What Should My Real Estate Conversion Rate Be? The Answer Might Surprise You.

Tired of not knowing what your ideal conversion rate should be? Go through our easy conversion rate calculator to learn more.

The one thing that is important for every real estate team is - Profitability. Tracking profitability on every lead source and agent is a bit of work, so conversion rates are an excellent proxy to see if you’re headed in the right direction and course-correct before you lose money.

Teams or brokerages have conversion rate goals because it’s a great metric to benchmark the performance of your team, agents, and lead sources. However, only some teams track this consistently, correctly, and understand the right benchmarks.

This brings us to Benchmarks. Yes, finding out what your conversion rate should be is essential, but just knowing that it’s important won’t do much. How do we actually find these numbers?

Don’t Look The Wrong Way

There have been countless discussions on countless real estate groups around - “What’s the ideal conversion rate for this lead source?”

Taken from a popular facebook real estate group discussion on conversion rates

Teams ask for this data on social media threads, in meetings, and you hear all sorts of numbers being thrown around. It’s 20 to 1... It’s 7% on realtor.com, 5% on Zillow, and so on.

None of these are actually right.

This is because all real estate businesses are unique. Your market, price point, and lead mix will result in your own unique numbers. And honestly, what works for someone might not work for you.

Look within your business! Your benchmark conversion rates should depend on your growth and profitability goals, not what the rest of the market is doing.

So what should my conversion rate be? There are two numbers that you want to look at.

1) At what point do we break even?

2) At what point do we make our target profit?

You also want to measure this for each individual paid lead source because they’re all unique.

Keep these simple metrics handy:

  1. Avg. Sales Volume
  2. GCI %
  3. Net to Team %
  4. Cost / Lead

Your breakeven conversion rate is the point where you’ll be recovering your money. This is the minimum standard your team should be hitting. Anything more than this margin will be a profit.

Through the metrics mentioned above, you will be able to calculate your margin/closing and then your breakeven conversion rate. Now let’s get down to calculating!

The Process

REMINDER: Before you start calculating your breakeven conversion rate, remember - your conversion rate should not depend on other teams and their numbers. Always focus on your numbers, and figure out a benchmark according to your business.

Let’s begin!

After filling out your Average Volume, GCI%, and Net to Team, you will be able to figure out how much revenue you are making per closing, i.e., your revenue/ closing.

The next step is to work out your cost per lead - this does not have to be exact. You can get your cost/lead by dividing your monthly lead generation spend by the number of leads that come into your CRM each month.

Finally, your Breakeven Conversion Rate will be calculated by dividing your cost/lead by revenue/closing.

Breakeven conversion rate =   Cost per Lead / Revenue per Closing x 100                                                        

Free Conversion Rate Calculator

Let’s take an example:

Breakeven Conversion Rate


By knowing your conversion rate, you can also calculate your margin:

Through your cost/lead and conversion rate, you can calculate your cost per closing.

  1. I.e. cost/closing =  Cost per Lead / Conversion Rate
  2. Finally, your margin on every closing will be Revenue/closing - Cost/closing. Through this, you will get your Margin percentage.

Let’s look at an example:

Margin %

But you may still ask - What should my ideal conversion rate be?

Your ideal conversion rate for a lead source should definitely be above your break-even conversion rate for that lead source, and ideally at the point where you get your target profit margin.

With this easy calculator, you can plan your optimum conversion benchmarks for a profitable lead generation strategy.

I know my benchmarks - What should I do now?

  • Track conversion rates for your lead source and see where the choke points are.
  • Analyze conversion rates for each agent in your team. See who isn’t profitable, who needs more leads, who are doing well, and so on.
  • Identify why some of your agents are not performing well - not enough prospecting, not going on appointments, not converting appointments, low connectivity rates?
  • After this identification, create a conversion improvement and coaching plan for these agents and track their performance metrics.

Sounds like a lot of work?

Want to improve conversions and profitability for your team like a pro?

Book a free Auctm demo to get all this data at your fingertips.

                                                                               



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