Marketing And Budgeting Your Way To Success

Home Discussion Forum

Become Amember
Become a member & get immediate access to all of our resources.

Marketing And Budgeting Your Way To Success

By ⋅ September 16, 2008 ⋅

Coming up with a marketing budget is one of the difficult tasks to do and I see many Real Estate Professionals base their budget on guesses and currently available funds.

Well, Today I want to talk a little about how to come up with your Real Estate marketing budget based on formulas rather than SWAGing it (SWAG is a Technology estimating theory used to perform an uneducated, unbased estimate and it stands for Scientific Wild Ass Guess).

I have developed my own Real Estate marketing estimating model, I call Budget Based Marketing. In all honesty there isn’t anything magical about it, but with lack of structured marketing budget concepts, I had to borrow a make one up based on existing standards elsewhere.

While I cannot describe the model in a single article, I will go over enough details to get you thinking and help you formulate your own to solve your budget challenges.

commonly Used Marketing Concepts

You see, one of the most commonly used marketing budgeting I see people use follow one of the following two methods:

Allocate a percentage of your income to wards marketing.

This method varies by industry. companies usually allocate from 2.5% to 10% of their gross income or net income to wards marketing.They do so because they operate on a fiscal budgets and have both boards and sometimes public investors they have to report to.

I am not going to get into weather this is the best approach for a large company, but without larger and fundamental change in their operations, this tend to be good for them.

But what about us Real Estate Investors, Real Estate Agents (Realtors), Mortgage brokers, or small companies?

Within this concept, there are couple of approaches or recommended approaches. There are only two because frankly, there isn’t much options to do here.

First, if you are currently successful in your business, then you allocate a percentage to wards marketing based on your current income. The major flaw here is that if you base your marketing budget on income, chances are you will continue to operate within that income. Sure you make blow away all existing records and increase your production by 25%! but that means it would take you 4 years to double your income. Not impressive.

Second, is to decide on your future company income and base your budget on that. This is a better sounding approach, but it too has its flaws. You are allocating an amount of money to marketing based on projected income, and not based on projected cost of marketing to get the business and earn that income. 10% might do it, or may not.

Lets look at Budget Based Marketing System** (See copyrighting warning in bold below)

The overall concept is very simple. For the sake of time and simplicity, I will use rounded figures.

Lets assume you are a Real Estate Agent and your goal is to make $100,000 a year. Your market budget should be based on the amount of money required to produce enough leads to earn a $100,000.

This sounds simple and no brainer. But there is really more to it and by formulating it, you end up with different variables that if you worked on improving on any of them, your budget will decrease and income increase.

Lets evaluate what it would take to earn $100,000 a year:

Fact #1, agents gross about 2% of total transaction cost. This figure is based on 70/30 split.

Fact #2, to earn $100,000 you will need to close $5,000,000 in transactions in a year

Fact #3, to close on $5,000,000 a year you will need to sell 50 houses at $100,000, 25 houses at $200,000, or one house at $5,000,000.

Fact #4, assuming we are using the 25 houses at $200,000 price range approach, you will need to get more than 25 houses under contract. Let’s say you have 50% closing rate, that means you must get 50 houses a year under contract.

Fact #5, to get 50 houses a year under contract, you will need to contract about 1 house a week

Great! we got the facts out of the way… now lets look at our budget.

You need to figure out the following:

1. How much does it cost you in marketing to get 1 contract done
2. On average, can you get 1 contract signed for that same amount spent?
3. Based on your current budget, how much can you spend on marketing and how many leads will that translate into?
4. Knowing how many deals you can get for X amount of dollars, can you allocate some of the new income to wards your marketing?

Now call me psychic but the major objection you will have is "I don’t know how much I have to spend to get a deal!" or "it really varies! one time it is $10 and another time it is $1,000!"

You want my answer? If you use the right marketing approach with all of its 3 elements, results won’t change much. And even if they did fluctuate, I hope you are not spending more than $50 to $100 for every $1,000 you are earning so even if you get fourth of your response one time, that is still 50% return on investment.

Results are not as variable as many believe. If they were, companies could not project their one, three, and five year income potential. sure they tend to be off, but they are off due to outside influences and usually they don’t go broke because of it. They are still profitable.

So the real question you should ask is "how do I perfect it to where I can project my income based on marketing money spent?"

The short answer for this is to use proven systems that work, and to test to see which works for your personality and your skill level.

Like I said, my formula has many variables that are based on knowledge, experience, and budget.

What you need to do is track how much you are spending on a marketing channel and what is the return on investment from it. Could you produce better results doing it different method? could you dump more money into it and get more results or is it capped?

Testing and tracking is your key. You have to systematize your approach and work on your variables to improve each one of them. Once you improve on the variables, the income will increase.

For example, I know if I spend $500, I will buy one investment house that will bring me $10,000 to $20,000. I know if I spend $150, I can get one listing. These are my numbers. What are yours?

Figure that out, come up with your own formula based on what I described of mine and not only will you succeed in reaching your income level, you will be able to predict your income for years to come and increase it at will!

** This program concept is protected by very strong men. Any use without the written approval of the author may result in severe and painful collection process regardless of law!

Marketing And Budgeting Your Way To Success

Share This site