What do we know?

We do a lot of mail for real estate investors and we find a large percentage of those clients do not understand how to calculate the number of mailers they need to meet their sales objectives. The process is simple, but you have to know a few key performance indicators to do the math.

Where to start

First you need to know how many leads it takes to close one deal, and how much profit you earn from a single deal. For the sake of this article, I will use the following assumptions for a hypothetical real estate client:

• It takes 25 leads to close one deal
• You generate 1 lead for every 100 mailers sent (1 percent response rate)
• Your goal is to generate 2 deals per month
• You earn $10,000 for every deal closed

If you want to close two deals a month, you need 50 leads. If you get one lead for every 100 mailers, then for 50 leads you need 5,000 mailers (100 x 50). Keep in mind these rates are simply averages and not guaranteed. When you send out fewer mailers, you’re less likely to meet these goals. Beginners are likely to have an even lower closing rate.

How you know it is worth it

The second issue becomes how much money you will spend for your mailers as compared to how much you can make in profit – your expected Return on Investment (ROI).

If the mailers cost you 75 cents each, and you mail 5,000 in one month, you will spend $3,750 in marketing money. But closing two deals will net you $20,000 in profit. So, your return on investment is $20,000 divided by $3,750 or 533 percent. Most would feel this is a very good return.

Of course, there is no guarantee of response rates. What if you only got .5% response? That equals out to five leads out of 1,000 mailers. Then, assuming the same closing rate, for your $3,750, you would earn a $10,000 profit. That is still a 267 percent ROI.

Your bottom line

You can scale this however you want. The bottom line is to decide how much money you need to make first. Then you can work backwards to calculate how many mailers you need to mail to get the proper number of leads to reach your goal.