Budgeting for Lead Generation

It’s not been very long ago since professionals in many industries, including real estate, viewed the Internet as a threat to the way they did business.  Indeed, the Internet and what it would bring loomed large coming over the hill, and many otherwise fearless pros hunkered down, waiting for the storm to strike.  

Now we have discovered that, not only is the Internet a major tool of business and arguably the most efficient method of communication since the telephone, but also that we have become adept at it, depend on it.  It’s indispensible.

Early Internet users were innovative and curious, with a lot of time on their hands. Today, savvy Internet users are proficient at finding ways to save time while growing their businesses, and online marketing has become a line item in every real estate pro’s marketing budget.

Planning Your Marketing Budget

In The Millionaire Real Estate Agent, must-read author and founder of Keller Williams International Gary Keller reveals some ground-breaking industry statistics based on his surveys of Keller Williams top producers. Keller discovered that millionaire real estate agents and brokers spend about 10% of their Gross Commission Income (GCI) on lead generation marketing.  The following is a brief synopsis of Keller’s “Budget Model,” based on his findings.

• Of 100% of GCI,
  • 30% is spent on cost of sales (listings, salaries, and commissions).
  • 20% goes for operating expenses, not including marketing.
  • 10% is tagged for lead generation marketing, and
  • 1.5% on technology in general. That leaves
  • 38.5% as net income.

This maintenance lead-generation budget model of 10% of GCI for marketing is typical for a mature, referral-strong real estate practice and is consistent with every survey and analysis I have seen.  Based on my own experience and conversations with rainmaker real estate agents, I recommend that new or expanding practices slot 15% of GCI for lead generation. For businesses facing stiff competition or planning an aggressive push into a new market or niche, 20% of GCI should go toward a one-year blitz. 

What is your marketing mix?  Every real estate rainmaker needs to discover the balance that works best for them and their market.  Share your experience!