In the book Giftology: The Art and Science of Using Gifts to Cut Through the Noise, Increase Referrals, and Strengthen Retention, John Rhulin suggests spending 5% of your earnings on gifts.
But he also emphasizes that it is not the amount that matters nearly as much as how special you can make it to your customer.
An expensive gift won’t make up for a more thoughtful one.
How much should you spend? A Realtor should spend a total of $350 in a year on closing gifts and other gifts after the transaction.
Budget Based on the Lifetime Value
Your budget is not about a single transaction, but the lifetime value your relationship. That includes the transactions they do with you and the transactions they refer to you in the future!
In most states, there are limits on what you can gift for a referral to a non-licensed agent (e.g. $50 in Texas). But I am not talking about referral gifts. I am talking about regularly gifting to your sphere of influence and past clients whether they have given a referral or not.
If you are diligently marketing to your top 100, the closest relationships in your life and career, you should be getting about 2 referrals for business every year. Estimate what that value is and gift accordingly!
Reducing someone to a number like “lifetime value” may seem a little soulless. But it’s inescapable that gifting is not just about having a generous spirit but a business investment as well.
We should celebrate when our business interests and doing right by our customers are aligned!
How to Budget Your Gifting
How did I get to $350? I used the math below based on the 5% rule.
The average home price in America is ~$350,000.
Imagine the average commission after split is 2%.
That is $7000.
5% of $7000 is $350.
Then, if your customer is sending you 2 referrals a year and you convert one of those, that is another $350 every year.
You should be spending about $350 per past client and person in your sphere of influence.
If your sphere is 100, that is $35,000 per year in gifts. That’s a lot! But, if done right, that is 100 transactions! Minus the amount you spent on gifts, that is $665,000/year in commissions.
$35,000 is far less than what you would spend on Zillow, Boomtown leads, or Facebook ads to get $665,000 in commissions.
Even better, referrals and repeat customers are the highest converting leads, meaning you are spending far less time converting cold leads and marketing and far more time doing a great job for people who want to work with you.
There is a reason many of the top real estate agents don’t pay for leads.
They don’t need to.
Not Just Closing Gifts!
That is $350/year, not per closing.
Don’t blow your whole budget on a gift.
If a customer closes with you, spend $100-200 on a gift, and use the rest of your $350 annual budget to plan additional things throughout the year.
Try touching everyone in your sphere four times a year. Just a small $25 thing each time is more than enough to keep you top of mind, give back, and make relationships who are zealous about your business.
- $200 on a closing gift
- $35 on Winter gifts
- $35 on Spring gifts
- $35 on Summer gifts
- $35 on Fall gifts
You can do a lot with $35. You can do cheaper if need be, but keep it personal. Or maybe one expensive gift a year with other, smaller ones throughout the year.
Conclusion
“Give, and it will be given to you. A good measure, pressed down, shaken together and running over, will be poured into your lap. For with the measure you use, it will be measured to you.” – Luke 6:38
When Jesus commanded his disciples to give, he wasn’t just talking about literal gifts.
Giving is less about the gift and more about the action and what it says about you. You can give love, blessings, and your time. There are lots of ways to do that for free. You don’t always have to spend money to do something generous.
Just make sure it is genuine and real.
Be sure to check out my articles about the best and worst gifts Realtors can give their clients.
