Growing a Real Estate Agency: Key Metrics and KPIs
For many principles and high performing brokers, driving the performance of your business can only be improved when you can measure the impact of actions taken towards achieving your business plan.
Peter Drucker is credited with saying, “If you can't measure it, you can't improve it." While understanding this is simple and many are aware of the need for tracking metrics and key performance indicators (KPIs), it can be difficult to practically identify the most important benchmarks for your agency.
In order to help you better guide the activities of your business, here are 7 essential KPIs that you can use to judge the performance of your real estate agency.
Tracking the number of cold calls, visits and even email contacts which create the opportunities to grow your database and secure new listings is crucial for your real estate agency.
These actions are one of the few that allow you direct and complete control in creating both buyer and vendor leads.
Tracking prospecting contacts also allows you to set minimum KPIs for agents in your brokerage to ensure that the required level of action is taking place. A lack of contacts made may signal the need to improve training and motivation for certain team members.
An additional benefit of doing this is that it allows you to measure your conversions for buyers and listings. If the number of contacts made is high but conversions are low, you may need to revise your sales processes to ensure you are maximizing your commission revenue.
Prospecting contacts made can also be categorized by the method in which the contact is made. This will allow you to judge the effectiveness of each particular tactic, allocating more time to the methods that provide the most impact and signalling to you which tactics require the most development. Want some more ideas on prospecting? Check out our blog post on lead generation tracking
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Number of Listings
Listings are one of the three main focuses in Gary Keller’s famous Millionaire Real Estate Agent book, and rightly so. Listings give you not only the opportunity to generate revenue but also provide a useful marketing function through signage and promotion opportunities.
While listings can fluctuate at any time in your market, measuring your listings growth can give you a good indication of the results of your marketing efforts as well. With a close watch over these figures, you can see growth and contraction in your area.
Measuring listings by agent can also help you evaluate individual agent performance. If you can see a particular team member is underperforming, you may want to analyze further to find out how their prospecting and sales techniques can be improved and take remedial action where necessary.
Not only the number of listing is important, but also the channels your agents use. Keep track of where and how houses are listed to make sure agents are listing in all the places you’ve asked them to.
You may have recently changed your listing strategy and want to use a new channel. Next to making sure all agents use this channel, you can start tracking whether it’s bringing in any new leads. This will help you see whether the new channel you use actually brings in more sales.
Number of contracts
This is a quick check to understand performance of agents and teams of agents. Changes in number of contracts could, of course, be down to factors outside of your agents’ control -- say the housing market is slowing down or the company’s marketing plan needs an upgrade.
Nonetheless, if you notice the number of contracts is going down, it’s worthwhile checking in with the agent or team in question to see if there’s anything you can do to improve their performance and increase your business growth.
Final selling price
In most deals, it’s up to the selling agent to finalize a deal and make sure the price that is paid reflects the true value of the house. Next to that, if the local property market is growing, you’d expect selling price to increase over time. If you see price isn’t increasing, there might be a sign the market is weakening and you may need to invest more in marketing. It could also be that individual agents are not performing and not pushing hard enough to maximise the price. These are all things that you can quickly action on to do damage control.
National averages for real estate commissions are reported to be approximately 6% per purchase in the US.
However, some agents may be tempted to lower their commissions in order to secure more listings or sales. While this can help you increase your overall revenue and inventory turnover, this can have consequences for personal income and brokerage profit overall.
Also, measuring your average commissions generated allows you to analyze where exactly your marketing efforts are the most profitable.
For example, you may find that larger value homes profit more profitable opportunities even at lower commission values, given their large purchase prices.
Even if you’re tracking everything that’s happening now -- which you definitely should -- you’ll still want to have an idea of what you can expect in the future. The state of your sales pipeline is perhaps the most important thing to safeguard business continuity. If you don’t know whether you can expect deals to be finalized over the next few months, you won’t be able to do any long-term planning.
So the most important thing here is to make sure you know what deals your agents are working on now, when they’re likely to close and what price. Then, if you see the number of future deals dropping, you can take immediate action -- you won’t have to wait until your business actually hits a slump to take action! You’ll have enough time to find out where the problem lies -- is it an individual agent, a team, or is the local market just underperforming in general. Once you have an idea of the problem, you’ll still have a number of months to make sure your pipeline is in better shape.
Defining the key metrics which you will use to measure and guide your business is the first step towards growing a profitable agency. The next step is to keep monitoring these metrics on a systematic basis. No matter what tool you use for this, you should be checking your metrics to make sure your teams are functioning properly and you achieve the business growthyou’re aiming for. That will also allow you to spot barriers to growth early on and put in place measures to overcome them.
Looking for a way to make monitoring and reporting on your KPIs easy? Check out Zipi’s dashboarding solution here and request a free demo.