Track these Key Performance Indicators to ensure consistent performance and profitability.
This is the second of a two articles focusing on Key Performance Indicators (KPIs) for real estate team success. The first one addressed short-term KPIs for immediate sales impact; today’s article focuses on long-term KPIs for real estate team success. Long-term KPIs will help you focus on optimum business management. You must review periodically take the pulse of your own business see how your business metrics are stacking up. These measurements are not transaction-specific; they are the collective result of all of your business efforts, and they are indicators of production, profitability, growth, and quality. I recommend tracking and thoroughly reviewing Long-Term KPIs on a monthly and quarterly basis, including year-to-date totals where applicable, and then comparing them to the same period in the previous years. This exercise will give you a good awareness of the status and direction of your business, and here are some important items to include:
Revenue: Like every other business in the world, the long-term success of your team depends on bringing in revenue, so tracking yours is one of the fastest ways to know how your business is doing. There are several layers to this, however, especially in teams, so we need to look at more than just Gross Commission Income (GCI). You also must follow: Adjusted Gross Income after broker splits and fees; Adj. Gross Income based on team leader sales, Adj. Gross Income based on team member sales, and percentages of each as compared to each other and to previous periods. This may seem a little detailed or complicated, but these are important figures to know to determine whether your personal revenue is going up or down as team leader, whether other team members’ revenue is growing, and whether the relative growth of the two matches your goals for the direction of the team.
It is important to note that we are not tracking volume here, because you can’t spend volume. These KPIs are about measuring revenue and making sure that it is being generated both on a positive track and in a way that meets your team goals.
Expenses and Profit: In a perfect world, you keep updated books and can print a Profit and Loss sheet on monthly and quarterly bases, in which case you can easily know your periodic expenses and profit for those periods and for year-to-date, and also compare them to previous periods. With that, your most important KPIs to review are: total expenses (especially as a percentage of GCI), staff expense, marketing expense, and net profit. Knowing these figures—especially after you know the corresponding revenue figures–will help you understand if your expenses are in line with your production and are allowing for maximum profitability.
By the way, if you do not have easy access to periodic Profit and Loss statements, do your review of these figures with Excel or even with a pen and paper. You can probably get pretty close to the true numbers, and it is essential that you do this exercise on a regular basis so that you are never blindsided by runaway expenses or unexpectedly low net profit.
Recruiting: If team growth is a goal, you must focus on your results to ensure that they exceed your expectations. Track the number of newly-licensed agents added to your team, co-brokes added, and licensed agents lost to retirement or who left your team. Net Gain from recruiting and retention is one of the most important KPIs for growing teams, and you need to track both the raw number of agents gained and lost, and their total commissions generated and lost. Keeping the overall figures positive will ensure team growth year after year, and a good rule of thumb is that for every agent lost, you need to add two to your team—one to replace and one to grow!
Satisfaction: While a little less literal, I recommend having a program in place to survey both you clients and your team members to gain feedback on satisfaction levels. Client feedback is especially helpful to garner testimonials and 5-star ratings that you can then promote, and also to gain necessary tips on areas that you can improve upon. For the long-term health of your team, it is also important to give them the opportunity to give feedback that you convert to a measurable score and review. Make your process anonymous if necessary, but tracking client and team member satisfaction will be an invaluable way to make sure that the quality of your business keeps up with your production success, and that team stability and repeat business continue as you grow.