also need to add the bounce rate (how fast users leave your site) to determine the most effective changes to make to your website.
Note that there is a bevy of metrics attached to website management, and if you aren't careful, it can become a rabbit hole. Identify the top priorities for your business then match that to the right metric so that you can get the most value from your site.
Position Your Business for Growth
The real estate opportunity is massive, but so is the competition.
If you're to go beyond surviving to thriving, you need to know how your firm is doing. Identifying your strong points helps you build on them more while knowing your weak points empowers you to improve your performance. Real estate KPI metrics are useful tools to help you steer your business to greater heights.
Hommati.com is a one-stop platform so buyers can search and find homes for sale. Reach out today to see how potential buyers can find a reliable real estate agent and see how Hommati offers a more visual approach to showcasing homes.