Agents, there's gold in calling cold
How far would you go to make $290K a year?
By Bernice Ross, Monday, May 7, 2012.
Businessman and phone image via Shutterstock.Editor's note: Telephone numbers used in cold calling campaigns should be checked against the National Do Not Call Registry. Telemarketers and companies that sell phone numbers are required to search the registry at least once every 31 days and drop consumers who have registered from their call lists.
Do you know how much you earn per hour in your real estate business? Assuming that you made $100,000 last year by working 40 hours a week for 50 weeks, your hourly rate would be $50. What would it take to make more than seven times that amount per hour? The answer may surprise you.
What would you be willing to do to increase your hourly rate up to $386.75? Assuming that your average commission per transaction is $4,641, would you be willing to repeat the same monotonous task for 15 hours per week in order to earn $290,693? What if the task were as simple as picking up the phone and repeating the same script over and over?
Only a small number of agents earn $250,000 per year. A common path to success that has worked for years is cold calling. The question is whether this tried-and-true approach is still appropriate in today's Web-based sales world. A new study from the Keller Center at Baylor University reaches some interesting conclusions about this important issue.
The study
The study divided 134 agents from 10 different geographic areas into two groups. Each group set aside a different hour each day to make cold calls for seven days using the same script. Cold calling was defined as dialing random numbers from a certain farm area not previously marketed to by the agent. The result was 14 hours of lead generation over 14 days.
The goal of the study was to determine if cold calling as a baseline lead generation activity -- meaning no experience, no contacts, no database, no marketing, no listings, and no "just-solds" -- would generate appointments for agents.
The results
Out of 6,264 calls made, 1,037 numbers were not working and 3,450 had no answers. In other words, 71.6 percent of all calls failed to reach a live person.
Of the remaining 28.4 percent where the agent did connect with a live person, 929 (14.8 percent) said they weren't interested; 132 (2.1 percent) of those contacted asked the agent to call back later. The agents set 19 appointments and received 11 referrals (0.047 percent). In other words, it took 208 calls to get an appointment or referral.
The conversion ratio was 1.7 percent for the agents when they actually reached a person. This means for every 60 people the agent actually reached, the agent would either receive a referral or schedule an appointment.
Conclusions
1. If an agent can make 50 calls per hour, it will take him approximately six hours to achieve one appointment.
2. Anecdotal evidence of the conversion rate suggests a 2-to-1 appointment-listing ratio. That means for every 12 hours of calls, an agent can expect to achieve one listing.
3. If an agent's commission averages $4,641, that equates to a return of $386.75 per hour.
The fatigue factor
By the time the agents had spent 11 hours cold calling, all 134 had quit calling. Yet the data showed that it takes 12 hours of cold calling to generate a closed deal. In other words, the agents quit one hour short of reaching the 12-hour goal.
What does this mean for you and your business?
1. The best time of day to call
If you are cold calling, the data suggests that you will achieve the best results if you call between 10 a.m. and 2 p.m. The least effective time to call is after 5 p.m. Here's how the numbers stack up:
a. Calling between 10 a.m. and 2 p.m. converted at a rate that was 42 percent higher as compared to the rate between 8 a.m. and 10 a.m.
b. Calling between 10 a.m. and 2 p.m. converted at a rate that was almost 300 percent (three times) higher as compared to the conversion rate for calls made after 5 p.m.
Sarah Eagleson of Keller Williams in Columbus, Ohio, has at least one potential explanation for this result: "I find that many of my clients are rushing off to pick up their kids after school, so later in the day is not a good time for them."
2. Readjust your mindset
A research study of 1,000-plus consumers from Best Agent Business showed that the one prospecting technique that everyone hated the most was receiving cold calls. Nevertheless, the conversion ratios from the Keller study show that 12 hours of cold calling consistently yields one listing. The issue is how to shift your mindset so that cold calling becomes a sustainable behavior.
In the book "High Probability Selling," authors Jacques Werth and Nicholas Reuben suggest that you "search for the aces." In other words, in any given year, only 14 percent of the people you reach will be buying or selling a home. That means at least 86 percent are not "high probability" leads for now. Instead, you're searching for the 3 to 5 percent who are the "aces," i.e., who are ready to transact now. The people who "reject" you are really not rejecting you, they're simply not interested in doing a transaction at this moment in time.
3. Is it worth the price?
The Keller study concludes with this important point: "Spending three hours a day cold calling Monday through Friday can potentially yield $290,063 in total commissions in a year."
Would you be willing to work 15 hours a week on the phone to make almost $300,000? The answer for most agents is "No." For those who have the persistence and the discipline to make those calls, the win for their business can be substantial.
Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of Realtors' No. 1 best-seller, “Real Estate Dough: Your Recipe for Real Estate Success.” Hear Bernice's five-minute daily real estate show, just named "new and notable" by iTunes, at www.RealEstateCoachRadio.com. You can contact her at Bernice@RealEstateCoach.com or @BRoss on Twitter.
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Submitted by Ruthmarie Hicks on May 7, 2012 - 11:22pm.
The answer is 100% NO! NO! A thousand times NO! Why??? Because for every listing I land - how much damage have I done? I won't consider working with anyone who cold calls me - ever. And I have a long memory. Someone cold -calls me my first reaction is "Loser!" If you have to cold call me you don't have a viable business. I remember who they are and they will never, ever get my business. I will also slam them to others. If they are stupid enough to ignore my "no soliciting" sign - I stick 80lbs of death on them...my dog. They will never be used by me either and bad-mouthed as well.
It astounds me when I read blog after blog and post after post about agents whining about how they hate being cold-called by vendors trying to push their latest in lead generating garbage on us, and then have the nerve to say that we should get out of our "comfort zone" and do the same thing to the public.
Now, am I struggling in this market - the answer is yes....But I will say this. If you have to turn a service industry into a self-serving industry in order to get what you want or need- its time to hang it up and realize that you aren't really doing anything useful with your life.
Understand - this is not a value add for the consumer. It serves us and no one else. One of the problems in our industry is that it has long ceased being about the buyer or the seller. If you are spending most of your time NOT providing a useful service, but trying to scrounge up business in the most obnoxious way possible - you aren't performing a service. Period.
Submitted by Ruthmarie Hicks on May 7, 2012 - 11:27pm.
If everyone hates it, then the answer is simple. Don't do it. It absolutely astounds me that anyone would advocate doing something the public detests in order to get what you want.
This is supposed to be a service industry not a self-serving industry. One of the reason agents are thought of as lower than a snake's belly is because we persist in these hard-sell techniques.
What about having NAR and Brokerages start to control the numbers of agents...stop allowing this to be a free-for-all revolving door where anyone with a pulse can get a license? Oh...sorry - they wouldn't make so much $$$$ in fees and dues.
This industry is a total mess and this post proves that more than anything else.
Submitted by Jon Astaris on May 8, 2012 - 10:40am.
A 2-to-1 conversion rate? 6-to-1, maybe, if you are really good. BUT: How many listings are "distressed"? 40%? Those are out of reach, spoken for, assigned to the connected, the few, the smart. That further dilutes the "score".
This study is meant to prove a predetermined point, that cold calling works, is not carried out to conclusion, makes unrealistic assumptions and therefore should not be used as anything but a joke.
Cold calling works if it is properly targeted and used in conjunction with filters. But that wouldn't really be cold calling...or would it...
Submitted by Leo Kingston on May 8, 2012 - 1:49pm.
This is a subject that will always draw strong opinions on both sides. But the reality is, cold calling is a form of gambling. All those hours spent dialing people who don't answer or who resent the intrusion are hours that could have been spent in other, less intrusive networking activities. If time is money, then 12 hours of valuable time is a lot to invest in one lead that may or may not close. Yes, cold calling can work, but so can a whole lot of other ways to meet people.
Leo Kingston
Chief Visionary
www.18002SellHomes.com
Submitted by Kirk Eisele on May 9, 2012 - 3:37pm.
Where cold-calling holds an edge is for new agents or agents that are starved for business. Many of the other forms of marketing out there either require cash or are limited in how much time you can spend on them. Cold-calling is always available and is "bottomless" for the most part. If your back is against the wall picking up the phone beats moon-lighting at McDonald's!
Submitted by Derek Haffner on May 10, 2012 - 5:57am.
Ruthmarie Hicks the real estate business is about making money and servicing your clients. The reason you are struggling in this market is because you do not make calls. Maybe if you did your business would grow and you could meet your financial goals. Cold calling is a great source of business as well as calling FSBO's and expireds. maybe you should try?
Submitted by James Billings on May 12, 2012 - 1:07pm.
Absolutely YES YES YES to this article. The NO posters are examples of closed minds. The first post sounds like a vicious dog.
I used to walk door-to-door for new business. I could knock on 30 doors per hour and after two hours..worn out. However, it worked. I had zero competition because nobody would do it. The other part is I reached people just before or when they first started thinking about selling. I was ahead of the pack. It's about timing.
Cold calling on the phone can work too. The fact that so many people are against it is perfect. Again, no competition.
james at mill dot net for any questions. door to door is actually fun. yes, i'm a bit crazy too.
Submitted by Randall Henderson on May 14, 2012 - 1:36pm.
I couldn't agree more with Ruthmarie. This tactic is terrible and gives our industry a bad reputation. Who enjoys telemarketers? Agents, this is NOT the way to find new business or build your business.
Submitted by Randall Henderson on May 14, 2012 - 1:48pm.
Also, the author's analysis or spin of the study is very misleading. I am not sure if it is a sales job on your part or just sensationalism, but the idea of working only 15 hours per week and making $290,000 dollars or increase your billable rate to $387 per hour is completely laughable and reminds me of the multi-level marketing pitches I have been unfortunately subjected to. The study does not follow the agents results to the money, so why do you jump there? What is the quality of the leads, the appointments, the listings? In my experience, the bottom of the barrel. Meaning that for the most part, these forced contacts or appts will result in dogs that only drag our business down and take away from valuable time spent finding or selling good listings.
Submitted by Ruthmarie Hicks on May 16, 2012 - 12:59pm.
Derek - you can't manufacture a market that doesn't EXIST. Real estate is a numbers game and around here there are about 5 agents for every home on sale. The point is that this is supposed to be a SERVICE industry not a SELF-SERVING industry.
Now, do the numbers have to work for me? Of course. There are people who are not worth the time etc. and you cut them loose. I have to make a living and service doesn't mea being a doormat.
But the point here is that with massive number of agents everyone is crawling all over potential buyers and sellers like they are SHARK CHUM. Then we whine and complain when our time and energy is not "valued" If we have to back people into corners and chase them relentlessly and hog tie them to get a contract - we've proven that we are a dime a dozen and of absolutely no value.
Submitted by Ruthmarie Hicks on May 16, 2012 - 1:04pm.
@Randall - I'm surprised people are responding to my comment so much. But it seems to me that the agents that complain the most about vendors cold calling them seem to feel that its just fine and dandy when they start cold calling homeowners. The fact that people have signed onto the DNC list in droves speaks volumes about how people feel about cold calling, door knocking and other invasive techniques. Thank you for defending my position.
Submitted by Derek Haffner on May 24, 2012 - 10:24am.
So Ruthmarie how do you find your business?
Submitted by clarin realty on May 28, 2012 - 7:48am.
No , cold calling don't work these days and that is effecting business as-well.i its better to go door to door and meet people personally , that might help to get some sales.
Thank you,best regards.
http://clarinrealty.com/
Submitted by Peter Lavelle on August 2, 2012 - 6:50am.
WOW!!!! So much inside the box thinking in the comments section. Yes cold calling does work, with a plan. Look at how companies advertise....to a "target" market. Of course cold calling will not work if you reach someone that just purchased their home 2 months ago, but 9 years ago and back.....hmmmmmm...... As agents we have access to the MLS and public records, you can find your target market there. So what is the plan? There is the Law of Reciprocity. What is that? Google it and find out. You have to offer something first, before you receive something back; and no it is not being selfish, it is what it is. A little something I've set up is the Community Event Hotline, and yes I have a ten second commercial before and after the message with a call to action. This allows me to call and inform my target of this service, and then I can ask a few questions while on the phone. Yes it breaks down the barrier, and allows that trust factor to kick in. I do not sell, and this also allows me to follow-up. I have been welcomed with open arms when I call back and has given me the opportunity to brand myself in the community. I hope you all the best.