Inman

Why you shouldn’t build your business on buying leads

Autumn Mott Rodeheaver on Unsplash

Jay Thompson is a former brokerage owner who spent the past six years working for Zillow Group. He retired in August 2018 but can’t seem to leave the real estate industry behind. His weekly Inman column publishes every Wednesday.

Even though it was over seven years ago, I distinctly remember one of the first conversations I had with an agent just a week or so after I started working for Zillow Group. The conversation went almost exactly like this:

“Hey, cool to see you’re with Zillow now! I’ve been a Premier Agent for almost five years, and I love it. One hundred percent of my business comes from my Zillow advertising.”

My gut reaction to that comment was not, “That’s terrific! It’s always nice to hear success stories.”

Nor was it, “Awesome! You should buy more ZIP codes.”

While both of those may sound like something a freshly-minted Zillow Group employee might say, the reality is far different.

What I actually thought and said to this agent was: “One-hundred percent of your business? That’s a bad idea. You shouldn’t get 100 percent of your business from any single source.”

It was the same thing I told my agents when I was a broker-owner. Never, ever rely on one source for all of your lead generation and business. Never.

Why not? Clearly Zillow Group advertising was working for this agent, and working quite well. So why not double down? Why not buy pump up the volume and buy more of what’s working?

Don’t put all your eggs in one basket

That’s some sage advice. While the origin of “don’t put all your eggs in one basket” is somewhat suspect, it is generally attributed to Miguel Cervantes, who wrote Don Quixote in 1605.

Read that again. Over 400 years ago, Cervantes was trying to tell you not to rely on any one person, process or system — for anything.

“But if it’s working shouldn’t I do more of it?” you ask.

On the surface, that sounds reasonable. And you might be well-advised to increase your efforts on what is known to work for you. Increasing your effort however, is completely different from putting everything into one method.

Back in the early 1600’s, there was no internet, no social media, no buying and distribution of leads. Obviously. People, for the most part, were agrarian. Much of life back then was spent securing the next meal — they farmed the land, grew crops and raised chickens.

Every morning someone would trudge out to the chickens to collect the eggs that had been laid. Often those eggs were placed in a basket in order to get them back to the homestead and ultimately converted into food. After all, it’s far more efficient to gather all the eggs at once and transport them together.

Efficient, yes. But what happens if one trips on a rock and the basket of eggs go flying?

They all break into a slimy pile of goop, right there in the dirt, rendering them useless for feeding you or the children.

Back in those days, you couldn’t skip off to the store and just buy more eggs. No, what happened was you and the children went hungry.

Hence, the saying, “Don’t put all your eggs in one basket.”

Same goes for the source of your real estate business. Don’t put all your business potential in one thing.

But the internet isn’t going away

True, it’s not going away. But it sure can change. The “portals,” like any good business, are constantly examining and evaluating how they work and what they offer. Zillow Group has announced some big changes recently. Same with Realtor.com.

Then there are new portals popping up all the time — challenging the old guard, practically forcing them to make changes to answer the competition and satisfy the consumer.

Those agents relying exclusively on buying leads are worried about these changes. How will it impact their personal business? There are a lot of unknowns out there.

And buying leads isn’t limited to the portals — I see agents talking all the time about how they get all their leads from Facebook or Instagram or their blog.

HUD has charged Facebook with housing discrimination. If you get all your leads from Facebook advertising, what are you going to do if Facebook simply throws in the towel and stops running real estate ads?

Think that can’t happen? Ever had the federal government accuse you of something and file a lawsuit against you? I didn’t think so. The simple fact is that no one knows how Facebook will react to this. Cash cow that real estate advertising may be, Facebook just might take the easy way out and shut the whole agent ad thing down.

Don’t say it can’t happen. They very well may severely curtail real estate ad targeting and send you scrambling to reinvent how you use them. All your eggs in the Facebook basket could wind up scrambled.

At a minimum, there will be changes. And you have no idea what those changes will be or how they’ll impact your ability to use Facebook for lead gen.

Be diverse

Back in my active selling days, I generated the vast majority of my business from my real estate blog. I was one Google algorithm change from completely upending my business.

Despite what some naysayers feel and say, there is nothing wrong with buying leads. I’ve talked to hundreds and hundreds of agents that see a solid return on investment (ROI) from buying leads. It’s an integral part of their business.

The smart and business savvy ones, however, all have one thing in common — buying leads is but one source of lead generation for them.

Diversify!

Talk to any financial planner and they will tell you that you should never put your money into a single investment vehicle. No one in their right mind would dump their retirement funds into a single stock. No one would even dump their funds into only stocks, no matter how diverse their equity portfolio might be. The pros and the smart investors diversify — stocks, bonds, exchange-traded funds (ETFs), closed-end funds, gold, real estate, mutual funds, IRAs, 401(k) plans, real estate investment trusts (REITs), the list is almost endless.

If you wouldn’t put all your financial investments into a single vehicle, why would you even consider putting all your lead generation efforts into one activity? You shouldn’t. Having multiple lead generation pillars is crucial to reducing exposure and risk. It’s smart business and something that should be practiced by all.

Jay Thompson is a real estate veteran and retiree in Seattle, as well as the mastermind behind Now Pondering. Follow him on Facebook or Instagram. He holds an active Arizona broker’s license with eXp Realty.