Over the years I’ve worked with some of Australia’s top real estate businesses. Along the way, I’ve noticed one thing they all have in common - the principals really know their stuff. They gather information the way some people collect stamps. These principals know every detail relating to their particular marketplace; from the total number of properties that have sold in any given period right through to the details of every agent in their area.
While it’s definitely possible to get carried away collecting statistics just for the sake of it, the habit of knowing your area is a good one. And if you want to even get off the starting blocks there are a few bits of information you really do need to have. With them, your business has every chance of being a first class operation. Without them, it’s almost impossible to make informed decisions about the direction and potential of your business.
Market turnover is the first thing you need to know. Both the number of sales and the total dollar value of sales in your target area are critical. These will give you a rough idea of the total commission available in your market. By multiplying the total commission available by your target market share, you will have a good idea of the gross income levels that you are aiming for.
So for example, if properties worth a total of $600 million were traded last year in your target area, then based on an average commission of 2% there’s a pot of about $12 million up for grabs. If you’re aiming for a 15% market share, that equates to roughly $1.8 million in gross commission.
Remember, if you’re just starting out it’s important to be realistic about setting your expectations around income. If you aim to get a big market share of a big market, then you’d better be prepared to build a big business!
And another word of caution here; a total sales figure in any area will constantly change due to economic factors and seasonal trends. If you are using historical information for business planning, you should factor in any possible downturn or upturn in market turnover in the coming year.
The other area I would highlight as being critical to know a lot about is sale price information. It’s a must-know both for the principal of a real estate business and its salespeople. Ensure that you have the most up to date information of local sale price movements and make them a part of both your sales meetings and listing presentations. With some great research companies out there who make collecting this data their core business, there’s really no excuse not to know. If there’s one thing that vendor’s expect you to know a lot about, it’s what local property prices are doing!
There are literally hundreds of other numbers that you could know about your market. The basic key to success though is making sure you know the mission-critical stats that will affect your business.
Here’s a list of the key statistics to always stay on top of:
- Average monthly/annual number of sales
- Median sale price
- Percentage of units vs. houses traded
- Turnover of units vs. houses
- Number of sales in different price brackets
- Your market share
- Area total population
- Average income
- Age demographic
- Number of active listings
- Days on market
- Clearance rates
- Number of competitor offices and salespeople
- Average number of sales per salesperson
If you know these numbers and more importantly, how to use them in your business, you will be well on the road to success. As the saying goes, what you don’t measure, you can’t improve!
