System to Convert Leads is More Important Than Creating Leads
By Doug Huggins
Most people, when organizing any business, start with the notion that they first have to get business in the door, then they have to convert the leads, then they have to service those new customers. This is true whether you are running a restaurant, repair shop or mortgage brokerage. The only problem with this mind-flow, this way of thinking is it is completely WRONG! Typically, a new mortgage company owner gets all excited about generating inbound lead calls. That becomes their primary focus. Unfortunately, they spend their time and energy getting the phone to ring and have no plan whatsoever to convert those inbound lead calls on a consistent basis.
Two of the worst things any business person can do are to: One, generate leads without the knowledge, ability or a system to convert those leads. Two, convert leads to customers and NOT be able to service those new customers. I hear it all the time, "Oh, when people call in, I just wing it." Are they crazy? They've just spend time, money and effort to create a very valuable asset – an inbound lead call – and now they are going to "just wing-it" when it comes to converting that lead? What utter nonsense! What Stupidity! Then, once they get a few lead calls converted to applications, it dawns on them – "Oh my god, I have to get these deals processed and closed!" Like that is some new, dramatic revelation. If I were starting a new business from the ground up, or, as in the case with my consulting clients when advising them on how to organize their business – start with quality processing and an organized, accountable file flow system. Know, regardless of however many leads you get converted to application, that you can get those applications closed in a timely manner. Nothing will kill your mortgage business, whether based on consumer direct or real estate agents, faster and more surely than not getting loans closed on time. Yet, I hear it almost everyday – some mortgage company owner decided to cut costs by getting rid of all of their processors and allowing originators to process their own loans. I know of no better formula for total disaster! But, let's assume for the moment that your company has adequate processing to get the deals closed. That takes us back to the first problem in overcoming need – Leads Conversion. Typically, when a mortgage company or originator is not generating as much business as their owner or originator wants, the first knee-jerk reaction is to find a way to increase the number of leads. While, maintaining an ongoing flow of inbound lead calls is vitally important, that is NOT where I would first look to resolve the problem. Let me give you a quick example:
I had a young man here in Atlanta ask me:
"How do I get more leads? I have five houses in your FSBO System and am getting between 4 and 5 calls per house per week. But I need more leads." I was puzzled. He was already getting 20 to 25 inbound lead calls every week using the system. Frankly, 20 to 25 leads per week are more than most traditional originators can handle adequately, but he needs and wants more. I e-mailed him back and asked why he needed more lead calls. His response, "I'm not closing enough deals and so I need more leads."
My response was – "NO, you don't need more lead calls you need better leads conversion." To cut to the chase, I worked with him to script answers to the top six objection/reasons he was getting from callers that were not moving forward with an application. He called me back four weeks later to let me know that he didn't need any more leads. Using the scripts we designed, his leads conversion had gone up 600%. He stated he hadn't even had time to go out and get any new homes into the FSBO System because he was so busy. My point is – If you need more inbound lead calls, certainly you'll need to look for better more efficient ways of generating inbound lead calls. But, the very first thing I would do is look at your leads conversion process. What problems are you having and what can be done to improve conversions? Think about it – Let's say you spent $1,000 on marketing and received say 20 lead calls. That's $50 per lead. Let's say of those 20 you can only convert 10% or two loans. That means your cost per loan is a whopping $500. You'll still make decent money – assuming your average loan size is around $200,000 and you earn 2% that's $4,000 per loan and you are on a 50/50 split – you'll earn $4,000 on the two deals. It cost you $1,000 to make $4,000. Not bad but certainly not great. You want and need more closings – you have two alternatives: One, spend more to generate more leads. But, generating more leads with no improvement in conversion rate may make you more money, but your cost per closing remains the same. Two, you can spend some time learning how to convert a higher percentage of those leads. Let's say you can only convert one more lead. So now you are converting and closing 3 of the 20. What does this do to your numbers? You are now earning $6,000 from your $1,000 marketing investment – that's a 50% increase in your earning with NO additional cost or expense. What if you could do only half as well as my member here in Atlanta and only get a 300% increase not a full 600%? You are now at 6 closings per 20 leads. Your commission just went to $12,000 on the same exact 20 leads. No increase in cost – just an increase in conversions. Do you see why I spend so much time teaching how to convert leads? I teach a simple four-question segue from inbound caller to phone application. This four-question segue can be used for ANY type of inbound caller – purchase or refi, regardless of price range. I taught this simple, easy to learn and adapt process to a number of my members. Consistently, we are seeing conversion rates of 27 to 34%. Let me clarify that – we are seeing 27 to 34% of the inbound callers agreeing to do a phone application. How does that compare to your current conversion rate? Do you even know your conversion rate? If you don't, you need to figure it out very soon or your business will continue to struggle.
Most people, when organizing any business, start with the notion that they first have to get business in the door, then they have to convert the leads, then they have to service those new customers. This is true whether you are running a restaurant, repair shop or mortgage brokerage. The only problem with this mind-flow, this way of thinking is it is completely WRONG! Typically, a new mortgage company owner gets all excited about generating inbound lead calls. That becomes their primary focus. Unfortunately, they spend their time and energy getting the phone to ring and have no plan whatsoever to convert those inbound lead calls on a consistent basis.
Two of the worst things any business person can do are to: One, generate leads without the knowledge, ability or a system to convert those leads. Two, convert leads to customers and NOT be able to service those new customers. I hear it all the time, "Oh, when people call in, I just wing it." Are they crazy? They've just spend time, money and effort to create a very valuable asset – an inbound lead call – and now they are going to "just wing-it" when it comes to converting that lead? What utter nonsense! What Stupidity! Then, once they get a few lead calls converted to applications, it dawns on them – "Oh my god, I have to get these deals processed and closed!" Like that is some new, dramatic revelation. If I were starting a new business from the ground up, or, as in the case with my consulting clients when advising them on how to organize their business – start with quality processing and an organized, accountable file flow system. Know, regardless of however many leads you get converted to application, that you can get those applications closed in a timely manner. Nothing will kill your mortgage business, whether based on consumer direct or real estate agents, faster and more surely than not getting loans closed on time. Yet, I hear it almost everyday – some mortgage company owner decided to cut costs by getting rid of all of their processors and allowing originators to process their own loans. I know of no better formula for total disaster! But, let's assume for the moment that your company has adequate processing to get the deals closed. That takes us back to the first problem in overcoming need – Leads Conversion. Typically, when a mortgage company or originator is not generating as much business as their owner or originator wants, the first knee-jerk reaction is to find a way to increase the number of leads. While, maintaining an ongoing flow of inbound lead calls is vitally important, that is NOT where I would first look to resolve the problem. Let me give you a quick example:
I had a young man here in Atlanta ask me:
"How do I get more leads? I have five houses in your FSBO System and am getting between 4 and 5 calls per house per week. But I need more leads." I was puzzled. He was already getting 20 to 25 inbound lead calls every week using the system. Frankly, 20 to 25 leads per week are more than most traditional originators can handle adequately, but he needs and wants more. I e-mailed him back and asked why he needed more lead calls. His response, "I'm not closing enough deals and so I need more leads."
My response was – "NO, you don't need more lead calls you need better leads conversion." To cut to the chase, I worked with him to script answers to the top six objection/reasons he was getting from callers that were not moving forward with an application. He called me back four weeks later to let me know that he didn't need any more leads. Using the scripts we designed, his leads conversion had gone up 600%. He stated he hadn't even had time to go out and get any new homes into the FSBO System because he was so busy. My point is – If you need more inbound lead calls, certainly you'll need to look for better more efficient ways of generating inbound lead calls. But, the very first thing I would do is look at your leads conversion process. What problems are you having and what can be done to improve conversions? Think about it – Let's say you spent $1,000 on marketing and received say 20 lead calls. That's $50 per lead. Let's say of those 20 you can only convert 10% or two loans. That means your cost per loan is a whopping $500. You'll still make decent money – assuming your average loan size is around $200,000 and you earn 2% that's $4,000 per loan and you are on a 50/50 split – you'll earn $4,000 on the two deals. It cost you $1,000 to make $4,000. Not bad but certainly not great. You want and need more closings – you have two alternatives: One, spend more to generate more leads. But, generating more leads with no improvement in conversion rate may make you more money, but your cost per closing remains the same. Two, you can spend some time learning how to convert a higher percentage of those leads. Let's say you can only convert one more lead. So now you are converting and closing 3 of the 20. What does this do to your numbers? You are now earning $6,000 from your $1,000 marketing investment – that's a 50% increase in your earning with NO additional cost or expense. What if you could do only half as well as my member here in Atlanta and only get a 300% increase not a full 600%? You are now at 6 closings per 20 leads. Your commission just went to $12,000 on the same exact 20 leads. No increase in cost – just an increase in conversions. Do you see why I spend so much time teaching how to convert leads? I teach a simple four-question segue from inbound caller to phone application. This four-question segue can be used for ANY type of inbound caller – purchase or refi, regardless of price range. I taught this simple, easy to learn and adapt process to a number of my members. Consistently, we are seeing conversion rates of 27 to 34%. Let me clarify that – we are seeing 27 to 34% of the inbound callers agreeing to do a phone application. How does that compare to your current conversion rate? Do you even know your conversion rate? If you don't, you need to figure it out very soon or your business will continue to struggle.
