Sphere of Influence: A Source or A Supplement?



If I’ve heard it once, I’ve heard it a thousand times: You’re single most important source of new business should be your sphere of influence.  I’m sure you’ve heard it too.  But is it true?  I say no, and I’ll tell you why.  There are two basic schools of thought when it comes to sphere of influence marketing, and I am in the latter school, but only after having first tried the former.

Traditional Model: SOI as primary source of future business.

Many agents and probably inspired by many trainers who didn’t have any better alternative to offer, consider SOI marketing to be the bread and butter of building a successful real estate practice.  By that I mean that your sphere is to be carefully cultivated, and marketed to on a regular basis because from it flows all of your future business.

I believe that there are some serious problems with this philosophical approach to your sphere.  First, at least for me, is that I consider my friends my extended family.  I hope they see me as enough of a friend to refer business to me, without having to be constantly hounded and marketed to.  Whenever I get a marketing piece from an acquaintance, I feel managed and not connected.  It moves the relational ball the wrong way down the field for me.

Shortly after starting real estate, at the advice of all the experts, I began systematically writing, calling, emailing, direct mailing, and (let’s be honest) managing my network of friends and family.  I noticed a very palpable cooling of my relationship with several people, because while good intentioned as it may have been, I was dropping the relational ball.

No, dropping it would have been preferable.  I was actually moving it the other way down the field.  I was subtly communicating to my friends a lack of trust by having to continually remind them I wanted their referrals.  What would you think of a relationship where your partner was constantly asking you if you loved them?  Or worse yet, if they attempted to quantify what that measure of love was — an action on their part.

It always felt a tiny bit dirty and manipulative making those calls and acting as if they were spontaneous and heart-felt when they were checking the block on my scheduled followup.  My friends were talking to me openly and without underlying motive, while I was “working the sphere”.   Not cool.

One day I was walking in a crowded store and I happened to notice one of my sphere at a distance moving my direction.  I glanced away before being seen and I noticed in my peripheral vision they made a move to avoid me when they recognized me.  They were right, and I was wrong.  That was a wake-up call because it confirmed to me that what I truly felt in my heart was right, even if it meant that the experts were wrong.

But set aside the relational aspect completely.  Let’s assume that you can look yourself in the mirror doing traditional SOI marketing.  There are some other reasons that SOI can never be the primary source of business for anyone who wants to be more than a low producing agent. Let’s look at the numbers.

Hundreds of studies have been conducted on social networks.  One of the most popular was by famous author and columnist, Malcolm Gladwell.  In his best selling book, The Tipping Point, he explains that our social networks increase in size as we age, and that the average number of acquaintances at age 40-50 is 39.

Now let’s imagine that in your typical network of 39 people who know you, love you, and would do business with you, that 5% of them will either buy or sell a home this year.  That’s the national average.  That means that if you were to get all of their business, it would amount to only 2 deals per year.

“But,” you may be thinking, “what about the people they know?”  If all of them know 39 people, and they trusted their mutual friends enough to refer you all that business, we are talking about a total potential of 76 transactions.  But let’s be honest here.

Of the total of 1520 people in this network, there are 5 other agents.  Now divide the total potential business by all six of you and there is a statistical maximum potential business of only 12.6 transactions in a year.  Starting to see my point yet?

Now comes the really tough question:  Just how much of that business do you really expect to get?  All of it?!  Get real!  You’d be doing well to get just the first level business.  Anything beyond that should be considered gravy.  So now that we’ve determined the size of the pie, now let’s look at getting your slice of it.

The most popular methods of staying in touch with your sphere of influence is by direct mailing them a newsletter, and by calling them monthly.  If the mailing costs you $1 per piece (very conservative considering the postage, and the cost of the newsletter), that’s $39.

Suppose you plan on making $100,000 this year.  Your time cost is $50 per hour.  Now if you are very efficient, you can produce the newsletter and do the mailing in one day.  That’s another $400.

Now suppose you were to get all 12.6 potential deals this year.  Your cost is $439 times 12 or $5,268, divided by 12.6 for a cost of $418 per lead.  The reality is you can never really hope to get all that first and second level business.  It just can’t happen!  It’s not possible.

“OK, but what if I save the money and just call them?”  Good question.  An average call of 20 minutes staying in touch, times 39 people in your first level network, let’s see… that’s 13 hours per month assuming everyone is home the first call, and you are never interrupted.  Do the math.  That’s right — $7,800 a year divided by 12.6 for a cost of a staggering $619 a lead!

It would probably be cheaper and more effective to just write your name and phone number on $20 bills and hand them out!  All I’m saying is don’t stand by your mailbox waiting for my newsletter.  It’s not coming.

I realize that I’m upsetting a lot of apple carts with this, but you asked, and I’m being straight with you knowing it may not be what you want to hear.  The biblical proverb says, “Wounds from a sincere friend are better than many kisses from an enemy.”  Now let me share with you my philosophy on SOI.

New Model.  SOI is my social network and a welcome supplement to my future business.

I personally believe friendship is a sacred trust.  I guess in many ways I am a romantic because I prefer a few close relationships to hundreds of acquaintances.  For that reason, I am very careful that I don’t knowingly do things that will diminish those relationships.

I don’t expect business from those people.  Truthfully, I almost prefer not to have it, because of the risk of it changing the nature of the relationship forever.  I don’t want to wonder for years why they let some other agent list their home and I don’t want to carry a chip of rejection on my shoulder about it.  If they ask me to help them, I will try to, but I simply will not market to my friends.

But let’s take it a step further.  Assume for a minute that you took the pressure off — the pressure of spending hours and hours grinding out SOI marketing campaigns and focused on generating your new business from a scalable and predictable source, like Internet marketing.

The right kind of marketing happens while you sleep.  While you have a casual lunch with a good friend (without ever even mentioning real estate, God forbid!) and just enjoy that friend time.  In the old days, people would spend hours gathering, cutting, and stacking firewood so they could keep their homes warm.  Maybe you do too.  Some people enjoy it.

I much prefer setting my thermostat and forgetting about it, and paying my utility bills at the end of the month.  Sure, I can cut wood, but there are many other things that I consider to be a higher and better use of my time.  I put the heat on “auto-pilot” and focus on what I do best.

If you do that, your SOI can produce an extra couple of closings a year without any stress and that can be like your annual bonus!  Consider it as found money and you will have better friendships, and you will sleep much better.  But, that’s just my philosophy.  I’m not asking anyone to make it theirs.

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Matt

I give away about 99% of all my technology and digital training content, completely free of charge, because I want to see other agents have the same kind of success that I've had. But one thing I charge for is my Ultimate Website technology. This is the web technology I created for myself that turned my real estate practice around overnight, and now I license it agents everywhere. But right now it's too popular and is currently waitlisted. Click here to get on the website as soon as possible and I'll notify you as soon as new invitations become available.

Comments 9

  1. author Dennis Helmstetter posted January 3rd 2011. 5:24 pm

    Totally agree – family and friend are just that – not business prospects

  2. author Brenda Waddell posted January 3rd 2011. 7:59 pm

    So true. So if your my friend and you don’t get any mail from me that’s why!!!! I love you too much. Peaceful Christmas and looking forward to a prosperous New Year for all of us.

  3. author Ellen Borschow Shaikun posted January 4th 2011. 6:31 am

    Absolutely on the mark…they know what you do and it should be spending wonderful times with them…our lives will improve tremendously if we balance our lives and take the time to enjoy our family and friends…thanks for your sharing your great insight…

  4. author Matt Jones posted January 4th 2011. 10:22 am

    Thanks for the great comments! Nothing quite like seeing your friends go the other way when they see you to give you a wake-up call. Hopefully this will help some agents who feel pushed by their brokers to think twice about SOI marketing.

  5. author Markelle Sargent Harden posted January 4th 2011. 11:47 am

    Very well said! As usual.

  6. author Forrest Erben posted January 4th 2011. 7:07 pm

    You comm ents defintely points me in a different directon. I have been a tradtional marketer. I’ve worked my shpere. I never really took the time to dissect my buisness to find out wht it costs me per lead. In the past I have been succesful in spite of myself. I kow now that if i am to survive in the real estate business I need to do it on purpose. I am working at getting your system up and running.

  7. author Chris Covey posted January 6th 2011. 10:04 am

    I’ve always felt the same way about soliciting to my friends, glad to see others feel this way too. It always made me feel I was in the wrong line of work, but I enjoy helping people and being a part of their lives involving something as important as where they call ” home”.

  8. author Matt Jones posted January 6th 2011. 11:36 am

    Thanks for the nice comments and for reading!

  9. author Mark Jacobs posted January 6th 2011. 4:19 pm

    Absolutely on the mark…