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The World's Highest-Yielding Investment
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So, what is the most profitable investment in the world?
When asked this question, most people would answer "the Stock Market," or "Mutual Funds," or "Real Estate." And why not? On a good year, you could expect a healthy 10%-15% return from the stock market.
Hey, some homes in California appreciated to the tune of 25% during the boom years.
But, those investments pale in comparison to what I am about to show you. I want to discuss the "ultimate investment." The ultimate investment is one that you make in your business. Specifically, it is capital placed towards marketing.
Every Real Estate Agent I've ever spoken to is aware of the fact that they need to invest in themselves and in their business to succeed. But, only a handful of them actually do so with any consistency.
Usually, most Agents use the excuse of: "I don't have the money to advertise. As soon as I close a bunch of deals and make some money, then I'll run a big marketing campaign."
OK, well I guess I can accept that excuse. And while we're at it, I have an excuse of my own. "I'll get my kid vaccinated for Polio just as soon as he contracts the disease!"
I'm sure you've heard this a million times, but I feel obligated to shout it out loud, one last time, for everyone to hear: "YOU WON'T MAKE MONEY IF YOU DON'T SPEND MONEY".
Once again: Clients will not magically appear out of the air. Clients are generally obtained in one of three ways:
1.) A client is referred to you by a past client
2.) It's your lucky day and you get a walk-in or floor call
3.) You advertise and the prospect responds
If you rely on numbers 1 and 2, you lose complete control of your business and your pipeline. In those cases, your income and livelihood depend on a former client or luck of the draw. To succeed, and succeed in a big way, you must focus on option number 3.
Most mega-producing Real Estate Agents have a strategy. And that strategy includes making temporary sacrifices with the knowledge that they will soon reap the benefits. There are some very successful Agents out there. And when I say successful, I mean that they personally make in excess of $500,000 per year.
Many Agents will scoff and say, "Well of course they can advertise. They have all the money in the world." But the truth is, those mega-Agents had to make the same choices once upon a time. Each and every one of them made a great decision when they chose to invest in themselves and their business.
Many Top Agents faithfully tithe 20% of their monthly income towards additional advertising and promotion. When those folks first started out, they were making very little in fact. Some were making only $2500 per month, but they still put back $500 into advertising.
It wasn't long before that $500 each month brought in enough deals that those Agents began making $10,000 a month.
To make a long story short; because of their original $500 per month sacrifice, they now live lives most Agents only dream of.
It's worth the sacrifice. I promise.
Lifetime Value of a Client
So, how can you decide how much you should spend on your business to obtain each new listing or Buyer? First, you need to know how much each closed deal is worth -- not just on their first transaction, but over a lifetime.
Statistics say that most people will buy 4-5 homes in their lifetime. Many will stay within your city, and 90% within your state. So, it stands to reason that if you have great customer service, you could expect to deal with each client numerous times. You could create "Clients for Life," if you will.
Now, let's imagine that you make $3000 per average transaction. If the client deals with you three times over the course of your career, at $3000 per visit, the client’s lifetime value is $9000. And that doesn't take into consideration how many friends and family they might refer to you over the years.
Now you must factor in what it cost you to obtain the client’s business. This is where you determine how much you spend on advertising. I am sure the amount you spend, even in two years worth of advertising, would pale in comparison to the lifetime value of just one client.
Many scoff at this methodology, but honestly, it's no different than any other investment strategy. Most people who invest long-term for retirement keep their money in the market for 30 or more years. There is no difference in this model.
HINT: Always calculate what a borrower’s lifetime worth is!
Summary
It can be scary to make that first investment in marketing. You might only be scraping by right now. But if you plan to ever get past this stage in your career, it is IMPERATIVE that you make the commitment to invest in your success.
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