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   ARTICLE   |   From Scotsman Guide Residential Edition   |   February 2018

Hire and Hope Is Not a Winning Strategy

Lenders should employ sophisticated and sustainable sales strategies

r_2018-02_coulter_spot.jpgMost mortgage originators would agree that sales strategy is critical to growing their business — especially if they work for small or midsized companies with finite reserves. Not every mortgage company has the resources to float million-dollar ad campaigns. Carving out market share in a competitive purchase market requires time, effort and, most of all, planning, so a strong sales strategy can be a real difference-maker.

Why, then, do so many lenders and mortgage companies rely on recruiting top producers from other companies and cold calling? This industry tends to hire sales people or promote existing staff into sales positions, yet often fails to give loan originators any resources beyond a bonus structure, a laptop and a phone. Let’s call this the “hire-and-hope” strategy.

Predictably, when these efforts fail, the company holds the originator accountable for failing to hit production numbers. What did they expect from such an unsustainable practice designed at its core to catch lightning in a bottle?

Unfortunately, too many mortgage companies unintentionally set up their originators to fail. They provide training and support for production or customer support, but then assume originators come self-equipped and ready to sell. This is like a professional football team adding several expensive free agents, and then running the “Hail Mary” on every play.

A select few professionals can pull this off, but originators should expect more from their companies. They should demand their companies invest a little time and thought into creating a viable sales strategy.

Stop winging it

Although no self-respecting branch managers or sales VPs would refer to their sales strategy as “winging it,” this is what a lot of them actually do. It’s not uncommon for mortgage companies to recruit top performers from other companies, bring them aboard and expect them to increase business simply by working their books of business.

Sometimes this works. Sometimes it doesn’t. Either way, the results are dependent entirely on individual performance and a bit of luck. A good strategy entails a plan of action or policy designed to meet a specific aim. It is something a business can run again and again for maximum results. A good strategy also allows for adaptation when market forces or other factors change. An effective sales strategy requires the following:

  • Preparation, including training and goal setting;
  • A targeted approach, such as market mapping, SWOT (strengths, weaknesses, opportunities, threats) analysis, etc.;
  • Measurement, using multiple metrics (rather than simply revenue); and,
  • Sustainability.

Hire and hope lacks most of these elements. Many top producers move from company to company, leaving one in the lurch when they receive a better offer. When companies bind their fortunes to one originator’s book of business and that individual’s ability to sell products to his or her existing client and referral sources, there’s always the possibility that those ported prospects are not a good fit for the new company’s products.

Stop cold calling

Cold calling is not the only sales tactic, nor is it the best. Unfortunately, many companies still rely on lists assembled from old conferences, web leads, phone inquiries and other resources of variable repute. Originators must then contact a percentage of that list daily, weekly or monthly. The assumption is that some percent will eventually be converted into sales.

There is a flawed presumption in that sales formula, however. Although sales is a numbers game to a degree, the quality of the list often is not considered in most companies’ measurements. Even top performers could find themselves at risk for termination if they’re handed an attendee list from a conference that happened five years earlier and told to convert leads.

When mortgage companies measure success simply by how successfully originators convert cold contacts into sales, they skip a lot of the real-life process.

Cold calling also is losing its effectiveness in a world where decisionmakers are constantly bombarded by information, solicitations and inquiries. Society has become much more cynical about information coming from unknown sources, such as a salesperson cold-calling them. So even when originators do connect with their quota of contacts, those connections are less impactful today than ever before.

End hire and hope

Any business is only as good as its people, but when a company’s sales strategy depends solely on how well originators perform with no real strategy, no targeted resources and no methodology beyond cold calling and contacting an existing book of business, that company faces a low chance of success.

Look at what happens if you eliminate one or two of the originators who are succeeding against the odds. People — especially good originators — do tend to move from company to company. It happens, and often without warning. Suddenly, that company must recruit someone new who also can defy the odds. Another roll of the dice.

It’s absurd to believe that the very best originators just happen to be successful. Star performers emerge where potential meets opportunity. Unfortunately, not enough mortgage companies and lenders invest the resources needed to train their sales teams. Expectations are not tapered to allow for any kind of learning curve. The results are predictable in these cases.

Businesses put a lot of time, effort and expense into creating sustainable systems, sustainable production and sustainable business plans. But, for whatever reason, it’s incredibly rare to find a sustainable sales strategy — one that is not mostly or solely dependent on the performance of a few individuals rather than upon a system or methodology. Imagine the competitive edge a company might have if it does employ a sustainable sales strategy.

Create sustained sales

A sustainable sales strategy is therefore one that is repeatable because it is successful. Although any business strategy depends, in part, upon execution and performance, a sustainable strategy shouldn’t be 100 percent reliant on a few individuals.

A successful strategy would take into account the types of borrowers most likely to seek out the company’s loan products, and it would then target the contact methods to the preferences of those borrowers. It would utilize an approach with a higher likelihood of success. And that success would be defined realistically.

Many companies expect originators to jump from point of contact to demo to close. The real-life mortgage sales cycle typically takes many more points of contact, which means there are many milestones available to measure progress. A sustainable sales strategy would not only offer up a process that maximizes the overall probability of success, it would measure success by increments along the sales cycle.

The easiest and most sustainable sales in any industry take place where there is a relationship involved. That relationship very likely includes multiple points of contact. It also likely includes providing information that is relevant and valuable to prospects before they sign off on new business.

When mortgage companies measure success simply by how successfully originators convert cold contacts into sales, they skip a lot of the real-life process — and set that cold-caller up for failure. A sustainable metric for a sustainable sales strategy must include the multiple points of progress along the road to the application as well as to the closing.

Finally, a sustainable sales strategy is one that can be repeated successfully over and over again. With the hire-and-hope approach, even the best salesperson has a limit to his or her book of business, and becomes dependent, to some degree, on cold calling. This is simply not sustainable. When origination teams are empowered with methodologies, resources and measurement methods that truly evaluate individual performance, that team is working with a sustainable strategy.

•  •  •

The mortgage industry is far too dependent on top producers when it comes to planning new sales. All too often, companies are only measuring long touchdowns — new sales from an existing book of business or cold calling — without taking into account the short gains necessary for a sustained sales drive. It’s time for the mortgage industry to reevaluate how it plans and captures new sales and move toward something more scientific and realistic.


 


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