5 Principles for Qualifying Clients
In any commission based business, time is money. As in any business you have to analyze your return on investment… and in real estate, time is your investment. So how do you qualify clients/leads? How do you determine how to use your time and how much of it you spend on each deal?
Someone tells you they want to lease or buy commercial space or you get referred to someone who’s looking to lease or buy commercial space. There’s a lead on a company looking to move. Whether or not you decide to work a deal and the amount of time you spend on it is directly related to the likelihood of it closing and the size of the commission respectively.
There are 5 things every real estate broker must analyze when deciding to work with a client:
Is this is a startup or has the company been in business for years and, if so, how many? Have they leased commercial space before? Is this a seasoned investor or an aspiring one? Clearly the more experienced the client the better. They’ve been through the process and require less education and hand holding. They’ve established a track record that makes them less of a risk to landlords as well as your investment. I have another blog post on working with startups and first-timers: Venture Real Estate: Investing in Startups, New Businesses, and First Timers, which outlines the specific issues they face.
What’s the timing on the requirement? Is there a lease expiration date approaching or is someone looking for space or to invest with no immediate need? The worst thing you can hear from a client is “I’m not in a rush.” A requirement should have a timeline and the more immediate the timeline the better. Urgency dictates need and the greater the need the more likely a deal will close.
Clearly an investor looking for another investment property is better than a first time investor but there are certain factors that drive client decisions that must be weighed when investing in a deal. A company looking to lease space for the first time is the highest level of uncertainty. Oftentimes there’s nothing driving their need to take space other than their desire to do so. Next you have a client whose lease is expiring but they haven’t grown so there’s the possibility they might renew their lease in their existing space. The best case scenario, lowest level of uncertainty is a client whose lease is expiring and they’ve outgrown their space. This means that they must find and lease a new space by a specific deadline.
Size of the Deal
The bigger the deal the more money involved… for both parties. More money for you means a bigger commission. More money for your client means more at stake/risk and, therefore, the greater the likelihood of issues arising that might compromise the deal. You can’t let the allure of a large payday cloud your judgment with regards to your investment of time. You have to analyze to what degree the size of the deal will affect the other factors determining its likelihood of closing.
Specificity of the Requirement
The more specific the requirement the better. It shows that the client knows what they want. If they know what they want the more likely they are to make a move. Knowing what they want means being able to clearly articulate how much space they want, what type of property, what their budget is, where they want to be, etc. If a client can’t make these simple decisions then what is the likelihood of them signing on the dotted line?
Not all deals are created equally and shouldn’t be treated equally when it comes to your investment of time. Ideally you want to work the largest deals that are guaranteed to close. In the real world though, whether or not you decide to work a deal or take on a client at all should primarily be based on the likelihood of the deal closing. You then prioritize the deals based on the factors listed above.
Every real estate broker and agent must approach each deal like they’re making an investment… because you are. You’re investing your time, of which you have a finite amount. Every investor wants to get the highest return on their investment, and by learning and applying these 5 principles to qualifying clients/leads you’ll be able to maximize your income in an “eat what you kill” world.