To take your real estate business to the next level, it’s crucial to develop the right strategies, starting from the top of your funnel: lead generation.
If you’re not quite sure how to get from where you are (a vague, underperforming, or non-existent lead gen strategy) to where you want to be (running a tight ship that’s firing on all lead gen cylinders)—this is the article for you.
With this three-step strategy, you can create a purposeful, structured lead generation plan that keeps your team fed and your business growing.
It’s an old adage, but it holds up: You can’t get where you’re going if you don’t know where you are. That’s why it’s so crucial to get the lay of the land before you jump into any new changes in your lead gen strategy.
First up, take stock of your current lead sources. Where are your new leads coming from?
Most lead sources will fall into one of five buckets:
Then, calculate your conversion rates. How many deals have you closed out of all the leads from a given source? This will help you see your success rate for each type of lead.
As a recap, the formula for your conversion rate is:
(In case it’s been a while since your last math class, multiplying by 100 allows us to express ROI as a percentage.)
If you’re more of the shoot-from-the-hip type and haven’t been tracking your number of leads from each source or their conversion rates, take a look at your last 10 closed deals in detail. For each deal, answer the following:
If multiple deals came from the same lead source, average your quantitative data points to get a more accurate view of how that lead source is working for you.
Evaluating your lead data will help you make informed decisions about which leads to focus on, rather than going by your gut.
When evaluating your lead sources, it’s also important to take your personal strengths and weaknesses into account. We reached out to Dale Archdekin, founder of Smart Inside Sales, to get his expert advice on the subject, and here’s what he shared:
Do you excel at creating and nurturing relationships? Then SOI and past clients should be your primary focus.
Do you find it more natural to only engage people when they have some business need, and not much before or after? Then paid lead gen/marketing should be your focus.
Just because a lead source has been hot or lucrative in the past doesn’t mean it aligns with who you are or the business you want to run—if it’s not the type of client or work you want to be doing, it likely won’t profit you for long.
After you’ve figured out which parts of your lead strategy are working for you and which aren’t, it’s time to start defining which lead sources you’ll keep, which you’ll drop, and begin looking at any potential opportunities you may want to add to your strategy.
Unless your sphere of influence is absolutely overwhelming your team with more business than they can handle, or you’ve become a knock-out success specializing in one particular source, you probably want to diversify your lead sources.
The real trick, of course, is finding the right balance of lead sources to rely on. While a little bit of diversity is good, you also don’t want to be spread thin between too many sources and strategies.
A good rule of thumb is to choose one primary source/strategy, and then 1-3 secondary strategies.
This allows you to focus your efforts while still providing a bit of diversity just in case a lead source dries up—like when open houses were effectively wiped out for a few months due to COVID-19.
Your balance will depend on your team’s strengths and weaknesses, as well as your most successful channels and specific goals. For example, newer teams might stick with 80% SOI leads, 20% paid:
You may choose your primary strategy based on qualitative and quantitative measures, such as:
Ideally, you’ll have one stand-out lead source that hits all of those targets, but if not, you may have to compromise (or up your game).
The best quantitative measure of a lead source is its return on investment. When you’re deciding where to spend your budget, you want to prioritize the leads that deliver the highest ROI. Here are a few simple ways to calculate ROI for real estate leads:
Real Estate Lead ROI Formula
This formula can be applied over any period of time—quarterly, annually, you name it. Just make sure that you apply the same time frame to all your variables.
Another simple ROI formula for your marketing is:
To interpret these values as a percentage, don’t forget to multiply by 100.
Tip: If math isn’t your favorite (no judgment), Realtor.com has created a handy dandy ROI calculator for real estate agents.
If there’s a lead gen source you’re interested in that you haven’t personally tried before, it’s still possible to calculate your potential ROI.
To explore the differences in cost, level of effort, and quality of different lead sources, check out the following articles where we (with the help of other experts) have covered these topics in-depth:
There are also many, many other ways that you can find new leads. If that’s what you’re looking for, check out our list of free lead generation ideas to get started.
As you’re preparing to evolve your lead gen strategy, make sure you’re taking advantage of the resources and opportunities available to you.
Perhaps the most important resource is your budget. What are you willing to spend on lead generating activities, including paid leads, marketing, etc.?
Remember that with paid leads, higher cost = higher quality. Dale Archdekin’s advice is to “Consider whether you want to spend $200-$300 per lead or more like $3-$5. The more expensive the lead, the fewer you get, the less time they need to nurture, the faster you can close them, and the higher the conversion rate is on them. The cheaper the lead, the more you get, the longer they need to nurture, and the lower the percentage is that will actually close with you.”
Don’t forget to account for your budget of time. This is especially crucial if you want to invest in a long-term lead generation strategy like your website or a YouTube channel. It will take time (and money, if you need to hire help or purchase equipment) to build up that channel so that it earns organic traffic and captures new leads for you.
Tap your network. You might usually think of your sphere of influence as a potential source of leads, but your personal connections can also be a great source for advice, tips, and other expertise.
Take advantage of brokerage resources. Your brokerage may provide additional support such as lead management systems, advertising, consumer apps, or FSBO and expired leads.
(^ Thanks again to Dale Archdekin for this expert advice!)
Follow Up Boss offers built-in reporting tools to help you keep track of your performance by lead source.
Maybe it goes without saying, but we’re going to say it anyway: After you’ve established your lead gen strategy, don’t drop the ball.
Implement an effective real estate lead management process to turn those leads into conversions.
As you continue working your leads, make sure your lead mix and strategy are working for you. Data doesn’t lie, so if you aren’t currently tracking these key real estate performance metrics, start right away.
While you may want to understand your numbers overall, you should always calculate your metrics by lead source so that you can easily compare channels against each other.
Return on Investment (ROI) by lead source
Here’s our simple ROI formula again:
Response rate by lead source
Since ROI for lead sources can take up to 18 months to deliver useful data, it helps to use leading indicators like response rate to help you get an earlier feel for how a lead source is performing.
Cost Per Lead (CPL) by lead source
For lead sources where you aren’t paying per lead, you’ll want to calculate your cost per lead.
So if you spent $2,000 on Instagram or Facebook ads and you got 16 leads, your cost per lead would be $125.
Customer Acquisition Cost (CAC) by lead source
Your CAC takes cost per lead a step further to include how many of those leads actually convert to closed deals. Continuing with our previous example, if the $2,000 you spent on social media advertising yielded 16 leads, but only 4 of those leads bought homes, your CAC would be $500.
You can also use CAC to calculate ROI using a different formula than what we previously provided:
(Remember that we multiply by 100 to express ROI as a percentage.)
If all of the clients from our example paid you $10k in commission revenue, your ROI formula would be:
Follow Up Boss makes it easy to see who’s leading the pack in key metrics with team leaderboards.
As you track your real estate lead metrics and evaluate your lead gen sources, it will be much easier to know when to change your focus or scrap a lead source that isn’t working for you.
Say your team has been focused on SOI leads, but they’ve still got a bit more room on their plates. It might be time to invest in paid leads.
On the other hand, if your team is swamped with more leads than they can handle, it’s probably time to cut off those low-ROI lead sources so they can focus their time on the leads that are going to convert and deliver big revenue.
John Selby of The Selby Team had to add a new lead source when his team could no longer work open houses due to COVID-19. They decided to start working Zillow leads—but John prioritized tracking from the start (because those Zillow leads ain’t cheap).
“If I spent $20k on Zillow leads and we made $40k, then all right, we’re good!” he says, ”But if I spent $20k on them and we only made $10k, that’s a problem.”
You’ll only know for sure if you have the data to back it up.
Giving yourself and your team visibility into how they’re performing collectively and individually in different lead sources can be enormously valuable in increasing accountability, motivating them to achieve, and helping them understand their own business.
As you continue to track performance and motivate your team, you’ll be able to make more informed decisions to optimize your lead gen strategy and reach higher levels of success in your business.
Because no two lead gen strategies will look the same but with the right math and lead mix, you can create the perfect, high-ROI plan for you.