Setting Income Goals: Listings, Sales, and Leases

Chapter: Setting Income Goals: Listings, Sales, and Leases

This chapter focuses on establishing robust income goals, a crucial step in “Mastering Lead Generation: Achieving Your Goals.” We will delve into the science of goal setting, exploring relevant theories and providing practical methodologies for establishing income targets specifically related to listings, sales (both existing and new), and leases (residential and commercial).

1. The Science of Goal Setting: Beyond Wishful Thinking

Goal setting isn’t simply about stating a desired outcome; it’s a cognitive process that significantly impacts motivation, focus, and ultimately, achievement. Several scientific theories underpin the importance of effective goal setting:

• Goal-Setting Theory (Locke & Latham): This theory posits that specific, challenging goals lead to higher performance than vague or easy goals. Furthermore, feedback on progress towards the goal is crucial for maintaining motivation and adjusting strategies. The core principle is that goals direct attention, mobilize effort, increase persistence, and promote the development of task-relevant strategies.

  • Specificity: A goal like “Increase my income” is too broad. A specific goal would be “Increase gross commission income from residential sales by 15% in the next quarter.”
  • Challenge: Goals should be difficult enough to require effort and stretch your capabilities, but not so difficult as to be demotivating.
  • Feedback: Regularly tracking your progress toward your goals and adjusting your activities based on the data is essential.
  • Self-Efficacy Theory (Bandura): This theory emphasizes the importance of believing in your ability to achieve your goals. Self-efficacy influences your choices, effort, persistence, and resilience in the face of challenges. Setting achievable sub-goals or milestones can help build self-efficacy and maintain momentum.

  • Expectancy Theory (Vroom): This theory suggests that motivation is a product of three factors:

  • Expectancy: Belief that effort will lead to performance.

  • Instrumentality: Belief that performance will lead to rewards.
  • Valence: Value attached to the rewards.
    To maximize motivation, you must believe that your efforts will result in increased listings, sales, or leases (expectancy), that these achievements will translate into higher income (instrumentality), and that the increased income is something you truly value (valence).

2. Defining Your Income Target: A Mathematical Approach

The first step is to define your desired Net Income. This is the income you actually take home after all business expenses and taxes. Work backward from this figure to determine your required Gross Commission Income (GCI). Based on the P&L report you must account for Expenses, Cost of Sales and Taxes.
The Net Income can be calculated based on the following:

*N* = *G* - (*E* + *C* + *T*)

where:
* N is the desired Net Income
* G is Gross Commission Income
* E is Total Expenses (from your P&L statement)
* C is Total Cost of Sales (including commissions paid out)
* T is Total Taxes (estimated tax liability)

Solving for G:

G = N + E + C + T

Example:

Let’s say you want to earn a Net Income of $100,000. Your historical Expenses average $20,000, Cost of Sales average $30,000, and you estimate your Taxes will be $25,000.

G = $100,000 + $20,000 + $30,000 + $25,000 = $175,000

Therefore, your Gross Commission Income (GCI) goal should be $175,000.

3. Breaking Down Your GCI Goal: Listings, Sales, and Leases

Once you have your overall GCI goal, you need to allocate it across different income streams: Listings, Sales (Existing and New), and Leases (Residential and Commercial). This requires analyzing your past performance and considering your current market conditions.

• 3.1. Analyzing Past Performance:

  • Review your previous year’s Profit and Loss (P&L) statement. Pay close attention to the following line items (as indicated in the provided PDF):
    • 4210 Listing Income
    • 4320 Existing Sales Income
    • 4330 New Sales Income
    • 4810 Residential Lease Income
    • 4815 Commercial Leasing Income
  • Calculate the percentage contribution of each income stream to your total GCI.
  • Identify your strengths. Which income streams are most profitable and enjoyable for you?

• 3.2. Assessing Market Conditions:

  • Analyze current market trends. Are listing inventories low or high? Is the sales market favoring buyers or sellers? Are rental rates increasing or decreasing?
  • Consider any shifts in your target market. Are there new developments or businesses moving into your area?

• 3.3. Allocating Your GCI Goal:

  Based on your past performance and market assessment, allocate your GCI goal to each income stream.

  Example:

  Let’s assume your target GCI is $175,000, and your historical data and market assessment lead you to believe the following allocations are realistic:

  1. Listing Income: 40% = $70,000
  2. Sales Income (Existing): 30% = $52,500
  3. Sales Income (New): 10% = $17,500
  4. Residential Lease Income: 15% = $26,250
  5. Commercial Leasing Income: 5% = $8,750

4. Calculating Required Activity: The Conversion Rate Equation

Now that you have your income goals for each category (Listings, Sales, and Leases), you need to determine the activity required to achieve those goals. This involves understanding your Conversion Rates.

• 4.1. Define Key Performance Indicators (KPIs):
  Identify the key activities that lead to income. Examples include:
  1. Number of Listing Appointments
  2. Number of Buyer Consultations
  3. Number of Lease Inquiries Received
  4. Number of Open Houses Held
  5. Number of Contacts Made (calls, emails, etc.)

• 4.2. Determine Your Conversion Rates:

  A conversion rate is the percentage of leads that convert into a desired outcome. For example:

  • Listing Appointment to Listing Signed Conversion Rate: (Number of Listings Signed / Number of Listing Appointments) * 100
  • Lead to Buyer Consultation Conversion Rate: (Number of Buyer Consultations / Number of Leads) * 100
  • Inquiry to Lease Signed Conversion Rate: (Number of Leases Signed / Number of Inquiries) * 100
  • Consultation to Closed Sale Conversion Rate (Closed Sales / Number of Consultations) * 100

  Track these rates meticulously over time to understand your performance.

• 4.3. Calculate Required Activity:
  To calculate the required number of appointments or consultations needed to reach your income goal for each category, you can use the following equations:

  • Average Commission per Listing: The average commission you earn per listing transaction.
  • Average Commission per Sale: The average commission you earn per sales transaction.
  • Average Commission per Lease: The average commission you earn per lease transaction.
    For instance, to find out the Number of listings needed:

  N_listings = G_listings / C_listings

  where:
  N_listings is the number of listings needed
  G_listings is the target income from listings
  C_listings is the average commission per listing

  For instance, to find out the Number of consultation needed:

  N_{consultations} = G_sales / C_sales

  where:
  N_{consultations} is the number of consultations needed
  G_sales is the target income from sales
  C_sales is the average commission per sales

  For instance, to find out the Number of leases signed needed:

  N_leases = G_leases / C_leases

  where:
  N_leases is the number of leases signed needed
  G_leases is the target income from leases
  C_leases is the average commission per lease

  Then, you will need to use your listing signed conversion rate or the consultation to sale conversion rate or the lease inquiries to lease signed conversion rate to calculate how many appointments or consultations needed.

  Example:

  • Goal: $70,000 Listing Income
  • Average Commission per Listing: $5,000
  • Required Listings: $70,000 / $5,000 = 14 listings
  • Listing Appointment to Listing Signed Conversion Rate: 50%
  • Required Listing Appointments: 14 listings / 0.50 = 28 appointments

  This means you need to go on 28 listing appointments to achieve your $70,000 listing income goal, assuming your conversion rate remains consistent.

5. Experimentation and Optimization

Goal setting is an iterative process. Don’t be afraid to experiment with different lead generation strategies and track your results.

• A/B Testing: Test different approaches to see what yields the best conversion rates. For example, A/B test different ad copy, email subject lines, or open house strategies.
• Continuous Improvement: Regularly review your KPIs and conversion rates. Identify areas where you can improve your skills or streamline your processes.
• Seek Feedback: Ask for feedback from mentors, colleagues, and clients to identify blind spots and areas for growth.

6. Practical Applications and Experiments:

• Experiment 1: Targeted Lead Generation. Choose one income stream (e.g., New Sales). Implement a specific lead generation strategy targeting first-time homebuyers. Track the number of leads generated, the conversion rate to buyer consultations, and the conversion rate to closed sales. Compare these results to your historical averages.
• Experiment 2: Improving Listing Presentations. Revamp your listing presentation using data on what motivates sellers in your area. Focus on showcasing your marketing plan and demonstrating your expertise. Track your Listing Appointment to Listing Signed Conversion Rate for one month and compare it to your previous month’s rate.
• Experiment 3: Time Blocking for Lead Generation. Dedicate a specific block of time each day or week solely to lead generation activities. Track the number of contacts you make and the number of appointments you schedule during this time. Monitor the impact on your overall income.

7. Conclusion

Setting income goals based on listings, sales, and leases requires a combination of scientific principles, mathematical calculations, and practical experimentation. By understanding goal-setting theory, analyzing your past performance, assessing market conditions, and tracking your conversion rates, you can create a robust plan to achieve your financial objectives and master lead generation. Remember to regularly review and adjust your goals and strategies based on your progress and market dynamics. Good Luck!