Do You Really Need to Spend Money, to Make Money?

By Alex Camelio, CEO - Posted on
Don’t forget to leave us your comments at the bottom after you’re done reading this article…

Last Updated on February 26, 2021

There’s a well-known saying in business that you have to spend money to make money, yet so many of us still believe we can succeed at some level without making the proper investments to get there. The reality is, if you’re in the profession of selling real estate, you’ve got to be willing to fork over some dough to get ahead, and research reveals just how true this is.

It’s not all bad news of course – I am an optimist and an entrepreneur, and it’s easy for me to argue that there’s more than one way to get to the top… it also helps that I’ve seen thousands of agents have success without taking all the traditional avenues. But, I do believe there’s merit to some extent, to having to spend money to make money. I see it reflected in the real estate industry (and every other industry for that matter) year after year.

So I’m sure by this point you’re asking “just how much of an investment is actually worth making in my business, where do I make investments, and what can I expect to get out of them in the end?” Let’s take a look at what market research reveals…

What are the Facts?

Every year, NAR puts out credible industry research about the real estate profession as a whole, along with data about buyer’s and seller’s behavior. If you’re not familiar with the annual reports that NAR compiles, I highly recommend taking a look at them. It’s not only important to know what the industry benchmarks are, understanding them gives you a roadmap for success.

Looking through NAR’s findings on REALTORS®, there’s a crystal clear relationship between your income potential as an agent, and 3 key factors: experience, expenses, and referrals and business from past clients. A deeper dive into each of those reveals exactly what you need to know to fast track your success as an agent – meeting income goals in your professional youth that even veteran agents struggle to hit.

  1. There’s a Direct Correlation Between REALTOR® Experience and Income

The typical REALTOR® has 9 years of experience and earns $49,700. It’s not until somewhere around year 16 that the average agent seems to reach the top-end of the market with an annual GCI of $86,500.

“Income was typically commensurate with experience. As REALTORS® gained a larger network of referrals and previous clients and experience, their income generally rose.” – NAR Member Profile 2020

Tenure is obviously a factor when it comes to generating income as an agent, however it doesn’t have to define it. As I’ll explain below, your expense to income ratio also plays a role in how much business you do, but even more important is the quality of your personal network, which could tilt the scales in your favor. 

  1. There’s a Direct Correlation Between REALTOR® Expenses and Income

The average REALTOR® spends $6,290 in business expenses, but agents making less than $10,000 a year reported expenses of just $2,050, while REALTORS® who made $150,000 or more reported their median business expenses to be $34,760.

Although the total spend between these income levels is drastically different,  in actuality, it’s consistently about 20% of their total income. This number can seem overwhelming, especially to agents who aren’t really sure where their next commission will be coming from, but when you scale your business with the right investments you can be a lot more confident with the money you’re spending. What are the “right investments” you ask? The data gives us some insight on that as well.

  1. There’s a Direct Correlation Between Referrals & Business from Past Clients and Income 

Regardless of experience or expenses, referrals and business from past clients were cited as the largest single-source of business for agents. 

That “typical REALTOR®” we talked about earlier, with 9 years experience making $47,500 in annual GCI, earned 35% of their business through past clients, with 15% being repeat business, and 20% coming through referrals. 

However, the agents who’ve been in business for 16+ years (making $40K more in commissions a year), earned a staggering 68% of their business through past clients, with 39% of them being repeat clients, and 29% from referrals.

What’s the Bottom Line?

When you put all the information together, you see that the experienced agents making the most money in GCI, invest in getting repeat and referral business as the core of their income.

I know, it’s hard to let go of the idea that you should be spending money on lead generation, but it’s hard to argue with research that compiles hundreds of thousands of agents. So, instead of spending your money on generating leads, invest in your past clients and friends.

One of the most effective things that I’ve seen agents do with past clients is, shift to a referral marketing strategy using the Service For Life!® Newsletter. Using carefully curated lifestyle content, personal-looking design, consistent follow-up, referral programming, engagement triggers, and involvement devices, this ingenious marketing system psychologically bonds your clients with you. Bonded clients send more than 3x’s the number of referrals the average client sends, and are nearly 100% more likely to do business with you, every time they need a REALTOR®. TRY SERVICE FOR LIFE!® TODAY

Works Cited: NAR Member Profile 2020

What did you think of this article?

Click here to leave a comment!
Alex Camelio
Throughout his career, Alex has personally helped over 15,000 Agents and Brokers, including some of the Top REALTORS® in North America. His passion for marketing, technology and business development has translated into more than a decade of cutting edge technology and contributions to the real estate industry. As the CEO of the Agent Inner Circle®, a 40,000-member real estate agent community, Alex focuses on providing agents with education and actionable strategies to grow and optimize their business, ultimately building some of the most successful careers in real estate today. Alex is an internationally recognized educator who’s shared his thoughtful and energetic presentations with various National Associations and industry organizations. As always, Alex is excited to share his expertise with everyone.
Interested in similar articles? Click here.

Leave a Reply

Your email address will not be published. Required fields are marked *