Do You Know the Growth Potential of Your Market? 
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Do You Know the Growth Potential of Your Market?

Understanding your current market potential will make all the difference between sitting courtside in the middle of the action and watching the game from home.

First you need to get a pulse on your current market. Since only after you comprehend the pulse of your market sphere can you sufficiently measure: 1. your impact, 2. your competitor’s power, and 3. future growth potential. 

Let’s start with establishing a baseline.

Define Market Size

Consider your sphere of influence. Since it would most likely be difficult to define said sphere with strict county or state lines, let’s first consider using the MLS delineations.

Market size is not determined geographically, but rather through the amount of listings and volume of these listings’ current value.

*Note: You can find this information with your MLS! 

Use the number of current listings to number of current agents ratio to determine the true power of your current or potential markets.

Calculate Market Opportunity

We’ll dive deeper into two specific examples to break your market size down further. Keep in mind we are doing this one MLS at a time. In order to get the true big picture you would need to gather these numbers for each MLS you work with.

Real Estate Market Potential

MLS “A” at one point in time has 88,000 listings which is $72 billion in total current volume. Seems like a doozy right? Wrong. This MLS “A” has 33,000 agents which leaves an average of around 2.6 listings per agent.

Conclusion: Larger market size does NOT equal larger opportunity.

Real Estate Market Potential

MLS “B” currently has 9,500 listings and $9.6 billion in total current volume. MLS “B” however has 750 agents and in turn there are on average 12.6 listings per agent.

Conclusion: Market size matters. But no opportunity is completely lost without a further look.

Real Impact of the Listings to Agent Ratio

This ratio matters breaks down the actual opportunity per each agent in your market (or current sector of your market if you use several MLSs).

Remember, the market size is your baseline. The market opportunity is derived through the Agent:Listings Ratio.

Not to say that a market with a low Agent to Listings Ratio cannot be a great market. It all depends on the time, your competition and how you play the game.

Market Gamechangers

How many months of inventory exist? How has your market historically performed? Beyond the ratio of agents to listings, you also need to consider the other main factors driving your market’s performance and in turn, its potential.

A highly profitable market now may be a buyer’s agent’s dream today, but a seller agent’s dream tomorrow. Keep in mind the historical ups and downs while assessing your market potential.

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It could be one of the most important decisions you ever make as a business person to understand what the market needs over time as opposed to what it needs right now.

Position your business to diversify among buyer and seller opportunities throughout a real estate boom in order to survive and thrive throughout the downturns.

My Market Has Potential, Now How Do I Compete?

After you established your baseline, researched your market size and established market opportunity, the next step is to compare yourself against the competition.

Simply because there is “X” number of listings per agent on average does not mean every one of your agents will have this number of listings. It all comes down to which team has the best systems and processes to facilitate transactions.

Real Talk: If you are trying to expand your business in today’s competitive landscape, a simple spreadsheet is not going to cut it. Start heading in the right direction with our steps to dominate your market:

Step 1. Create a Business Plan if you have not already.

Step 2. Refine your unique value proposition.

Step 3. Drive down costs.

Step 4. Facilitate and support these processes with the best system fit for your business.

Step 5. Get to It! 

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