Learn how to Plan, Set and Achieve your goals by using this 1 simple formula
When you understand this 1 simple rule, you realize whether or not your goals are unrealistic, within reach or that you need to have bigger goals.
What is The 29% Rule?
The rule is pretty simple, out of everyone that reaches out to you asking for a mortgage 29% of them will close with you. Some people call it a hand raise, some call it a lead some call it an inquiry, whatever you call it 29% of those people will close with you This is not just guessing, this isn’t rounding I took a sample my last 8 years of business, I asked for the same data from top originators around the country and when I put it all together 29% is what it came out.
Yes, some people were a little higher and some were a little lower but there are quite a few variables that can come into play. What I want to explain is how you can use this as a benchmark for goal setting, identifying areas in your business to improve and using this to reach your goals.
Establishing the Benchmark
Step 1: Pull the Data
You should have a lead management system or data base that you store and keep all of your inquiries for a new mortgage. This should allow you to run a report and the report you want to run is based on date you added them to the database. I would run it by all time, by year, then by a few recent months.
Step 2: All Time Data
Once you have your all time data lets just say it’s 300 inquires I would venture to say you closed about 87 loans in that time frame since that is 29% of 300. We’ll get into what if you are higher or lower in a minute.
Step 3: Run a Year by Year Report and Follow the Same Process.
100 inquires last year, I bet you closed 29 loans and you do this for all the years you can. What you’ll find is that each year it is close to this 29% number with some years being higher or lower. Then you can start analyzing each year and why you were higher or why you were lower.
Step 4: Run the Report by the Last Few Months
This is going to show you what you can expect in the coming months. If 3 months ago you had 10 inquires, 2 months ago you had 8 inquires and last month you had 15 inquires. You can expect that over the next 90 to 120 days you close about 9 loans.
Variations to The 29% Rule
- Once you have the data and have sorted it the way I explained you’ll start to notice variations to this 29% rule, but you should also see that as a whole the 29% rule is pretty accurate.
- In years where rates are low and we have a refinance market this will get closer to 34% or 35%, in years we have a quick rate spike this could be around 27% which accounts or consumer sticker shock
- Keep in mind this is based on a referral only purchase business plan for originating. If you buy leads or anything like that I have no idea what the numbers would look like since I don’t do that model and don’t believe in that business model.
- The other variation can be if you don’t track your data very well and only add some of your inquires. If that’s the case all the numbers will be skewed and you will have a higher percentage so start adding all your inquires so you can plan appropriately.
Goal Setting based on lead flow
- We all have goals that we set whether it is monthly or yearly we all know what we wan to achieve. The first step in any goal is planning otherwise it’s not a goal it’s a wish.
- Once you know how many inquires you are getting you’ll be able to see if that is enough to reach your goal. If your goal is to do 5 loans per month which is 60 for the year that means you need to have 206 inquires which is 17 per month.
- If you have more than 17 inquires per month then you know you can confidently reach your goal or increase your goal.
- If you have less than 17 inquires per month you should lower your expectations since too many times I see loan officers set their goal, miss it and then wonder why. They are just setting goals because that is what they are hoping for but sub consciously they know they will never hit it. Set real goals don’t make wishes.
- If last year you had a 35% close ratio don’t use that as your benchmark since 2017 was a fairly decent refi market and 2016 was even better. Use 29% since as rates rise everything will pull back closer to this figure.
Areas of improvement
- If you are always under 29% no matter what year then you realize you are not doing a great job converting and that should be your focus. How can I convert what I have coming in. This will be the quickest way to increase your production.
- Assuming we’re still using our example of closing 5 loans per month. If you are not getting 17 inquires per month then you have a lead flow problem and need to focus your efforts on getting more inquires.
- If you are converting at the 29% or better ratio, you have enough leads and you’re hitting your targets this is also how you start to grow and break through your current production levels. I look at what you do best first. Let’s say that year after year you are closing at a 33% level but your lead flow is right at 17. you know you are over achieving on the conversion and just barely getting enough lead flow. Focus on lead flow to grow. On the other side, let’s say you are getting 22 or 25 inquires per month and closing between 28% and 30% year after year. This tells you that conversion is what you need to focus on and really taking advantage of the inquires you get.
- What if everything is off? If you are converting at 20% and only get 10 leads per month this just tells you that your goals are not goals they are wishes and you need to reset your expectations. Don’t give up just readjust and set realistic goals that will build you towards the 5 loans per month.