How to Set Smart Branch Volume Projections that Motivate Originators
Both approaches have their merits — and their shortcomings. Top-down projections are often met with resistance from boots-on-the-ground producers, whereas bottom-up projections don’t always meet the expectations of company executives and investors.
Whether your company employs a top-down or bottom-up approach to make volume decisions, you still have power to control your numbers. This four-step process will help you carry out leadership’s volume objectives and make them relevant to the individual producers at your branch.
Step 1: More questions, less orders
“How much money do you want to make next year?”
Giving originators an opportunity to influence the success of the branch by asking how much commission they want to earn next year is a much more motivating conversation than simply asking how much volume they plan to do. Your team will have greater respect for the projections when they understand how it relates to their own goals. What’s more, by tying commission goals to overall branch objectives, your producers can see the direct impact they have on the overall success of the business, further fueling drive and motivation.
Step 2: Use data to keep goals grounded in reality
• Application pull-through percentage
• Average loan amount
• Average commission (in basis points)
Factoring in historical data enables you to create realistic projections on an individual level. Not only is it an effective way of helping individual originators understand what they need to do to reach their goals, it also gives you benchmarks to track performance over time.
Step 3: Convert desired commission into specific KPIs
Mike Manager asks Olive Originator how much she wants to make next year. Olive says she wants to make $200,000 in commission.
- Commission Goal: $200,000
Mike reviews Olive’s year-to-date performance and enters the following metrics into an Excel spreadsheet:
- Application Pull-Thru: 15%
- Average Loan Amount: $250,000
- Average Commission: 100 bps
The Excel model indicates that Olive will need to close $20,000,000 in volume to achieve her $200,000 commission goal. Using her historical performance as a reference point, the Excel model calculates what her monthly production needs to be and how many applications she needs to take, providing two use cases:
- Use Case 1: Lower Units, Higher Average Loan Amount
- Units/Month: 6
- Average Loan Amount: $277,788
- Average Applications/Month: 40
- Use Case 2: Higher Units, Lower Average Loan Amount
- Units/Month: 7
- Average Loan Amount: $238,095
- Average Applications/Month: 47
This model also offers the opportunity to talk about the different levers originators can pull when they want to see higher earnings. If the LO asks for more basis points because they heard that that’s what another lender down the street pays, you can talk about other ways to increase commissions, such as strategies to increasing the number of applications they are taking or provide coaching to help him improve turn time.
Step 4: Put it all together into a branch budget
Regardless of your organization’s approach to budgeting and forecasting, creating your own branch budget allows you to make adjustments necessary to achieving goals. For example, if corporate sets a target of $175 million in volume for your branch, but your team of 10 producers determines 600 units for a total of $162 million in volume is more of a realistic, attainable goal, you can show corporate that you plan to bring on one more originator in the new year to cover that $13 million variance.
Your branch budget is also a guide to track progress throughout the year. By looking at application pull-through rates each month, you’ll be able to determine the quality of leads being brought in. If you notice a LOs pull-through rate is dropping, you can help come up with strategies to improve lead quality or build referral partnerships.
This approach is a great way to merge executive expectations with input from producers in the field. Going through these steps provides you, as a manager, with insights to drive your strategy.
Ready to take this approach to build your branch budget? Use our free projections template to get started.