While it’s not new, the law of the vital few will determine which loan originators thrive going forward.
Have you heard of it? It’s all about extracting the most value from the most valuable things instead of wasting your time on trying to focus on everything.
For loan officers, acing the law of the vital few comes down to managing leads properly.
The law of the vital few borrows from the well-known “law” of time management called the 80/20 rule that’s a modern take on the Pareto Principle.
The gist of the 80/20 rule is that 80 percent of results come from just 20 percent of the action. Used by business moguls and “life hackers” today, the 80/20 rule stems from the observations of an Italian economist named Vilfredo Pareto.
Pareto noticed that 20 percent of the pea plants in his garden were responsible for 80 percent of the healthy pea pods in his yield. Pareto thought this was wild. Even wilder was his investigation into how 80 percent of Italy’s land was owned by just 20 percent of the population. Later, he also discovered that 80 percent of Italy’s production of goods was generated by just 20 percent of the nation’s companies.
The Trend is Real
The 80/20 rule is insane because it nearly universally applies to all types of industries, natural phenomena and interpersonal actions. It even applies to the very thoughts that filter through our minds.
If you find that 20 percent of your negative and worrying thoughts take up 80 percent of your mental energy, you’re not alone! And this is pretty much how it works for everyone. It’s a game changer. Once you realize that 80 percent of your mental energy is being sucked up by just 20 percent of the thoughts you’re capable of thinking, you can rewire your mind to focus on better, more productive thoughts.
The Same Ratio is Sucking up your Time at Work
Modern-day “mind hackers” like Tim Ferris note that the 80/20 rule applies to customers. According to Ferris, 20 percent of your customers are responsible for 80 percent of your revenue. This is the law of the vital few that loan officers need to tap into!
How Are YOUR Peas Looking? Using the Law of the Vital Few as a Loan Officer
Let’s talk about job titles. What’s on your business card? Loan officer? Loan advisor? Mortgage agent? Mortgage specialist? All of these titles essentially deal with loan origination. That means that your primary focus needs to be on producing loans. You’re in the business of originating loans. Period.
Make sure that’s what you’re actually doing. It could mean the difference between hustling 20 percent of the time versus hustling 100 percent of the time.
Most LOs originate two to three loans per month. It works out to just 24 to 36 loans in a calendar year. Are bells going off that this sounds suspiciously easy?
It IS easy. Honestly, making a full-time salary while originating just two to three loans per month is very doable for LOs that understand the game. Many LOs in big markets doing just two loans a month are easily bringing in $60,000 to $80,000 per year.
Compare that to the many hours per week people in other industries are working to bring in that kind of money! An accountant pulling in $70,000 is no doubt putting in nights and weekends with all kinds of people breathing down their neck about reports, spreadsheets, meetings and general paper-pushing nonsense. It’s very hard for a salaried accountant to make 80 percent of their money from 20 percent of their work.
LOs don’t have the same restraints. Lucky you!
Unfortunately, you can’t do it until you’ve identified where you’re getting the vital few that make up your 20 percent. We’ll get to that!
Let’s Talk About the Competition: Yes, Some LOs You Know Are Making Six Figures Without Sweating
It’s time to meet your competitors. According to the Bureau of Labor Statistics, there are currently 304,950 loan officers in the United States. Let’s dive into what the 80/20 rule looks like with this kind of number.
If we apply the law of the vital few, 20 percent of the top loan officers in this pool of 304,950 are originating seven to ten loans per month. That means that roughly 60,000 loan officers in the country are making serious bank well into the six-figure range. Imagine what the top tier of those LOs (about 12,000) are making.
If they’re using the 80/20 rule to run their businesses wisely, they’re essentially making a doctor’s salary while sitting at a desk for a few hours per week.
This may be the first time you’re actually seeing the bold breakdown of just how much top-tier LOs are earning. It’s a jaw dropper if you’re stuck at one to three loan originations per month. You may have even thought you were doing pretty damn well where you were…
But YOU can go so much bigger!
What does it take to break into that top 20 percent?
You have to know how to execute the 80/20 rule in your personal business strategy. That means making getting more loans your TOP priority. Here’s your new game plan:
- STOP doing all of the unproductive things that aren’t directly tied to the magic 80 percent yield. Automate or outsource tasks that are sucking up your time without leading to direct revenue.
- Focus all of your energy on doing the 20 percent that gets you 80 percent of your results.
- Make sure you’re showing up ready to give your all to the 20 percent! Think of it like a sport. You have to give your A-game to the 20 percent. There is no phoning anything in! Think incentives! Draft up a loyalty/referral program!
What will this look like in practical terms? It’s different for every LO.
Let’s say that 80 percent of your business comes from referrals from real estate agents. Embrace that this is your bread and butter. Pour your energy into fostering relationships with agents.
If 80 percent of your business is coming from lead-generation advertising, focus on reinvesting more into advertising.
Do not try to reinvent the wheel by slicing and dicing your efforts when you already know what’s working.
It’s all about doubling down your focus on getting maximum results from the efforts that are producing most of your rewards.
There’s More to Squeeze From the 80/20 Rule
You’re not done with the 80/20 rule just because you’ve used it to figure out where to focus your efforts. You can now drill down on the 80/20 rule even more. Let’s say that you’re in the group that discovers that most of your business comes from referrals from real estate agents.
You can get even more specific to get even better results while doing even less work.
Look at which agents are generating the most business. You might discover that 80 percent of your 80 percent is coming specifically from NEW real estate agents, so now you know to focus efforts and resources on networking with new agents.
You can also drill down on the 80 percent of the 80 percent if you’re pulling in business from ads. It might be that most of your business is coming from just a handful of the advertising channels you’re using. Pivot all of your ad spending to these money makers instead of dividing your budget between high performers and low performers.
Final Thoughts on Riding the 80/20 Rule Deep Into Six Figures
Following the 80/20 rule has a snowball effect that allows you to build momentum by using existing momentum.
Just remember that any revenue you make outside of the 80 percent that comes from your golden 20 percent is part of the exception instead of the rule.
At Empower LO, we want to help you use the 80/20 rule to make more money with less effort.
We know how to make that golden 20 percent pull you over the six-figure finish line by using quality leads. Unfortunately, an LO can easily spend 100 percent of their time instead of 20 percent of their time on 80 percent of their business if they have a poor lead system.
Let us help you set up your own simple and predictable lead-generation system that puts the 80/20 law of the universe in motion for you.
See you at the top!
The Empower Team