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  • David Hagan

Is It a Waste of Money to Invest in Sales Training in This Market?



I attended a social event for new home sales professionals recently. I walked up to a sales leader who works for a large production homebuilder, and we exchanged pleasantries. We started a conversation about the local market and were talking about all things related to real estate when she brought up the subject of sales training. She told me that she wanted to have a conversation with me later this year about coming in to train her sales team next year. Before I could respond, she said, "My boss would laugh me out of the office if I suggested that we spend money on sales training this year, in this hot market!" She gave me a laugh and I reciprocated, but to be honest, I didn't really know how to respond. I was somewhat puzzled by what she said.


For the next few days, I wondered to myself if my friend's company was atypical or if this was a more wide-spread sentiment among new home leadership teams. Are there other homebuilders who just don't see the need to invest money in sales training right now? I can understand if a homebuilding company has already committed their budget for sales training for the year. After all, we're just a few weeks away from the third quarter. I know several sales leaders who fall into this category. They are consistently training their sales teams and they have a comprehensive plan in place. Surely, her company is just an anomaly.

I asked around to see what others are doing for their sales training and to my surprise, I found that several other homebuilders have adopted a similar mindset to my friend's company. There are indeed homebuilders who have taken sales training out of their budgets and presumably, they don't see a need to add it back anytime soon. To be certain, this has been one of the hottest real estate markets we have ever experienced. When homebuilders were planning their budgets in 2020 and 2021, I can see where record-breaking sales might have had some second-guessing whether it made sense to spend tens of thousands of dollars, or more, on sales training.


For the past two years, many of the nation's homebuilders have been able to sell their homes with little-to-no price incentives and almost free of any kind of negotiation. Most homebuilders have operated with limited releases and have still maintained long wait lists or robust lottery systems. Steady price increases and continued delays have not affected the record-high demand at all nor did these seem to affect margins. Several public homebuilding companies have reported record-high profits. This extraordinary sales velocity has definitely changed the way homebuilders' sales teams have been operating. My concern is that these incredible gains may have caused some to forget the old adage, what goes up must come down.


We are beginning to see some leading indicators that suggest a shift in the market may be upon us. Some U.S. real estate markets are reporting upticks in price reductions, the number of days-on-market, and in available inventory. These all indicate that things may be cooling down. As the Federal Reserve continues to hike interest rates, in order to combat inflation, there is real concern that demand for real estate could continue to fall. No one is suggesting the housing market is going to crash, but there are signs that it is indeed slowing down from the record highs that we've gotten used to.


If these trends in the market continue and become more widespread, the way we’ve been selling homes will change. If the changes in the market are dramatic, the changes in the way homebuilders sell new homes will have to be just as dramatic. The homebuilders who have been consistently training their sales teams will be ready, regardless of what happens in the market. The homebuilders who removed training from their budgets may not be ready. I’ve heard some who rationalize it with something like this, “our sales team has been selling new homes for years. If the market changes, they will simply go back to doing what they did before. They sold homes before things got crazy and they will sell homes after this all cools down.”


One big problem with this rationale is that most new home salespeople working today have never sold real estate in a declining market. According to the National Association of Realtors (NAR), the current median number of years of experience for all Realtors is eight years. It’s been fourteen years since we experienced a major downturn in the housing market. Think about that for a moment. You can have an incredible new home salesperson on your team who has twelve to fourteen years of experience, and yet they have no experience in selling real estate in a declining market. The next question, naturally becomes, “what is different about a declining market from every other real estate market?” I hate to quote Johnny Depp from his recent trial, but his words are so fitting here, “nothing less than everything”!


Everything is different in a declining market. From the way your salespeople first engage your prospective customers to the way they foster certainty and confidence that this is the right time to buy. From the words they use around financing and mortgage rates to the way they create a sense of urgency. From the way they work to overcome every single objection because the number of leads has dropped dramatically and now every prospect matters more than ever, to the way the salesperson follows up through to the signing of the contract and even all the way through backlog, to closing. Everything is different in a declining market.


So, if now isn't the right time to think about sales training, when is the right time?

I suggest that the right time is right now. Sales training was created for times like these.

In his commencement address to the 1991 graduating class of the U.S. Naval Academy, General Norman Schwarzkopf said, “the more you sweat in peace, the less you bleed in war”. At first glance, that may seem a little gruesome when talking about real estate and new home salespeople, but General Schwarzkopf wasn’t just referring to times of literal war. He was reminding the graduates at Annapolis that day, and all of us, that the more hard work and disciplined preparation we do in advance, the more pay off we will receive in terms of success and victory when the time comes to carry out the task at hand. In other words, we can’t afford to wait until we’re in a declining market to start preparing our sales teams for it.

The homebuilders who are currently training their sales teams and the homebuilders who begin to train now will be in a position to reap great rewards because their sales teams will already be prepared when their market begins to decline. These leaders will be in a position to not only capture as much margin as possible but will be able to capture market share because many of their competitors will be caught off guard by the shifts in the market. The gains that are captured in market share in a shifting market can pay huge dividends for years to come. History has shown us that companies that lose market share often struggle for years to gain it back, if they are able to reclaim it, at all.


The investment in sales training is a smart investment because none of us know what the future holds and sales training pays off regardless of what happens, or doesn’t happen, If the market does take a downturn, your sales team will be prepared for the declining market. If the market plateaus or begins another upward trajectory, your sales team will be prepared for that, as well. Sales training is never a bad idea nor a bad investment.

I keep thinking about the homebuilding company my friend works for. I wonder how they used the budget dollars they saved over the last few years by not spending anything on sales training. I wonder if they invested that money in another specific category on the balance sheet. I wonder if they bought some land or paid down debt. I wonder if they’re tracking the ROI on those funds that they didn’t waste on sales training. If so, I wonder how that ROI will compare once all the other metrics are calculated if they continue to delay in training their sales team. If the market does decline, will their sales team be experienced enough to recognize the shifts AND disciplined enough to react in time? If not, will the ROI on the money they didn’t waste on sales training offset the costs of not being prepared?


If you would like to prepare your sales team for the future, regardless of the market or the industry you’re in, reach out to Sales Uncomplicated today.

www.SalesUncomplicated.com

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