Hopefully you've never been the recipient of the Christopher Columbus Award. This award is given to people who don't know where they're going, have no idea where they are when they arrive, and upon returning, don't know where they've been.
How important is it to know what you want and where you're going? A study of graduates from the Yale class of '53 showed that upon graduation only 3 percent had written a plan to achieve success. Thirty years later at their class reunion, the study was completed and demonstrated that the 3 percent of the graduates who had written a plan controlled 90 percent of the total net worth of the entire class.
Creating a written plan for your business is the first step toward achieving your goals. If you choose not to take the time to plan your business, chances are you'll become one of the statistics.
In case you missed my announcement in last week's e-zine, I launched a new series of articles about planning your marketing strategy for 2006. Click here to get last week's issue. Today's article focuses on production planning.
Your Production Plan
Have you ever set a goal to earn a specific amount of income only to become disappointed when you didn't achieve it? Why do some loan officers seem to accomplish their income goal every year when the rest of us don't? In many cases, the successful loan officer had a written production plan.
A production plan has a sole purpose - to help you effectively
determine an income goal that you can realistically achieve.
If you could do that, how helpful would that be? Could you plan your marketing budget better? Be less reluctant to plan personal time off? Know when it's right to splurge on your lifestyle? You can have all that simply by using a scientific approach.
Determining an income goal isn't just about picking a number that makes you feel good, and it's definitely more than guesswork. Planning your income goal is a process of using basic formulas and key production indicators to calculate ratios that help you accurately forecast your earnings for 2006.
Key Production Indicators
There are three key indicators for 2005 you need to measure in order to forecast next year's production goals. Here are the formulas for computing them:
Key Indicator #1: Average Loan Amount
- Divide your total loan volume by the number of loans funded
Key Indicator #2: Average Commission per Loan
- Divide your gross commissions by total number of loans funded.
Key Indicator #3: Pull Through Percentage
(percentage of total loans originated that funded)
- Divide your total loans closed by the number of total loans originated.
With these three key indicators, you're a step closer to determining your income and production goals.
What Makes Up Your Income Goal
Income is more than a number; it's compiled from certain activities in your business. So instead of just naming a dollar amount you want to earn, you need to drill down to the point that you know the number of originations you need daily to achieve it. If you could do that, wouldn't it help you see if your income goal was realistic?
To get from your income goal to determining how many originations you need daily to achieve it, you calculate how many closings and originations you need annually. Take your income goal for 2006 and divide it by your average income per loan (in 2005) to uncover your annual closings goal. Then take your annual closings goal and divide it by your pull through percentage to compute your annual originations goal.
Once you have your annual originations goal, divide it by 12 for originations needed monthly, then by 4 for weekly and finally by 20 to reach daily originations.
When you see how many originations you need daily, you give yourself a reality check. If it isn't realistic, you can lower your income goal, re-calculate the numbers to compute a new daily origination ratio and determine if it's more realistic.
In my experiences leading loan officers through this exercise, someone earning $50,000.00 annually and wants to increase it to $100,000.00 discovers that they must go from one loan origination every 4 days to one loan origination every other day. For many, that's too unrealistic.
So good planning means lowering the income goal to $75,000.00 and work toward increasing originations from one every four days to one every three days. Now is it more realistic that they'll achieve their goal? And if they achieve it, does the person stand a better chance of growing their income from $75k to more than $100k the following year? Absolutely. Because smart planning does that for you.
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Stuck on Calculating Your Income and Production Goals?
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No problem because I've made it an integral component of my program, Become an Agent Magnet. One of the exclusive bonuses I've made part of the program is a 5-page Excel workbook.
It's built around the formulas I described in today's article and the best part is that the spreadsheet does all the work for you. So if mathematics isn't your best asset, don't panic since the Excel workbook will take care of it.
But don't wait, start the program now, so when January rolls around, you're ahead!
Go ahead and check it out:
Thanks for support,
Jeff Nelson
Salesachievers
Helping loan officers attract more clients
© 2004, 2005 by Jeff Nelson
All rights reserved
