Matthew Ferrara, Philosopher

The Next Powerful Sales Advantage

The most powerful advantage doesn’t come from making the easy . It comes from avoiding impossible ones. Organizations who practice the art of declining bad deals have discovered a powerful market advantage. Here’s why.

The best salespeople understand the law of scarcity. In every deal, something is scarce. During booms, it’s the product. During busts, it’s often money. At various times, it’s time, physical labor, or even knowledge. Yet the trickiest scarcity to master is the scarcity of the deal itself: when no deal is possible.

The most powerful sales organizations know how to protect everyone’s capital when there is no sale possible.

This might be the next big competitive advantage in the housing industry. Not a new technology, finance program, or compensation plan. Imagine organizations rigorously identifying when no deal is possible, then acting in everyone’s best interest by saying:

Thanks, but no thanks.

Good or bad, all deals require capital. But bad deals waste capital, with little hope for returns. Start with the broker’s capital: cash spent up front marketing the unsellable. Add in the agent’s time, invested like Sisyphus for weeks and months. Estimate the value of the client’s goodwill, possibly the most valuable capital in a referral-based industry. When the good deals are barely breaking even on such capital investments, the bad ones are sinfully wasting it.

It would be a huge advantage to a company who train their agents to recognize bad deals, and how to systematically walk away. Rather than the emotional approach: protecting your integrity, honesty, pride, etc, why not train agents to look at it financially. Not only can’t you get the job done. It would be a waste of capital to try.

All the glitzy gadgets alone won’t rescue companies whose agents don’t understand the value of capital. Future companies will think like asset managers as well as salespeople.

A recent example. Next month I have to trade in my leased car. My choices are to buy out my current lease and keep a car with all the goodies, for a modest payment. Or, find something smaller but with newer goodies for the same payment.

As you’d expect, some dealerships I visited displayed classic disregard for capital. After five minutes, they should have known they could not help me, and acted to preserve their capital (gas, brochures, labor/time). Yet each tried to go “all in” with test drives, financial contortions and persuasions for a non-deal that was recognizable from the start. Everybody, including the consumer, walked away poorer.

It was refreshing, therefore, when I met the saleswoman at the Cadillac dealer, who clearly valued everyone’s capital. She demonstrated the advantages of recognizing the non-deal quickly, and taking action to preserve everyone’s best interests. After we talked for ten minutes, she punched a few numbers into a calculator, then she sat silently for a moment.

Her next statement blew me away: 

Well, Matthew, given your criteria, and your love of tech goodies, it sounds like it would be best if you bought out your lease and kept your current car.

There I sat, across from a salesperson telling me not to buy her product, that the best deal was the non-deal?  More importantly, she wasn’t even going to try creating something out of nothing. She would rather not waste my goodwill, her time or her company’s assets by showing me cars we’d never come to agreement on.

She recognized a non-deal, then acted in everyone’s best interest. Even though I wasn’t even a client, she refused to waste my time by giving me the final answer up front. Even when she asked me to meet her manager, it was only so he could thank me for stopping by, not convince me to do a non-deal.

Now apply that thinking to the housing industry. Imagine a salesperson who tells sellers their price doesn’t exist, won’t exist, won’t even let them pretend it could exist. And walks away from an overpriced, painful-price-reduction listing. An agent who tells their buyers their offer won’t work, can’t work, won’t even let them waste time making foolish offers. And encourages them to rent for another year or two until they can save up a better down-payment.

An agent who acts to preserve capital, in all its forms: marketing, sweat, and goodwill.

Imagine institutionalizing the art of rejecting bad deals. Creating teams of agents who can’t possibly believe it’s worth trying to sell the unsellable. They realize that undertaking a futile deal isn’t merely impossible, but irresponsible. Agents who see every expired listing as a misallocation of capital, desperately needed these days. Agents who couldn’t imagine wasting money, let alone writing their marketing plan around it.

Consider the advantages of approaching your their sales strategy as a capital investment plan. You’ll quickly see how easy it is to walk away from bad business. The argument that, if we don’t take the listing, somebody else might, becomes meaningless. Marketing strategies built around “sequential price reductions” wither under the scrutiny of asking, Is this the best way to spend cash, invest agent labor, or earn consumer goodwill? 

Once we look at the sales business as an asset management activity, the art of good deals becomes easier, the art of avoiding bad deals, a matter of course. Once we ask ourselves if we’d be happy if our stock broker called us to tell us about a bad deal, we see how silly it is to be happy to do bad deals as a real estate broker.

  • Great info on the importance of not wasting time, energy and resources.  This applies to lenders as well.  How many agents or buyers have found out 3-6 months after working with a buyer that they don’t actually qualify?

    A good loan officer prevents that from happening.

  • Anne Webster

    Excellent advice for a still volatile market.  We need to work smarter not harder.  Qualify the client first before taking action is essential.

  • David Rollins

    The client will respect you as a professional more if you are truly honest with them, than build repoir by telling them what they want to hear. I have dealt with those scenarios quite a bit lately, and are telling them that I would rather turn down their business than commit to something that neither I nor anyone else could possibly make happen. So far, I have still won most of those clients because of direct honesty. I don’t want my doctor to tell me I am ok, if he knows it is much more serious…

  • Great perspective.  I have asked our agents, “What does an un-sold listing cost?”  They struggle to answer, but when I share that it is easily $5000.00, they start to look at their listings, and potential listings, differently.  How do we arrive at that number?  Well add the hard costs of marketing, advertising, employee time, and etc to the time the agent invests at $xx per hour, and it quicly adds up! 

    Then when you account for the intangible costs to the equation, as you mentioned, the negative good will when the listing remains unsold and we leave the seller sitting in the home they don’t want to be in, well, is that the opposite of the famous line “priceless”?!

  • David:
    That sums up my thinking as well! In fact, when we’re willing to be SO honest with a client as to walk away from their potential business, it often gets “through” to them more than if we were to try to make it work and then just dance around the particulars….
    Thanks for your comment!

  • Chris:
    An EXCELLENT exercise! Add up the costs – and it’s eye opening for lost listings, as well as those that languish for MONTHS and MONTHS!
    Now, imagine this calculation: How much money is thrown away by the industry every year? Just add up all the EXPIREDS in any market and multiply by $5000. Who needs a housing recovery, when we’re willing to throw away money like that any time? Scary, huh!
    Thanks for commenting!

  • Sage advice.  

    Because we’ve always fawned, rewarded and defined success primarily on production-based-values like number of listings taken, sales made, closings and dollar volume, it takes concentration, and reminders like yours, how smart and important it is to focus on the long term and perpetual success.    

    Not to mention that a client-satisfaction component should be a factor in any modern matrix that fawns, rewards and defines modern mastery.  

  • Payne Walker

    I often tell the story to new agents of the first time I stood up, extended my hand and informed the seller prospect I wouldn’t be the one to help him in the sale of his home. Fortunately for me just a few weeks earlier I had attended IBC conference where I learned the method/process of how and when to “walk” or decline the business. It came in handy soon after and it was one of the most empowering sales days I’ve had in my near 20 years of real estate sales. I can define my sales life by pre-walk, and walk/decline.

  • Great story! It’s very empowering when you have enough respect for your expertise and time to be able to (gently, of course) decline an offer of bad business. Good for you!
    – Matthew