Rates have gone up and by most experts' opinions, they will not be going back down. Refinances are slowing and volume is dropping. This is not a death knell to brokers, but if they do not diversify their income and get loans from more than one source, they are in great danger of becoming extinct. If most of your business has been coming from an ad, and it has pulled 200 calls a month, that ad may only pull 20 calls a month in a pure purchase market. To strengthen your business, you must create layers or revenue streams from your numerous business sources. It can be fun, and it is certainly profitable.
When you create multiple revenue streams, you consistently focus on diversifying successful attributes of your current business in order to create less dependency on strictly one source of income. It's great if all of your business comes from real estate agents, but what happens if they go away? Sounds preposterous, but real estate agents are finding it harder to compete with the Internet and the host of buyer-owner type companies. A person can list their house, post it online with a virtual tour and never use a real estate agent. But when you have deals coming in from real estate agents, affinity groups, home buyer seminars, friends and family, and past customers, your business has legs that can withstand any storm.
It is the difference between a diving board and the Parthenon. A diving board has one big pole in the middle with the board attached. That pole represents a source of revenue. The board represents your business. If all of your business comes from ads, then you have one pole, and your business is in danger of crashing if that source dries up. The Parthenon, if you remember your social studies, is supported by numerous poles around the entire platform. It is still standing today because its structure is so sound. The platform is your business and each pole represents another source of income. The more you have, the stronger the structure. I am not talking about diversifying outside of the mortgage arena stay within the mortgage business. I believe that you should become great at one thing and then disseminate. Someone who dabbles in real estate, mortgages and Amway, tends to be inefficient with all of them. It is better to dominate one area, for instance, mortgages, and then diversify those profits into real estate and investing. Microsoft, for example, became dominant in software, and then they began to spread out.
The journey begins by analyzing your business and seeing how many poles or revenue streams you really have. Where does your business come from? Real estate agents? Friends and family? The Internet? Then determine how you can improve each stream. It is easier to get business from existing customers (to implement a simple new plan to increase your loans from a loan, for example) than it is to create a new revenue stream. The key is to add one tactic per revenue stream, and try not to do everything at once. Execution is key. Nailing one simple strategy to bring in new business is better than trying five strategies in a haphazard or mediocre way.
Let's use an example to illustrate: Say you analyze your business and, 75 percent of your business is coming from an ad, 10 percent from real estate agents and 15 percent from loans in process. You have three revenue streams, but you are very dependent on ad calls. Look at ways to improve your ad first. A change in the headline can reap a 200 percent better response. Do the same with your real estate agent business who is it coming from? How can I improve it? In each of these venues, implement just one thing don't try to do too much. Let's take the 15 percent of your business from loans in process. That number should be 25 percent if you are average and more than 50 percent if you are good. If you get one loan from every other loan in process, your business increases 50 percent per month! Try adding one simple system to improve your business from your customers in process. Let's say that you add a mandatory weekly follow-up call. Sell the customer on the value of this at the time of application, and each Friday, share what is going on with their loan with them and ask them for referrals. Most people need to be asked five times for referrals before their subconscious starts working for you. Calling once per week, at approval and at closing will give you at least five opportunities to ask for business. This one tactic could triple the referrals and hence, deals, you get from each client in process.
Once you have implemented a new system to your existing revenue streams, you can begin to look at new income sources. Underlying all new revenue stream systems is the overarching fact that consistently adding value is the only sure way to bring in business. You could decide, for example, to add commercial mortgages as a new revenue stream. The first and best way to start doing commercial mortgages is to leverage your existing customers. You already have real estate agents, CPAs and well-heeled people who are probably already invested in commercial real estate or looking to be. Begin calling on these customers, and let them know you do commercial loans. Not only are you opening up a potential new revenue stream, but you are also touching base with your past and present clients, which can only lead to more residential business. Done correctly, your revenue streams should feed into each other and produce exponential benefits. By discovering areas where you can dominate and applying what you already do well, one simple system that consistently promotes value can add new streams of income for years to come. In doing so, you bulletproof your business!
Brian L. Peart is president of Nexus Financial Group Inc., and its commercial division, Commercial Capital Ltd. He is a national trainer and editor of Top Producer magazine. He may be reached at (866) 355-1244 or e-mail [email protected].