Tighten up referrals for revenue growth

08 August 2011

By Ben Abbott

Broking business can increase revenue growth if they tighten up their referral networks, according to Macquarie Practice Consulting.

A survey of 117 mortgage broking businesses conducted by Macquarie's consulting arm has found that average estimated revenue growth for those businesses surveyed over the past 12 months was 13%. Of these businesses, 66% credited strong management of their referral networks from existing clients for this growth, while 55% said referral networks with business partners contributed.

Macquarie Practice Consulting found that almost half of all 'larger' businesses - or those with four or more people - had formal referral agreements in place with referrers. This contrasted with 65% of individual brokers who only have informal referral arrangements.

Macquarie Practice Consulting senior consultant Fiona Mackenzie said while all broking businesses are aware referrals are critical, smaller broking businesses are not taking such a business-like approach.

"This highlights an opportunity for smaller businesses to tighten up some of their referral networks and put more formal arrangements in place, helping to ensure a solid and consistent pipeline of new business opportunities," she said. "Ultimately, a broker's time is very valuable and they need to make sure that any investment in a referral relationship is worthwhile for growing their business."

In addition, the survey found that the average business earned approximately $363,000 in revenue during the 2010 financial year. The average revenue per broker among businesses surveyed ranged from $142,000 in individual businesses to $175,000 for larger businesses.

The average mortgage book across all businesses surveyed was $93m. However, Macquarie Practice Consulting found brokers in smaller businesses typically manage larger books - with an average book size for individual broker businesses being $51m - while larger businesses averaged $40m per broker.

Mackenzie said there were a several explanations for the difference. "Larger firms tend to have a more diversified revenue stream making them less reliant on lending than smaller firms. They also may employ more junior or less experienced brokers who are still developing."

http://www.brokernews.com.au/news/tighten-up-referrals-for-growth/116924/