As 2010 approaches, I’m sure we’ll all be reminded of the old saw, “Plan Your Work and Work Your Plan.” As trite as it may sound, there’s something to it. Ever wonder what separates a lot of the top performers from the “also-rans”? It’s often the existence of a focused, written plan that serves as the daily roadmap for where they’re going (and how they avoid getting lost along the way!).
If you’re in the new homes business (not that this exercise isn’t beneficial for all), you have to start your 2010 planning with a look back at some key metrics.
How much traffic (and that includes incoming phone calls and emails) did you generate in 2009? What was your conversion ratio of that traffic? How many of your sales were co-brokered? What was the difference in conversion between site traffic and agent-accompanied traffic? How much was spent on traffic-generating promotion from all sources? How does that break down between cost/traffic unit generated and cost/sale? What was your average closed sales price? What was your cancellation rate (as we all know – only net sales pay the bills)?
Once you’ve quantified these metrics, forward planning can emerge. What we know from years of experience is that rarely do these metrics change radically from one year to the next (outside of significant swings in the economy that may have an overriding dampening or accelerating affect on your sales).
A good place to start is with a net sales goal. Market research can augment your daily experience as to whether that number is realistic. Then apply your cancellation rate and you know what you really have to sell in order to get to your net. If you know your breakdown of where the sales are coming from and how much each unit of traffic is costing you, you can quickly, and quite accurately, develop a marketing budget for the year. It may not answer where you need to spend it, but it will tell you how much you’ll probably have to spend to get there. In an economy that is forcing us all to do more with less, we are tempted to challenge the metrics, to think we can nudge them from their historical levels. But the numbers almost never lie. The most tempting metric to think you can change is the conversion ratio. Sure, there are superstar agents out where who can make a difference in conversion ratios. But with the myriad elements that influence the sale (location, product type, price point, buyer trepidation and the builder’s acumen as a marketer), there are often many things working hard to keep these metrics in check. I’m not saying it can’t be done – we all have stories where we beat the system. But it’s a bad assumption to make when starting your annual planning. Its parallel in our industry is the builder who falls in love with a piece of land, overpays for it and then thinks he/she can force the numbers to work by simply raising the sales prices. Time and again we learn the same lesson when we fail to hit our annual sales goals – that the real challenges is simply not being able to drive enough traffic to the site. It’s a push and pull game, but builders and their agents have to meet in the middle somewhere, with each party having a clear understanding of their role in this whole process.
I was introduced to the X-Factor concept (the fancy name for everything I’ve been talking about) early in my building career by Frank Spadea of Franciscus Homes. 30 years later, it’s still one of the most valuable, tried-and-true tools I have in my planning basket. 2010 is almost upon us. The planning for it needs to be started now, if you haven’t done so already. If you’d like to chat more about X-Factor planning or get a copy of a blank form to start working on your 2010 plan, just email me at tgear@terrypeterson.com.
