Prospecting Is Panning For Gold
Prospecting is the act of looking for clients and customers. Think of it as panning for gold, with the different types of people in your database as prospecting pools. The image you must hold in your mind is of crystal-clear water with beautiful pebbles at the bottom, each pebble with the potential to be a nugget of gold.
How you navigate these prospecting pools from the beginning of your real estate career and forever thereafter will determine whether your business grows at a healthy rate and according to your objectives. You must choose the right approach for prospecting and nurturing the people you add to your database -your pebbles- to ensure you connect with potential customers and referral sources in a way that builds lasting relationships, generates ongoing referrals, and leads to successful transactions.
Prospects and Everyone Else
Let’s take it from the top. Prospects are anyone who expresses interest in buying or selling a property. They could be strangers you met at an open house, a past client ready to move again, or someone referred to you by one of your referral sources. Once prospects declare their intention to work with you either by signing a buyer broker agreement or a listing agreement, they become your customer or client.
Your referral sources, also called your sphere of influence (SOI), are your clients, past and current, your friends, family members, business associates such as agents in other cities or states, and service providers ranging from your doctor to your car mechanic.
Active vs. Passive Prospecting
Active prospecting gives us control over who we engage with, while passive prospecting only lets us manage the prospects that come our way. To forecast your business revenues, you must set transaction goals. To meet transaction goals, you must interact with prospects and referral sources and, especially early on in your career, ask for business.
A key metric you must establish by tracking your interactions is the number of people you must speak with to generate a transaction. Everyone is different, has different circles of family and friends, and has different networking capabilities. But everyone can prospect successfully if they contact enough people to generate the number of transactions they set as their goal. This activity is what we call active prospecting.
The rule of thumb in our industry is that you must reach at least 50 people per week, people with whom you can have a conversation and ask for a referral. To reach that number, prospect actively by systematically rotating through the people in your database via phone, drop-byes, or coffee clutch, and reach out to homeowners in target neighborhoods through cold calling or door-to-door canvassing to introduce yourself and offer real estate information.
Always approach these conversations with a service mindset, offering information and assistance they or someone they know might need in the future. Do not solicit. Do ask for referrals. Be consistent, reliable, and knowledgeable, and when they have a real estate need, you will be the agent they think of.
Passive prospecting, on the other hand, includes methods like floor time and open houses. These activities must be done, again especially early on in your career, but they lack the predictability of deciding how many people you will speak with. An open house may be full of potential buyers, or you may sit for three hours and not see a soul. For that reason, always make sure you take work with you when you go to an open house, and you will not feel your time wasted if it isn’t well attended.
In any case, be prepared for the buyers who show up and follow up doggedly with anyone who shows an interest. Have lists of similar homes in similar price ranges, screen people with the right buyer qualifying questions, offer to meet visitors after your open house, either at your office or other convenient location, call people back the following morning, and add visitors to your database as prospects for nurturing.
Nurturing Your Prospecting Pools
We’ve talked a little about the different groups of people you may have categorized in your database. Since you cannot connect with what you don’t know, smart prospecting begins with understanding these diverse prospecting pools and the people within them. Invest some time to scroll through your database to keep the image and facts of each person fresh in your mind. Then and only then will you be able to decide the correct communication channels and the frequency of communications you should use with each group.The key methods for each group are:
1. Sphere of Influence (SOI): Your SOI consists of people you already know, friends, family, and acquaintances. These individuals are more likely to trust you and provide valuable referrals. To effectively target your Sphere of Influence (SOI), engage in regular, personalized communication such as phone calls, text, and emails. Drop-byes with seasonally appropriate little gifts, send relevant print mail, attend networking events, utilize social media, host special gatherings, and implement referral programs.
2. Expired Listings: Properties that were listed but didn’t sell are a superb source of business. Target expired listing for the prior 12 months, checking that the homes have not been re-listed or sold privately. These owners have already made it known they want to sell their home, were probably frustrated by their experience, and, at some point, will be ready for a new approach. You just need to be there for them. Target Expired Listings by employing tailored outreach strategies [link to sidebar], leveraging market insights, and showcasing your expertise to position yourself as the solution to sellers’ needs. Once you’ve reached an owner, add him or her to your database for nurturing. If they wanted to sell their home at one time, the likelihood is that they will again.
3. For Sale By Owner (FSBO): Homeowners trying to sell their property without a real estate agent will most definitely benefit from your expertise in navigating the complexities of the real estate market. Do not hesitate to knock on the door when you see an FSBO sign outside a property in your area. This direct outreach can be a game-changer, showcasing your commitment to personalized assistance and willingness to go the extra mile to help homeowners achieve successful sales.
Target For Sale By Owner (FSBO) properties by offering clear and valuable assistance while attempting to sell the home on their own, demonstrating what you can bring to the table. For example, offer a sheet with which they can track the number of phone calls they’ve received about the property, the number of appointments they’ve set, the number of appointments to which a buyer showed up, and the number of offers they’ve received. Also, offer a printed sheet on remaining safe while allowing strangers in your home, and another about ensuring a potential buyer is financially qualified. Sooner or later, they will realize there are many complex aspects to selling a property and will ask you to represent them.
4. Farm or BDA (Business Development Area): Your farm is the targeted geographic area where you concentrate your marketing efforts to cultivate potential customers. Targeting a Farm or Business Development Area (BDA) involves employing regular and frequent mailings, using localized advertising, participating in community events, and building relationships with local businesses to establish a prominent and trusted presence. Farms are best if you can walk them or become an area regularly, for example, by walking your dog to the neighborhood dog park.
Prospecting Volume
How much prospecting is enough? Determining the number of hours and contacts per week is based on your business goals and skill level. It is essential to strike a balance that aligns with your specific objectives, whether you’re aiming to expand your client base, increase sales, or enhance your market presence.
Years In Business and Prospecting Activities
Understand the evolving role of prospecting throughout your real estate career:
1. Years 1-3: For the first few years, choose your farm, build your database, and focus on prospecting with strangers. Lay the foundation for a robust customer base.
2. Years 4-10: Continue building your database, shifting towards prospecting with people you already know. Ask for referrals; within 5-6 years, 65% of your business should ideally come from referrals.
3. Year 10 and Beyond: After a decade in business, your prospecting efforts will primarily consist of asking for referrals. By now, your sphere of influence should be a powerful source of business.
Rate of Return for Each Pool
Different prospecting pools yield varying rates of return. Your sphere, expired listings, FSBOs, and farm will likely provide the best return on investment. Focus your efforts where they count the most. Navigating various prospecting pools involves implementing diverse methods to optimize returns. Engage with your sphere through personalized communication, leverage market insights to approach expired listings strategically, establish rapport with FSBOs by showcasing the value of your expertise, and cultivate your farm through targeted marketing efforts. And track your results to understand where and how you are succeeding and where you must improve.
Prospecting Goals and Conversion Rates
Prospecting goals are all about conversion rates. Track your interactions, measure your success, and constantly refine your approach. The more targeted and intentional your prospecting, the higher your conversion rates will be. Mastering the art of connecting with potential customers in various prospecting pools will lead you to sustained success. Remember, it’s not just about selling houses; it’s about building lasting relationships and becoming the go-to Realtor in your community. Stay focused, be consistent, and watch your business flourish.
If you have any questions about prospecting more effectively, I invite you to schedule a complimentary consultation here.
