Before some bright spark in China invented the compass in 206 BC – the west didn’t get their version until AD 1190 – navigators used the North Star to find their way home (trivia!).
Today, North Star metrics (NSMs for short) are used to guide the ‘hacking’ techniques used to drive the growth of many of the fastest growing start-ups and best-known tech giants in Silicon Valley. For Uber, it’s number of trips. For Airbnb, it’s nights booked. For Facebook, it’s daily active users.
If your NSM is improving, it’s likely that one of the other metrics important to you is going in the same direction.
Take Uber: if the number of trips is increasing, it means:
- the number of repeat users (users who take more than one trip) is increasing
- the number of new users (new trips) is increasing
- the number of drivers on the platform is increasing
Before you set your NSM, it’s important to understand that the NSM is the means – not the end itself. Once you’ve set an NSM you’ll be able to use it to drive a single-minded focus on measuring and improving all the other variables that affect how much you can grow your NSM – to drive sustainable growth.
Ready to start using a start-up mentality to grow your business?
SUSTAINABLE GROWTH IS THE GOAL
Running a real estate business is a complex ecosystem of many moving parts. If you add up your monthly sales volume, it gives you a basis to say, ‘I’m not generating enough revenue; I need to get more sales’. But how do you get more sales? The classic approach is simple: make more dials, get more appraisals, list more and sell more!
Or is it?
The thinking behind the NSM is to drive growth that is sustainable rather than surface level. Surface-level growth might look and feel good, but it’s without direction – and, as the name suggests, it really only scratches the surface of what you can achieve. Sustained growth, on the other hand, is the realistically attainable growth you could maintain without running into cash flow problems, or stagnating.
Long-term, sustainable growth is born of action based on data-fuelled insight. Achieving that kind of growth starts with nailing your NSM.
Choose your NSM
Everything important to your agency should be accounted for, and directly or indirectly affected by your NSM.
Your NSM must be specific and measurable – and it’s likely to be revenue or volume focused. You’re in the sales game, after all. However, it won’t always stay the same. Your NSM should change as your agency grows and the industry evolves.
Take Facebook. In its infancy, Facebook’s NSM was monthly active users. Then, as competitors entered the space and the industry changed, Facebook started focusing on its daily active users. As the industry continues to change and competitors like Snapchat begin tracking hourly active users, Facebook’s NSM might change again to reflect that.
So your NSM may be 20 new listings across your agency per month. However, if your agency grows and your core area expands to include a suburb where property prices are significantly higher, your NSM may become revenue based.
Long-term sustainable growth is born of action based on data-fuelled insight. Achieving that kind of growth starts with nailing your NSM.
Now you need to create a mechanism around your NSM to help drive growth. To do that, you need to map the variables that define your metric.
For example, if your NSM is number of listings per month, the first variable will be number of calls and the second will be number of appraisals. These steps are the inputs and your NSM is the output.
So if you know that your conversion ratio from conversation to appraisal is 10 per cent and your appraisal to listing ratio is 50 per cent, then you know you need to make 400 calls to get 20 listings per month.
This is where plenty of agents get to and then stop. But it’s not just about making more calls to book more appraisals to win more listings; it’s about refining and improving your processes to do better.
Where is your team falling down – and why?
Are they making plenty of calls, but getting called in for barely any appraisals? Focus on their prospecting. Do you need to workshop some scripts? Learn, train and buy books.
Or are they getting called in for lots of appraisals but winning only a small portion of those as listings? Your efforts would be better spent revising how your agents are presenting to potential sellers. Review your marketing material. Are you offering enough services? Are you differentiating yourself from competitors with something like digital marketing?
If your NSM is revenue based, your list-to-sell ratio would be a significant variable. If you take 20 buyers through a property and receive zero offers, work out why. Go through your buyers’ feedback. Is it overpriced? Can you set a more realistic market price? Or maybe you’re marketing to the wrong demographic – or across the wrong channels.
It comes down to analysing your data and using it for deeper insight. Work out your conversion ratios and determine whether they’re being influenced by external or internal factors. If it’s because the market is poor, then you may simply need to ramp up the volume of calls. But if it’s internal then training should be your focus.
Measure and experiment like a start-up
You’ve likely also heard of the saying, ‘It’s a numbers game’. Well, the difference between traditional sales and start-ups is that tech companies focused on growth are fastidious with measurement.
You know all the variables that control your NSM – so how do you measure those variables? How do you assess staff performance? What about your own actions?
Say the variable impacting your NSM the most is the number of calls your team is making. Your conversion rates are great, but there simply aren’t enough hours in the day.
You could tackle the problem directly: Minimise the wasted time between calls. Time how long it takes for your team to go down a call list and manually dial numbers; you’ll be surprised how long it takes. Should you invest in a dialler?
Another approach might be to rethink your starting assumption: Are calls the whole solution?
With the right tech, personalised emails and letters can be sent to thousands of potential sellers.
If you send out information ahead of a call, the people you connect with already know a little about your agency – improving your conversion rates.
Less time explaining who you are also minimises call time, giving your staff more time to make calls that convert.
Selfishly, we can point out here that a good real estate CRM can let you send a mail merge email or letter to thousands of people in a few seconds of work. What’s more, good CRM reporting can be used to track how your ‘experiments’ in driving growth are improving your conversion, volumes and other factors.
Setting an NSM for your agency will give powerful focus to your growth efforts, and can be the driver to dig deeper into your data and create levers to drive future growth. It can help unify your team on what success looks like, and lay the path to get there. Once you start, keep going; try new things and watch as the business rolls in.