Glossary
- Prospects: These are the properties you receive from 8020REI.
- Leads: Property owners who have shown interest in selling their house.
- Contracts: These occur when a property owner decides to sell the house to you at an agreed-upon price.
- Deal: This is when you find a buyer to acquire the property you've contracted.
How to Calculate ROI
ROI, or Return on Investment, measures the profitability of an investment.
Formula:
ROI = ((Revenue - Cost) / Cost) x 100
Example
Let's say you spent 2,000 on marketing to get a property. You sell that property for $12,000.
- Revenue: $12,000
- Cost: $2,000
- ROI: ((12,000 - 2,000) / 2,000 \times 100 = 500%)
You got a 5x return on your investment.
Note: Make sure to account for the dates when calculating ROI. You might spend on marketing in June but get the revenue in July. The ROI would still consider both these amounts despite the time gap.
How to Calculate Ratios
Lead-to-Contract Ratio
This ratio shows how effective you are at turning interested property owners into signed contracts.
Formula:
Lead-to-Contract Ratio = (Number of Contracts / Number of Leads) x 100
Example
If you have 10 leads and 2 turn into contracts, your Lead-to-Contract Ratio is (2 / 10) x 100 = 20%.
Contract-to-Deal Ratio
This ratio shows how effective you are at closing deals from contracts.
Formula:
Contract-to-Deal Ratio = (Number of Deals / Number of Contracts) x 100
Example
If you have 5 contracts and 2 turn into deals, your Contract-to-Deal Ratio is (2 / 5) x 100 = 40%.
Opinion: These metrics are essential. Knowing your ratios and ROI can help fine-tune your approach to each prospect, ultimately saving time and boosting profitability.
