What Is One Client Worth In Real Estate

August 2013 Issue

What Is One Client Worth In Real Estate

If you’ve ever bought a cell phone or a razor with replacement blades, you’ve done business with a company that understands the lifetime value of a client. Those businesses pay little or no attention to the profit they earn on the first sale. Instead, they know that their profit derives from leveraging client lifetime value. They know how much they can earn from repeat business.

Unlike businesses like Verizon or Gillette, many real estate agents and brokers are so busy finding new clients that they don’t think about the value of their existing client base. After all, every homeowner you work with who hasn’t already done business with you was someone else’s client in the past. Most young, new buyers have parents or family members who also did business with a different real estate agent before.

Leading agents don’t let this happen. They leverage client lifetime value because they know that the second deal they do with a client is more profitable than the first. Success comes from realizing that your business continues to grow as you get more transactions from the same client.

Calculating Client Lifetime Value

Figuring out what a client is worth to you is relatively simple. All you need to do is to add the value of the transactions they will do with you over their life with the value of the referrals they will send you. For instance, if you sell a $150,000 house to a young family and earn a net fee of 2.2 percent, that transaction is worth $3,300. However, if you know that you’ll complete four more transactions with them between listings and sales, and that each will be 15 percent larger, that’s an additional $18,950 in revenue. If that family is well connected and can send you two $3,300 transactions per year for 15 years, that’s another $99,000 in revenue. In other words, that $3,300 transaction is the bridge to a total client lifetime value of $121,250.

Tapping Into Client Lifetime Value

Knowing what your clients could be worth isn’t enough, though. You also need to be able to execute on those relationships so that you earn their loyalty and achieve high customer retention. You also need to be in a top-of-mind position with clients so they remember to send you business when the opportunity arises. Building that kind of relationship takes work and planning, and it starts before you even close a deal with the prospect:

  • Comprehensive cross media marketing programs establish you as an effective professional even before the client does business with you. If the client knows you’re good at exposing properties, he or she will come to you when they’re ready to sell.
  • Provide excellent follow-up after the transaction. Sending closing gifts and following up with satisfaction surveys help to extend the positive feeling your client has after a closing and cement your position in his or her mental list of trusted partners.
  • Repeated after-the-sale communication ensures that the client returns to you and that he or she remembers your name whenever a friend needs real estate services.

It’s never too late to get started. If, like many agents, you’ve seen some client relationships grow cold, there are several ways to reconnect with them. On the other hand, if you’re just forming relationships, there’s no better time than now to start locking them down and ensuring that you maximize each client’s lifetime value to you. Halo Programs can help you make more from each client. Contact us to learn more.