Give Me Lever(age) or Give My Car Death

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Last week, back on the home front, I wrote a post explaining that I was changing the way I do business as we head into 2009. With rare exceptions, my days of driving to the far eastern reaches of the Phoenix real estate market have come to an end.

Set aside the argument about local knowledge. True, my knowledge of the West Valley is much greater than my knowledge of the East Valley since much of the East Valley didn’t exist when I lived there last. But, in case you didn’t know, there’s this invention called the Internet that allows me to be the source that provides the source for information.

Also set aside the argument about gas consumption and miles on my vehicle. These are very real factors, but a little less worrisome at $1.67 a gallon than at $4.27.

And let’s also set aside, at least for a moment, the commission that comes from a successful close.

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What really was the determining factor for me in this decision was time. The near-hour spent driving from one side of the Valley to the other, the near-hour back … that’s 90 minutes off my day every day I make the trip that could be spent prospecting for additional business.

Working the Numbers

For those who already have teams or buyers’ agents or what-have-you, none of this will be new. But it was not until recently that I was willing to work the numbers as they apply to my buisness to see what leverage I could gain by working with others.

So here goes …

On a $200,000 property, I usually would net somewhere around $5,000 (in very, very round terms.) If I were to refer out the same lead, I would net somewhere closer to $1,200.

The conclusion? I would need to refer out four such properties in order to net the same.

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Time is the differentiating factor.

For me to receive the $5,000 for working a buyer, I would have to invest several hours – time spent searching for properties, showing the properties, writing offers. If an offer is accepted, add the time spent on inspections, lender and escrow follow-up, repair negotiations, etc.

On the referrals, however, I would need to spend somewhere around an hour to refer the four clients and follow-up with the receiving agent to see where things are.

One hour or several hours, all for the same result.

Of Course, There’s a Catch

… and that catch is lead flow. I need sufficient lead flow through my various websites to send the leads to these other agents. And it has to be sufficient lead flow for these specific areas in which I want to send out the business. Lead flow in my own backyard is wonderful, but not helpful to me from the standpoint of leverage as these leads I’m still better off working myself.

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Or maybe I’m not … no, let’s not go down that road quite yet.

The key as I see it is to generate the maximum number of leads with a minimum of time invested. In short, I need something that’s virtually automated – good SEO, compelling content, strong IDX – so I can invest my time not just on the buyers I keep but determining where the business will go. Outside of my current buyers and listings, I need to be spending my time in the future and not the present, as it were.

Again, none of this is akin to the invention of the wheel. Someone did that long ago, and someone figured out how to leverage leads for maximum profit long before I decided to stick my toe in the water.

And maybe if the leads I’d referred out last week had come back dry, I wouldn’t even be writing a post designed to talk myself into believing the results I’ve already seen.

But it did … and as I toy with the notion of creating a small team sometime in 2009 (call it the baby step before someday going solo, should someone be able to convince me that’s the next logical step), these minor milestones are remarkably handy in showing the eventual path that’s right for me.

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