In March of 2020, every title company owner, leader and employee all wondered the same thing: “Will I have a job or a company in 90 days?” And then they got their answer.
For more than 36 months title operations thrived, orders were at historical levels, staffs were stretched and profits were higher than likely ever before. Homes were on the market for hours and not days or weeks, and offers included “overvalue” cash inclusions of commonly hundreds of thousands of dollars.
For owners and leaders, there seemed to be no time to be businesspeople during the pandemic as everyone was forced into working “in” the business simply to keep the deals closing on time and not blowing up and getting delayed.
Then it happened. One morning in 2022 every title company owner and leader woke up with one very simple problem: they suddenly had too many employees.
Fast-forward to our current climate and accepting the fact that this “normal” market is going to be with us for a little while. It is critical for every owner and leader to make sure they are bringing their business A-game in everything they do.
Do you want to win big in 2023? Simply follow these five steps and watch your profits grow all year long.
1. Staff to the market
Everyone knows and hates the term “downsizing,” as it has a natural negative connotation to it. It represents the painful elements of running a business or even being on the wrong end of that term.
I am not a fan of the word, as the term I share with the leaders and owners I personally coach is not downsizing, but market-sizing. Any adjustment to a labor force, up or down, is critical to maintaining the correct ratios to be able to get the work done and to maximize throughput and profitability.
In 2020 and 2021 an adjustment up in staffing was made. That adjustment up was also considered market-sizing. Almost all title operations hired staff to keep up with demand during this time, but they failed to make one simple observation to help maintain level thinking. They failed to see the majority of those hires as temporary. The fact is that it was difficult to find good people and difficult to get them trained, and that leads to an out-of-balance subconscious desire to view them as permanent.
Consider this simple analogy: If a homebuilder built three homes per month and an investor came along and asked that homebuilder to build 15 homes per month for them over the next 10 months, that builder (not willing to turn down the business) would immediately have to hire a number of additional staff to be able to keep up. At the end of the 10th month when all 150 homes are complete, it is completely ludicrous for that builder to think they can keep all of those people.
This is exactly what has happened to the title industry.
While market-sizing through the pandemic required adding employees, today it requires removing them. It is simply a fact of business.
If you are struggling to decide who to select in reductions, consider this simple process:
- Create a list of employees.
- Ask yourself this question about each one: If they quit today, would I be stressed or relieved? (Not stressed must equal relieved – there is no indecision allowed in this market.)
Although this may sound overly simple, it has helped literally hundreds of title industry leaders that we work with over the last few months to make decisions that would have been otherwise too confusing resulting in long and costly reduction (market-sizing) decisions.
2. Invest for title market share
No matter how painful things are right now, always remember: you do not have an order count problem and you have never had an order count problem. If your business is ever down (like now), it is because your customers’ business is down. If you were to keep 100% of all your customers and make sure they are all completely satisfied with your service, in the end…your business would still be down.
In order to master a plan of recovery and growth, you must realize what your real problem is, and that isn’t an order count problem. Your order count is a result of your real problem – what you have is a customer count problem. You simply do not have enough customers.
It is a fact that if a market is off by 18% (hypothetical figure) then an 18% increase in your customer base will solve it and make you whole. So, the constant pursuit of additional customers becomes the platform of recovery from any market decline.
Simply put: invest in your sales initiative. Hire good salespeople and better train the ones you have.
The performance gap between salespeople who know what to do in this market and the ones who do not continue to widen. While markets soften, the sales results of the skilled salespeople in the title business that we coach go up month after month. Why? Because they are competing against those who do not know what to do.
3. Staff with the right people
No title operation will ever consistently rise above the average skillset of their team. The need to have the right people in the right seats on the bus is paramount in any company, but in the title industry, it is critical.
When we ask companies how they found their staff and why certain people were in certain roles, it is very interesting to hear common answers such as, “Well, they’ve been with us for a long time and this seems to fit them,” along with other answers with similar context. The one thing we rarely hear is a strategy for people placement and selection.
Why guess when we can know? A few years ago, I met Ed Fisher with AcuMax-Index. I was pleasantly surprised to learn that Ed had built hard-wiring indexes for most of the roles in the title industry, including the closer, assistant, manager and even sales. So in just five minutes or less an applicant can take an online assessment to determine their fit in a particular position or role within a title operation. The result: no more guesswork. Ed and his team are able to tell you the candidate’s percentage of a natural fit for a particular role or job position.
4. Buy proper focus
I am still amazed at how the title industry pays their employees, but mostly how they pay their salespeople. It is common to learn that if a title agency or company has five salespeople, they likely have five different compensation plans as well. Each salesperson they hired or recruited ends up with their own version based on what they had in their last company and what it would take to recruit them away.
The problem with the wrong compensation model is found in the very view of what compensation truly is. Compensation is a mechanism to buy focus!
So, if your salespeople are on the wrong plan, you have bought the wrong focus. For example, if they are paid a percentage of their book of customers then they are most interested in protecting their customers, but if they are paid an enhanced level on the first five transactions from a new customer, then they are now also focused on adding those new customers.
Our observation over the past three decades has determined that there are only a few things they are required to master your sales compensation plan.
- Be cautious of high base salaries. Do not pay a salesperson enough to live comfortably without having to make sales.
- Pay a flat rate instead of a percentage. The extra step of a rep having to calculate a percentage of a revenue number they are not even familiar with does not increase focus, it reduces it.
- Pay three to five times the rate of commission on the first five transactions from new customers. A new customer is one who has not directed a transaction in the previous six months.
5. Know and measure your most relevant (sales) KPIs
Let me start by clarifying the role of a salesperson. It is simple, yet often appears to be forgotten by the industry. The role of a salesperson is to generate customer conversions resulting in an incremental increase in the quantity of active customers each and every month.
Additionally, salespeople should never need to be paid out of any existing revenue beyond their 3rd or 4th month in the industry, with six months being the extreme limit. In other words, a title or closing (escrow) salesperson should be producing more additional revenue each month from new customers in only their first five transactions with the company than the salesperson costs. We refer to this as their X-factor.
When it comes to measuring salesperson performance, the first goal is obviously X-1, then X3 and so on to continue to grow their sales performance X-factor. Simply stated, X-1 is $1 of new customer revenue in a month for each $1 the salesperson costs.
Here is an example of how to calculate X-Factor.
- Example
- Sales rep cost: $7500 monthly / Average Fee Per File (purchase is $2200 and close ratio is 78%)
- X1 = 4.37 (5) orders per month from new customers above their existing book of business.
- X3 = 13.11 (14) orders per month from new customers above their existing book of business.
- Sales rep cost: $7500 monthly / Average Fee Per File (purchase is $2200 and close ratio is 78%)
Success in the title business can be predicable. If one follows the five steps, the success that will be found will not be surprising – in fact, it should be expected. Wake up each day thinking and acting on these five core critical elements of predictable profitability and watch 2023 turn out to be a great year for you and your title company.
Darryl Turner is the CEO of The Darryl Turner Corporation, the Title Industry’s prominent leader in Sales, Management, Closer and Executive Leadership Coaching & Training. For more information on DTC visit www.DarrylTurner.com