If you’ve paid any attention to the science of goal setting, you probably already know the basics:
· The goal must be specific, and measurable. If it isn’t, how will you know whether you’ve achieved it?
· The goal must have a time frame (deadline). This part is easy; we’re talking about your production and income goals for 2010. Your deadline for accomplishing this goal would be December 31st, 2010.
· The goal must be realistic (believable) to you, and something you can be excited about achieving. I touched on this in Part 1. When you’re alone with your own thoughts, do you honestly believe in your heart of hearts that you can achieve this goal you’re thinking of setting? You’re the only one who knows the answer to that question, and you gain nothing by trying to con yourself. The other side of the same coin is that you want to set a goal that requires you to stretch yourself and grow. If the goal doesn’t excite you, it will not provide the motivation necessary to overcome those days when you just won’t “feel like” doing it. It won’t provide the motivation you’ll need when you run into that unanticipated obstacle. It’s a bit of a fine line, but it exists: set a goal that is both realistic (in other words, you believe you can do it), and inspiring (to you).
A quick word here about having a goal that excites or motivates you: Because the goal must be specific and measurable, we’re almost certainly talking about a number. Who gets excited about a number? Not many people do, but the number represents something to you that will have great meaning. When you reach that number, how will it change your life? How will it affect you and the people you care about? When those things happen, how will it make you feel? Can you imagine with clarity of vision and emotion what it will be like for you when the number becomes a reality? Because that’s what it will take if you want your goal to motivate you to get up and get at ‘em when you don’t feel like it.
Here are the basic desires that drive people to grow and cross the boundaries of what they’ve accomplished in the past:
· Freedom
· Recognition, Status
· Love
· Security
· Honor, Idealism
· Adventure/Fun
If you can make the emotional connection between the abstract number of your goal and one or more of the basic desires on the list above, you’ll be able to tap into your inner power to move beyond those moods we all have when you just don’t seem to have the gas in your tank to make those sales calls or buckle down and get those files turned in.
My Model of the Loan Production System
For the last 20 years, I’ve used an assembly line model to visually depict the flow of leads and loans through a loan officer’s “closed loan manufacturing facility”:
It’s useful to think about your process as an assembly line with “stages” because each stage represents a measureable benchmark. If you know your numbers for each of the 6 stages on a weekly or month basis, sooner or later you can identify exactly where your biggest bottleneck is. Wherever you have a bottleneck, you will see restricted flow at that stage and at all the subsequent stages in your process. You cannot submit more loans that you have taken applications for, for instance.
A Simple Tool for Finding Your Number(s)
Now you’re ready to find the numbers that will give you that sense of emotional satisfaction you’re looking for. Take out a sheet of paper, or open an excel spreadsheet and enter the following categories:
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Production Goal-Setting Tool
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Monthly Income Goal
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Average Income per Loan
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Closings Needed per month
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% of final approvals that close
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Final approvals needed per month
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% of submissions that go to final approval
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Submissions needed per month
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% of loan applications that go to submission
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Applications needed per month
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% of contacts that go to application
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Contacts needed per month
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% of leads that get contacted
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Leads needed per month
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Follow these steps to complete your goals table:
1. Monthly Income Goal: How much do you want to gross per month? Enter it.
2. Average Income per Loan: How much do you gross per loan, on average? If you don’t know, take your total income from last year and divide it by the number of units you closed.
3. Closings Needed per month: Divide your monthly income goal by your average income per loan. That will tell you how many loans you need to close, on average, per month. Enter the number.
4. % of final approvals that close: Once you have a final approval (clear to close), what percentage of your loans close and fund? Obviously, unless you are doing something horribly wrong, this will be a very high percentage, perhaps even 100%. Whatever it is, enter the number (percentage).
5. Final approvals needed per month: Divide the number of closings you need per month by the percentage of final approvals that close. (Example: If your goal is 10 closings and 90% of your final approvals close, 10 divided by .9 is 11.1, or 11, rounded off to the nearest whole number.) Enter the number. That’s how many final approvals you need to average per month to real your production goals.
6. % of submissions that go to final approval: What percentage of your loan submissions (actual submissions to underwriting, not just running it through a DU app) receive a clear to close? If you don’t know the answer, you should be able to compile your stats by running a report for the past year in Calyx Point or Encompass. If you can’t do that for some reason, take your best guess. Enter the number (percentage).
7. Submissions needed per month: Divide the number of final approvals (clear to close) you need per month by the percentage of submissions that go to final approval. That’s how many submissions you need to average per month. Enter that number.
8. % of loan applications that go to submission: What percentage of your applications (signed 1003’s with a commitment from the client to get you whatever documentation you need) get submitted to underwriting? (Again, if you don’t know, run the reports for last year from your LOS software or take your best guess.) Enter that number (percentage)
9. Applications needed per month: Divide the number of submissions you need per month by the percentage of applications that get submitted. That’s how many applications you need to take each month. Enter that number.
10.% of contacts that go to application: What percentage of the sales contacts you make (a sales contact is a conversation with a lead or a prospect where you ask for the application appointment – any other conversation where you don’t ask for the app is meaningless for our purposes) result in loan applications? If you don’t know, take your best guess. An inaccurate estimate is better than nothing. Going forward, now that you know the importance of these numbers, you can track them and correct the percentages in your model. Enter the number (percentage).
11.Contacts needed per month: Divide the number of applications you need per month by the percentage of sales contacts that result in an application. The result is the number of sales contacts you must make each month in order to reach your production goals. Enter the number.
12.% of leads that get contacted: What percentage of the leads you generate or otherwise receive, do you contact (actually speak to – not leave voicemails for or send emails to). A lead is a name and phone number of someone who has either responded to your marketing or been referred by a client or referral partner because they are a potential candidate for a mortgage loan. Not all leads get contacted. Some never return your calls no matter how many messages you leave. What’s your percentage? Enter the number.
13.Leads needed per month: Divide the number of contacts you need per month by the percentage of leads you contact. The result is the number of leads you must generate each month in order to reach your production goals. Enter the number.
What to Do with This Information
Put it or keep it someplace where you will see it frequently.
The most important numbers are the number of leads you must generate and the number of sales contacts you must make. 90% of loan officers who fail to reach their goals do so because they either don’t generate enough leads, or they don’t make enough sales contacts.
We can all stand to improve our sales and presentation skills (which is what you measure in the percentage of contacts that become applications), but I’ll repeat: the number one cause of failure to reach production goals is a deficiency in either leads, or contacts.
Obviously, if you don’t generate enough leads, you won’t make enough contacts or take enough applications, or get enough submissions, approvals, or closings. That’s the way bottlenecks work. They restrict flow to all of the subsequent stages of your “assembly line”. But I’ve also seen plenty of LO’s who do generate enough leads and somehow can’t motivate themselves to sustain the effort required to reach them so they can ask for the application appointment.
Next: In the third and final installment of this series, I’ll offer some suggestions on how to schedule and manage your time so that you do generate enough leads and make enough contacts to accomplish your production goals.