How Too Many Contacts Can Hurt Your Business

Last Updated on January 14, 2021

Everyone seems to be talking about prospecting and lead generation. Some real estate agents – and even brokerages –  have built their entire business around it… but I’ve got some bad news… Generating too many new leads, and having a contact database that’s too big can actually HURT your business.

“But why, Alex? Doesn’t adding more leads mean I’m adding money to my bottom line?”

Yes, it certainly can – but it’s not nearly the most effective way to reliably multiply your income. In fact, according to a 2019 NAR Study, 63% of clients choose to work with YOU because they know you or were referred to you. I know you’ve probably heard this statistic before, but I want it to really sink in what that means. It means your income is a direct result of how well you bond relationships with your friends, family and past clients – or what we at Agent Inner Circle like to call your Power List™.

Don’t get me wrong, bringing in new leads can be a great way to increase your sales, but only up to a certain level. If the amount of work you’re doing to bring in and nurture new leads takes away from your ability to follow up with your Power List in any way – you’re actually doing your business a long-term disservice.

Don’t blame yourself too much – a huge part of the industry is designed to make agents think that lead generation should be their top priority, and that you need thousands of leads. And hey, they’re happy to charge you for each and every single one along the way.

How Many Contacts Does It Take To Be Successful?

What most agents don’t know is that they only need a shockingly low number of contacts to build a 6 figure income. Let’s just say you want to make $100,000 this year. Taking averages across the industry, here’s what that math looks like:

    $100,000 income goal
➗$6,000 average commission (3% on a $200,000 sale)
=  17 transaction sides to meet your income goal

    17 transaction sides to meet your income goal
×  7 years average between buying/selling a home
=  119 contacts to close 17 deals

In order for 17 deals to happen from such a limited number of relationships though, agents would need to shift their focus away from new lead generation, and work primarily on increasing their personal market share – or the percentage of people from your Power List that actually do business with you. What’s interesting about these contacts compared to just any other buyer or seller that you might acquire, is that because you have a relationship with them, they will convert to clients at a higher rate, with less overall effort and investment from you.

The Relationship Sales Threshold 

So where does it cap out, the opportunity seems infinite! Here’s the wonderful thing – it is! But here’s where I have to get real with you and remind you that we’re not dealing with cold, random leads anymore. We’re dealing with meaningful relationships that require a little time and effort to maintain, but have an upside potential that greatly exceeds any cold leads.

What this means in practice, is that agents cap out on the number of active clients they can handle at any given time, while still trying to maintain relationships with their Power List. From discussing this with countless clients over the last decade, the magic number where agents seem to cap out, is between 250 and 300 contacts.

I know what you’re thinking – maintaining real relationships with 300 contacts isn’t the easiest thing to do. Even when we set a threshold for the number of contacts we can successfully maintain meaningful connections with, there’s the issue of making those meaningful connections happen! 

But the agents I know who do this, along with 100% referral business, have all implemented a specific strategy to do so:

  1. Keep your contact list narrowed-down to the top advocates and the closest people in your network
  2. Focus on your relationships, staying in touch, providing value, and engaging with them consistently
  3. Use tools that automate “personal-looking” marketing that can help bond real relationships and immediate responses.

Using the Right Tool Boosts Results

Obviously you can’t do this with the traditional marketing tools you’ve been using to attract leads to your business – why? Because these people in your Power List already know you, and as such, they’ve probably seen your real estate pitch, new listing post on facebook, and gotten a marketing email from you a time or two by now. Plus – who wants to be sold to?

What they maybe aren’t getting from you, is a reason to want to connect with you, or even an obligation to reciprocate the contact. An age old secret I’ve learned from some of the most successful salespeople in the world is to provide value relevant to what the customer cares about, and that’s not necessarily going to be related to your business. 

That’s why some of the most successful agents I know use the Service For Life!® Newsletter because the system works to deliver content that your personal contacts will not only welcome from you, it’s built to bond you with past clients, and engage them on a regular basis without being salesy or pushy.  

Words of Wisdom

An old phrase comes to mind, but I’d like to put my own spin on it “A client in the hand is worth two in the bush.” Don’t make the mistake of over extending yourself chasing potential business, when you could be building a consistent six figure income based on a relatively small number of contacts. 

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