Could marginal gains propel your Estate or Letting Agency?
When Dave Brailsford became performance director of British cycling in 2003 it would have been fair to say that we as a nation were not very successful in cycling. To put that into context, just a year into the job the British team won two gold medals which was their best haul in the sport since 1908. Fast forward to 2008 where Britain took home eight gold medals, a feat they repeated in 2012 to dominate the world of cycling.
How did he do it? He is widely credited with pioneering the philosophy of marginal gains in the sport, here’s what he had to say:-
“The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together” Dave Brailsford (2012)
Cycling being cycling, of course there have been subsequent question marks around the Sky team’s performance who he later helped propel to the top of the professional sport.
Nonetheless, it has to be said the British and Sky teams he managed were dogmatic in their approach to seeking out small improvements in every aspect of team performance. Ranging from the expected things like training performance, bike performance, fabrics for team kits and even biometric sensors in shorts to measure muscle twitches. They didn’t stop at the sort of performance-based metrics you might easily imagine being important to a cycling team, they also experimented with different pillows for athletes (to improve sleep quality), they sought to reduce the risk of illness by bringing in a Dr to teach the team how to wash their hands and even painted the inside of the team truck white, in order to make it easier to clean and ensure no tiny amounts of dust or grit were able to impact the performance of the highly tuned bikes.
Do the principles behind marginal gains translate to Estate Agency? It’s probably fair to say that very few of us are quite as performance-driven as a professional athlete at the top of their sport, but yes you can absolutely use this approach to lead to significant gains in your own business.
1% doesn’t sound like a lot but if you find 100 areas of small improvement the impact could be huge. Me, just now.
Not only could this approach help your bottom line, but there are also two other reasons why I think it’s a must for anyone looking to thrive in this business regardless of market conditions
The first reason is quite simply that it’s hard, or to put it more accurately it’s harder than not doing it. This means that most of your competition won’t bother, which in turn means the gains you find will be yours alone, so you’re not just improving your own businesses performance you also grow your market share.
The second reason is the compounding nature of incremental improvements. This means that over time the improvements you make, albeit small at first will add up to significant gains in the long term. A five percent improvement, for example, in conversion rate every month nets an 80 percent improvement in a year due to the compounding nature of wins. So if you’re spending money on Facebook or PPC, or really any marketing and not trying to optimise your efforts then you’re essentially leaving money on the table. The sooner you can start looking for those incremental improvements, or marginal gains, the longer they have to repay you.
So to recap, we’re saying this approach could:-
- Improve your bottom line
- Raise the bar for your competition
- Keep on giving
If you’re sold in principle let’s take a look at some areas worthy of experimentation to find these small but significant improvements.
If we were to be really honest with ourselves there probably isn’t any aspect of our business that couldn’t be improved by some small per cent which means there are plenty of fruitful areas to explore.
- You should start off by setting goals which will be personal to you and your business, the obvious one is to increase the net income for your business but you might also be looking to free up more time to spend away from the office with your family, whatever it is, it’s important you know what you’re aiming for to make sure you stay on course.
- Measure everything you can about the business, your day-to-day jobs, where leads come from, which leads convert (i.e end up paying you money), how staff spend their time etc. Seriously the better the data you have, the easier it will be to find your wins and it’s imperative that you can measure the effects of the changes you make so you know what’s worked and what’s not.
- Think about the aspects of the business that are likely to have an impact on your goal, this is not the same as the ideas that are going to achieve said goal. These are the areas that will move you toward your stated objective. Let’s say it’s increasing net income, here are the areas for an Estate Agency that would be on my list:-
- Win more valuations
- Book more valuations
- Agree more deals on existing instructions
- Increase the proportion of deals agreed to completion
- Increase the speed of instructions to deal and deal to completion
- Increase average fee
- Increase your client retention rate
A lot of these might seem easier said than done, but these are here to guide you to make sure the ideas you have to find improvements later are going to help you meet your goal, in this case, increased net income.
4. Start looking for ideas, use the data you collected in step 2 to answer questions like:-
- Where do most of my valuation leads come from, can I double down on that source?
- Where am I spending money that isn’t returning on my investment?
- What activities that I (or my team) do positively impact my core priorities (section 3)?
- How much time is spent doing things that don’t positively impact my core priorities?
- What other marketing channels could I experiment with?
- Are there efficiencies to be found in my processes i.e onboarding a new listing, managing sales progression etc
- What’s my average fee? Last 10 instructions, how did we arrive at the fee and why?
5. Once you’ve answered these questions you’ll probably have a bank of ideas big and small to experiment with, keep a list and when you consider implementing a change, make sure you have a plan for testing it for the benefits and any side effects it might lead to. For example, you might decide the best way to agree more deals on existing stock is to incentivise staff to get reductions in asking prices, this might work to increase the number of deals but it might also negatively impact the client retention priority. I would suggest involving the whole team in coming up with ideas, not only will this improve the number and quality of ideas at your disposal it will also help to get buy-in from the team when you’re trialling them.
6. You’ll want to try as many ideas as you can being wary to make sure you can isolate the effect of different tests running concurrently. To begin with, you’ll likely have more ideas than time so you’ll want to triage the ideas you run with based on the ease to implement and the expected return. Clearly, some of your ideas will yield far greater results than 1% and some will fail to make an impact, be ruthless and move on from ideas that haven’t worked as long as you have more ideas to try. It can be difficult to give up on an idea, you’ll be strongly biased toward it if was yours, but firstly you will probably get better at planning the experiments to test your ideas so you can revisit things in due course. Secondly the idea of the compounding wins relies on you finding, proving and then implementing good ideas across the business, the faster you can do that the more you’re going to benefit.
However you fare and however fast and far you choose to take your efforts to find marginal gains we at ResiAnalytics wish you every success. If you’d like to discuss any of the above, perhaps run through some ideas for experiments to trial or if any of your experiments lead you to look for ways to improve the impact of your marketing then feel free to get in touch and see if we’re available to work in your area.
In the meantime, thanks for reading and pedal on to success!