During the months of November and December, I’m focusing my blogs on business planning. Look for ready to use checklists, processes, and systems. Let’s make awesome plans for 2011!

Today, real estate agents capture much more of the gross commission dollar than ever before. At the same time, they must become real businesspeople, because they must allocate some of these dollars to marketing—to increase their business. But, how do you know how to spend those marketing dollars?

Here are two basic principles of marketing dollar allocation

Principle One. Spend a proportional amount on your best source (s) of business—it will beget more business (your best source of business is from your past clients and people who know and trust you).

Most Agents are Not Spending Their Marketing Dollars Right

A recent study showed that agents spent the largest amount of their marketing dollars on direct mail, advertising, and the Internet. Yet, the majority of their business came from traditional ‘people to people’ sources

•Referrals
•IVR Technology (interactive voice response)–the only ‘technological’ lead generating source
Repeat Business
•Open Houses
•FSBO/Expired Leads
•Face-to-Face Networking

Do you know how much you spent on your best source of business last year?

Only one percent of the agents do. That means they aren’t treating that group of people as a ‘target market’. You must segregate your best source and allocate funds directly to marketing to them. You must make a marketing plan directly to these people, and attach a budget to this best source.

How much Money Should You Spend?

Principle Two. Spend between 5 and 10% of your projected income on marketing to your best source of business.

Example: If you were to project for next year that you will get 20 sales from your past clients, and that income would be $4000 per ‘revenue unit’ or $80,000, you would allocate $4000 to $8000 to marketing to that source.

Want more advice on smart business planning? Check out The Business Planning System for the Real Estate Professional. Special pricing through December, and a business planning bonus webinar, too.

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