Playing the numbers gameDouglas Smithsales, Douglas Smith, motivational speaker, ABC Advisor Seminar Series
The mortgage business is a business of numbers, and if you don't
know your numbers, you can't run your business.
Let's take Nick for instance. Nick is a loan originator with a
goal to make $100,000 this year. Nick's average loan amount is
$200,000 and he earns, on average, $1,000 a loan in gross
commissions. It's clear that Nick needs to close 100 loans this
year to reach his goal.
Let's back up a bit further. There are a few more numbers Nick
needs to know to be successful. Those numbers include his capture
and conversion rates. Like any good mortgage professional, Nick
tracks his leads and loans very well. He knows from monthly
production reports and pipeline data that about 75 percent of his
applications taken and entered into the system will close. The rest
fall out for a variety of reasons, such as appraisal issues, home
inspections, buyers backing out of the deal, and more. Now Nick
recognizes that to close 100 loans, he will have to take at least
134 applications throughout the year. Thats his conversion
rate.
Next, Nick must estimate his capture rate. Giving this some
serious thought, Nick realizes that he is successful in capturing
about one out of every five borrowers he speaks with; about 20
percent of his prospects will actually make a loan application.
(The others either don't qualify, arent ready to move forward, or
choose to finance their loan elsewhere.) Now Nick knows that to
close 100 loans a year he must take 134 applications, and to take
134 applications he needs 670 leads a year to reach his $100,000
goal.
In the final analysis, Nick plans to take three weeks of
vacation this year; spring break with the family, a summer trip to
the beach and one week off during the holidays. If Nick needs 670
leads this year, working 49 weeks, he must average 14 leads a week,
and that's the bottom line.
Every Monday, when Nick comes to work, he doesn't dwell on
making $100,000, or closing 100 loans, or even taking 134
applications. Every Monday morning, Nick thinks about his primary
goal; he must talk with 14 prospects or leads before he goes home
on Friday afternoon. If he so chooses, Nick could start out each
week with a piece of paper numbered one through 14. His objective
is to work hard, stay focused, make a lot of contacts, and fill in
14 names on his sheet of paper by Friday. If he does this
consistently every week, based on his numbers, Nick will earn his
$100,000 this year.
It's time that you know your numbers as well as Nick does. Take
a few minutes right now to figure out what it will take to reach
your goal this year; all the way down to how many people you should
be talking to every week, maybe even every day. The mortgage
business is a game of numbers in so many ways. To play the game
well, you have to know your numbers.
Doug Smith is President of Douglas Smith & Associates.
He is a 24-year mortgage industry professional, nationally-known
speaker, author and sales trainer. For more information, visit www.DougSmithOnline.com
or call (877) 430-2329.
