Happy birthday to my son David who is 40 today!
Loan officers are notoriously bad at knowing their real time numbers. Ask any originator how many deals they have and they will likely give you a number that is more than twice the number of loans they are closing in that given month. The perception of what is likely to close is distorted by the total number of people that particular originator is working with in all stages of their pipeline, not just those likely to close in that given month. These inaccuracies are a challenge for the originator and their managers to get a real handle on real time business. It also leads to the dreaded “roller coaster syndrome” where production peaks and valleys from month to month.
One of the ways I teach my clients to deal with this is to have a way to accurately measure their productivity and given them advanced warning of a poor production month on the horizon. You can do anything about a weak closing month you are currently in. It’s also difficult to resolve poor numbers over the next thirty days coming. But what if there was a way to see weak numbers that were two and three months out, far enough into the distance that you had a reasonable chance to engage in some activities to fill that future void? The good news is, by creating a simple set of measurable that you can track, you can set yourself up for success!
It’s called “The Gestation Period of your Deal”. The reason for “YOUR” is that all originators and markets are different. Each needs to be calculated and monitored because it can also change due to outside factors like time of the year, weather, and other market conditions. However, over time, you will find this will accurately become your “canary in the coal mine” to warn you about a pending slump in you productivity.
Here is how it works. We use some very simple math and easy information to track. First, we look at the last 25 or so loans you have closed and measure the time from pre-approval to closing. How many days was it? This number will vary, but it will give you an indication of your market and what the timeline looks like from start to finish. Again, full pre-approval to closing are the numbers you want. There will be outliers in the mix, but they are always likely to exist so don’t worry about them for now, they tend to average out.
Once you know the number of days, you have your Gestation Period for you in your market. Why is this important? Let me show you!
If you want to close EIGHT loans a month and your Gestation Period is 60 days, you will need SIXTEEN pre-approvals out looking at all times! If the period is 90 days you will need 24! Just plug in your targeted number of closings and calculate your time frame and you have a real way to forecast your productivity in advance!
So if you are looking for balance in your business, trying to avoid productivity peaks and valleys, or you are a manager that really wants to tune your projections and be able to assist your people before it log jams or production falls off, working with your team can really help!
Understanding the gestation period of your deals and tracking your pre-approvals is something you can do today that will help improve your tomorrow!
Questions or comments: Mike@IMTcoaching.com
Visit us online at http://imtcoaching.com