Last Updated on April 7, 2017I cringe when I hear the word. But if you did take physics, you might have learned about an amazing concept called “Critical Mass.” What is “Critical Mass” and what on earth does it have to do with real estate success? “Critical Mass” occurs when an object or process in motion reaches such a momentum that it continues at that momentum…even increases that activity for long sustained periods of time – even forever! And did you know that your real estate production can hit a point of “Critical Mass”? It’s true. In fact, after teaching more than 34,000 agents how to get breakthrough production and lasting profits in real estate…
I Have Never Seen a Real Estate Practice Achieve Long- Term Success WITHOUT Reaching Critical Mass™…Yes, it’s that important. Let me explain further… See…about 19 years ago…when I was working with small groups of agents, I coined the term “Critical Mass™” to explain the dynamic of growing such a strong “marketing momentum and personal market share” you actually start to generate 70%, 90%, even 100% of your clients from your created marketing momentum. But more than that…I discovered a way to make your production continue to grow and grow almost automatically year-after-year no matter what happens with the economy. Picture your real estate production like a small snowball in your hand. If you take that snowball and start rolling it down a hill, it will start growing bigger. And as it grows bigger it will start to take on its own momentum and start rolling itself. And as it starts rolling faster, it also starts to get bigger…and bigger…and bigger. And as it gets bigger, it starts to roll faster…and faster…and faster. Do you see what’s happening here? At some point your snowball reaches a point of “Critical Mass™” where its accumulated momentum will keep it rolling and rolling and rolling.
What happens when your real estate practice starts reaching Critical Mass™?Amazing things start to happen… Your production will multiply, and continue to grow for as long as you practice real estate, because you’re creating your own momentum…your own personal market share – it’s a mathematical certainty as you’ll soon see… You will never cold prospect again…never face the humiliation and frustration of cold marketing – nearly all of your clients will come to you the easy way: by referral, word of mouth, and repeat business… You will work half as much and stress a fraction of the amount you do now…and in the process you’ll make multiples of your present income. Why will all these good things happen? Because…
You Will Spend Your Time Only On the Most Productive Real Estate Activities: Working With Clients, Closing Deals and Getting Paid!Imagine if you could wake up each morning, and, instead of dreading your day cold prospecting or wondering where your next client is coming from, you relish in a steady flow of clients who want to work with you and only you. It’s not a pipedream. It’s not a fantasy – agents are doing it today. But there’s a small problem. See, most agents never reach Critical Mass™. They lurch from one bad effort to the next, because they never learn about the concept, or how to get there. So they either quit the business, or give up and sadly assume real estate needs to be a constant struggle – jumping from one marketing fad to the next. And many of those who actually reach Critical Mass™ get there by accident…or take 10 to 20 years to reach that point. Well, I’m here to tell you: You don’t have to be a victim of ignorance. You don’t have to struggle and strain or take 20 years to finally “make it” in real estate. You can “short-cut” your success by 90% or more if you simply build your own personal “Critical Mass™” momentum and market share. Which brings me to our little formula for building Critical Mass™ in your practice… It’s a simple calculation for building any size real estate practice you desire…a calculation that will reveal to you the exact size of your “power list”…your personal market share required to reach Critical Mass™ in real estate. It’s my…
Critical Mass Targeting System™Follow along carefully, because this is the most important little calculation of your real estate career. I want you to understand the dynamics here as well as the simple math. Take out a piece of paper and follow these 3 easy steps…
STEP #1:Write down the number of real estate transactions you want to achieve to reach Critical Mass™ in your real estate practice. Critical Mass™ is a different number for everyone. For some agents, it may be 15 transactions a year. For others it may be 40. And for others it may be 400. Another way to calculate the number of transactions you desire is to back into it. Simply take the “net income” you desire, and divide it by the average NET commission you make per transaction (that’s after all expenses: broker split, marketing costs, employee expenses, office rent, auto expense, etc.). For example, if you want to make $200,000 and your average “net” commission (after expenses) is $5,000, then your Critical Mass™ number is 40 transaction sides ($200,000/$5,000 = 40). As a side note (and food for thought): the higher the average price of homes you sell, the fewer you need to sell to meet your Critical Mass™ income level. But you already knew that, right?
STEP #2:Write down how long the average person in your area owns their home, and multiply that number by #1 above (the # of transactions you need to reach Critical Mass™). National home ownership average is about 5.5 years. But to be conservative, let’s assume its 7 years in your area (you can use 6 or 8 or 10 for that matter). Check with your local MLS or REALTOR® Association if you’re not certain – or just assume for now. For example, if the average homeownership period in your area is 7 years, multiply 7 times 40 transaction sides (from #1 above). 7 Years x 40 = 280. THE RESULT: In our example, you will require 280 homeowners on your “power list” to generate 40 transactions EVERY year (your Critical Mass Target™) – Remember, this doesn’t include the referrals they could send you. It’s just the number of direct transactions that will come from this group (and you can check your math: 280 people divided by 7 years = 40 deals per year will come from this group). But HOLD ON! Those 280 are your goal ONLY if you get ALL of their transactions. Let’s be reasonable: You won’t get all those transactions. Regardless of your efforts, some will go FSBO. Some will go to “Uncle Charlie.” And some will go to another agent. That’s why we now need to adjust for your “Personal Market Share™” with that group to get your true Critical Mass Target™.
STEP #3:Divide your “power list” number (from #2 above) by the estimated “Personal Market Share™” you have with those folks – to get the “actual” number of people required on your power list. What do I mean by “personal market share”? Market share is the propensity of these people to think of YOU FIRST (and final) for real estate services before any other agent How do you figure your personal market share %? Over time (a year or so) you’ll understand your market share because you’ll know how many transactions came from your power list or target farm. And remember, marketing to that group over time will have a cumulative effect, and actually increase your market share with them. Agents using a special marketing tool called Service For Life!® that’s designed to look like a real estate newsletter harvest between 30% and 80% personal market share with their “power list.” So let’s work an example… Continuing with our previous example, let’s say you have a 30% market share with your folks. That means you should divide your 280 people by your 30% market share: 280/.30 = 933 people. So if you have only a 30% market share with your power list or target farm, you’ll actually need to have 933 people on your “list,” not 280. But what if…because of your relationship contact systems – like our Service For Life!® members – you actually harvest 50% of those people? 280/.50 = 560 people. You now need only 560 people to harvest your 40 transactions every year (not including referrals they could send you). You just cut your list size almost in half! And what if, because of your relationship contact systems, you actually harvest 80% of those people? 280/.80= 350 people. You now need only 350 people to harvest your 40 transactions every year (not including referrals they could send you). You just cut your list size by one-third again! Do you see the “dynamic” that’s happening here? The SIZE of your list required to reach Critical Mass™ depends on the QUALITY of your list. And the quality of your list is controlled by YOU. The higher the quality of your list (i.e. the closer the relationship), the fewer people you need to reach Critical Mass™. The fewer people required means lower marketing costs and higher profits for you. By the way, I’ve seen agents create power lists larger than 700 in their very first year – and they closed an extra 20 to 50 transactions just in the process of building that list. And remember, the “Critical Mass Target™ number does NOT include the referrals you could harvest from these folks – it’s just the direct transactions that will come from that group. Many of our Service For Life!® agents actually add up to 40% more business from the referrals they generate from their power list. Question: WHO will be the agent representing these people when it’s time to buy or sell? Answer: The agent who’s created the closest relationship with them.
- The agent who has nurtured the relationship.
- The agent they can trust.
- The agent who’s demonstrated their competence over the years.
- The agent who brings regular, welcomed value.
- The agent who has differentiated themselves from every other agent out there!
How Do You Get Your Personal Market Share™ with Your power list as HIGH as it can Possibly Get?
How Do You Make Yourself the ONE Agent Your Market Thinks Of Before Any Other Agent Comes To Mind?The Answer: You need a consistent contact system that involves them. Gets read and shared. Automatically builds a deep relationship worthy of referrals, word of mouth and repeat business. A tool that brings your prospects and clients value so they’re subconsciously forced to reciprocate and do business with you. A tool that bonds them to you like family. Doesn’t it make sense? It’s intuitive but most agents nod their heads and do nothing to increase the quality of their power list each month.
Try This Amazing Formula…Let’s have some fun. Today I want you to dream a little. Whether you’re a new agent or veteran top producer…I want you to calculate your Critical Mass Target™ for your own practice. I want you to see how greater success with less stress and strain can be a mathematical certainty – and how your production can continue to grow automatically, year-after-year…regardless of the economy, competition or interest rates…if you just follow a simple strategy. Here’s the easy exercise: Step #1: Write down the number of transactions you need each year to be at “Critical Mass™” in your business: __________. (Example = 50) Step #2: Write down the average length of home ownership in your area. Check with your local MLS, or if you already have an estimate, enter it here (nationally is about 5.5 years, but you can use 7 years to be conservative): __________.
Calculation #1: Now, MULTIPLY Step #1 by Step #2. (Example: 50 x 7 = 350). This will give you the number of people needed on your power list (or farm) to generate your “Critical Mass™” number of transactions (IF you get ALL of them), not including referrals they could send you.
But remember, you won’t get all of those transactions – so we need to make a small adjustment for your “Personal Market Share™.”Step#3: Estimate your “Personal Market Share %” you can expect when marketing to this group: _______ %. (Example: 30%) If it’s a cold list (like a new farm) it will be quite low. If it’s a well-nurtured power list of past clients, friends, family, acquaintances – it’s going to be much higher – even as high as 80% or more.
Calculation #2: Simply divide your results from Calculation #1 above by Step #3. (Example: 350 / .30 = 1,167) This will give you the number of people you’ll need to build on your power list to reach your Critical Mass Target™ at a 30% Market Share.Now, let’s do something called “Sensitivity Analysis.” Let’s assume you had a great “Relationship-building” system (like Service For Life!® ) working in your practice… What if your Estimated Market Share % went to 40%? Divide your results from calculation #1 above by .40. What did you get? What if your Estimated Market Share % went to 60%? Divide your results from calculation #1 above by .60. What did you get? Did you notice that, the better your Market Share %, the LOWER your Critical Mass Target™ becomes? A lower Critical Mass Target™ means you spend less time and money marketing your services. You work with higher quality clients – friends. And what you don’t know is that these people REFER others just like THEM! Want to know a secret? Most agents never think about Critical Mass™ or “Personal Market Share™.” Rather than create a “Strategic Approach” to building their business, they force themselves to constantly prospect…or just hope and pray that clients will somehow, some way find them. Not you. Not any longer. We’ve just completed an important step in targeting your success – and believe it or not, most agents never even get this far. We’re starting to fill in the blanks in making your astounding success a “100% Certainty.” Stay tuned for more articles about how to build the size and quality of your power list. [Ed. Note: If you’d like to attend a free webinar training on how to use a relationship marketing system to increase your Personal Market Share™ and build Critical Mass™ in your real estate business, spending less than 30-minutes a month to manage, you can see upcoming event times by clicking here.]
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