I was lucky. When I got into real estate in Las Vegas in 2007, I already had run a successful business. I came into the industry with experience in business, employees, marketing, sales, numbers etc.
I was able to sort of ‘plug and play’ my knowledge and experience into the new industry. Instead of hamburgers, I’d be selling houses.
The bad news for me was that I choose the wrong brokerage and spent 3 years there before joining Keller Williams in 2010.
HERE ARE MY TIPS FOR BUILDING A TRULY SUCCESSFUL REAL ESTATE BUSINESS:
1.) Choose the right brokerage: When you first get into real estate, you may not realize the importance your choice of real estate brokerage. Many believe it’s just a matter of hanging a real estate license. This may be true if you simply plan to do real estate as a hobby or very part time, but if you truly plan to build a successful business, you will want to plan accordingly
- What is their economic model? Basically, how do they make money? You’ll want to know this because if their model does not support teams, and you decide build a team, you may struggle with profitability in a model that controls how you split commissions on your team. When you reach a high level of production, are you a benefit to them or a liability?
- How long have they been in business? Who owns it? Who’s the broker on record? Do a Google search and see who you are considering going into business with. There are brokerages out there that have closed their doors without warning holding back all commissions owed to their agents. You’ll want to make sure the owner has security to keep that business running. If they opened a small brokerage by the skin of their teeth and are now running month-to-month, how secure do you feel?
- Do they charge you based on the number of transactions? Flat amount per year? Varied amount per year? Are you charged per transaction? Is there a franchise fee? What monthly and annual costs do you need to be aware of? Is E & O insurance included?
- What’s the training like? You won’t learn how to run a real estate business in real estate school. You’ll want to look for both new
agent training and business training. It’s one thing to offer a ‘How to hold an open house’ class or ‘The Best listing presentation’. Once you have learned general real estate, you’ll want to learn about Profit & Loss Statements, tracking your conversion numbers, how and when to hire assistants and agents into your business, marketing, online marketing (SEO), Setting up corporations and LLC’s, leadership training and so on. Does this company provide high-level training in the business areas? If not, you will find that one day, you out grow that brokerage and then you will need to make an expensive move.
- Does the company offer any incentive for growth? When you reach a certain level of exposure in your market, you’ll find people want to follow success. This means, they will assume your brokerage has a lot to do with your success and will ask you about it. Are you rewarded in any way for bringing on talent to the brokerage?
2.) From moment one, start tracking. So what if you are not a numbers person. Don’t prove your limitations. Get purposeful about them. Whatever works best for you, a computer/tablet and worksheets or pencil, ledger, and a calculator, use whatever you will use. You’ll want to focus on the following numbers from day one, moment one:Income: Every cent you earn should be tracked. In addition to the dollar amount, you’ll want to track where that income came from. (See Tracking Sources Below). Best way to track income in my opinion is to track the ENTIRE amount you earned before paying any brokerage fees, referral fees etc. and then deduct those as expenses.
Expenses: Every red cent you spend on business should be noted. Ideally, you’ll have a bookkeeper and CPA, but in the beginning, it’s possible you will keep your own records. (God help you). You will need to be disciplined about your record keeping. Note the amount and then give it a category. I suggest you read MREA (The Millionaire Real Estate Agent ) and spend time in the budget model so you have a clear understanding of how to chart basic accounts. Here are a few to give you an idea
i. Marketing / Lead Generation
iv. Dues and Subscriptions
vi. Office Supplies
xi. Education / Travel
Profit: You’ll want to know immediately and frequently how profitable your business is. When real estate agents start earning commissions, their brain tells them how much money they made based on the dollar amount on the check. This simply won’t be the case. Your profit is your total annual income minus your total annual expenses (tracked monthly as well). You’d be surprised how quick that $10,000 commission becomes $6,000 profit.
Budget: Once you have a little time under your belt, you’ll be able to keep a budget. I suggest you start with one on day one, but know that it will change. It will be hard for you to predict your income and expenses when new to the industry. A budget helps you to stay on track with your spending and will let you know when you can increase a category or when you need to pull back on that spending. You’ll also find certain months have high expenses than others. Maybe you have 2 annual conventions where your education budget will spike. Best to budget for that in advance. From my experience, I’ve noticed the first thing to go when agents get tight on money is education. Yet, that’s the one thing that creates them more income and growth.
Sources: The sooner you get in habit of this, the better off you will be. The importance of sourcing is having a clear understanding of where your business is coming from. When you track this, you’ll know where to focus your energies. Top sources should get more attention, and more marketing budget typically where lower sources would only be increased if they were an activity based, not expense based category. Example, 40% of your business is Sphere of Influence (Friends and Family). That’s great! Could you expand that if you contacted them more often with items of value, holiday give away’s, annual BBQ etc.? If your lowest source is just listed cards, you’d have to look at that expense and see if it is returning enough profit to make it worth it. Would it be better to take that expense and pour it into your top source increasing that? However, if your bottom source is expired listings and you know if you simply made more dials, you could increase your listing inventory coming from expired listings, it would be well worth the effort. In most top real estate businesses, we usually see 2-3 sources that make up the majority of that business. You always want at least 2 in case the first should be a “market of the moment” or become reduced for any reason. That being said, do one thing, and do it well, and you can own your market.
Contacts: Your most valuable asset in your business will be your database. This should be the first system you acquire, set up, and begin to use. Even before your board of Realtors MLS system, you’ll want to have your database up and running so that you can communicate with it daily. From day one, set a goal as to how many new contacts you will add to your database. When I say contacts, I mean actual people you spoke to, not the list you bought. 5 Contacts a day might be a great place to start. These would have phone number, email, address, and be placed on some sort of campaign that reminds you when to call, pop by, or send a mailer. Communicate with your database early and often and you will become a millionaire real estate agent!
Appointments – The direct leading indicator to your success is appointments. Appointments are required to do business. You’ll want to track how many buyer appointments and listing appointments you go on each day. Track them for the month and for the year so you can measure your results. Always know this… If you are not on appointments, you didn’t make enough contacts. Period, End of story.
Conversion Ratios – You’ll want to know how your conversion skills are in each area of your business. This will immediately show you gaps so you know where to focus. Example, if your conversion ratio from contacts to appointment is low, you need more scripts for your calls. If your conversion ratio from appointment to listing taken is low, you may need a better listing presentation or objection handlers. These will be very important to you when you create the next years business plan. When you now your percentages, you will be able to calculate probable closings. Here’s what to track….. at least:
i. Contacts to Appointment
ii. Contacts to Closed
iii. Web leads to Appointment and Leads to close
iv. Buyer appointment to signed buyer agreement to represent
v. Listing Appointment to listing contract
vi. Buyer Contract to Closing
vii. Listing Contract to Closing
Your production numbers: At any given time, if someone were to ask you “How’s your year looking?” You should be able to answer in dollars and units.Example: “Great. I’ve closed 24 deals this year so far and $650,000 in sales volume with 30 listings taken so far to date”
i. Listings Taken (units and Dollars)
ii. Buyer Agreements Taken (Units and Dollars)
iii. Offers Written
iv. Listings Taken
v. Buyers Closed
vi. Sellers Closed
Statistics: You’ll want to know both the market data and your own data. Example, how fast do you sell a home as compared to the market? How many listings do you sell as opposed to the average agent? How much % of the seller’s asking price to you get them on average when you close a listing? You’ll also want to know local data such as: How many homes are on the market, How many homes close each month in your area, Average price range, Average days on market and so on. You are in real estate now, Become the expert.
Goals: In the beginning, this may be challenging. You may find yourself changing them as you learn. Hopefully, you are nailing your goals and will need to adjust. But remember to always aim high and think big when you are setting goals. That way, even if you come in a bit under, you’ve still hit a good number because you were aiming high. Your goals should basically be set around the numbers above:
i. Contacts Added to Database
ii. Contacts Made
iv. Buyer Agreements
v. Listings Taken
vi. Sales written/escrows
vii. Buyers Closed
viii. Sellers Closed
x. Total Production/Units Closed
3.) Make Lead Generation your first and top activity. Nothing matters more than leads (well until it becomes about leadership). You’ll want to have a plan in advance for what lead generation activities you will focus on. 2-3 hours a day, every day, should be blocked for lead generation activities. Put it on your calendar and make it non negotiable. You will have to dig deep and master the discipline to achieve this. Remember, if you skip this activity, it will directly reduce your income. And if you have to miss it for any reason, you’ll want to replace it as soon as you can. Double up one day if you have to. A best practice is to do it in advance. Example, if you know you are taking a trip for 2 days, double up 2 days prior. Do your lead generation first thing in the morning if possible. The best feeling is when you know you have completed your tasks and the rest of the day is then yours. Don’t have your email or Social Media open. Here are some examples of lead generation activities.
- Open Houses
- Calling Expired Listings
- Calling or meeting with your Sphere of Influence
- Working For Sale By Owners (FSBO)
- Door Knocking
- Direct Mail
- Internet Marketing (check out www.theballenmethod.com for how to)
- Booths at fairs, malls, conventions etc.
4.) Find a Mentor, and Get a Coach: Why both? There are very clear differences in a mentor and a coach but they both offer value. Typically your coach will be a paid hire and your mentor will be someone that has chosen to invest in you. Your mentor will generally be available “sporadically” where your coach will have scheduled appointments. A mentor generally has a more “friendly” approach where a coach is not afraid to dig deep enough where it hurts. Of course, some mentors have this ability as well. A mentor may or may not have a personal interest in your success. A coach is paid to have an interest in your success. Typically, your mentor is someone that has what you want or has gone before you in business, probably your field, but not always. A coach has been trained and has skills and tools to help you reach new levels of achievement. Both are truly key players in the success of your business. Most high achievers have several of each for different areas in their lives and business.
5.) Use Models – Success leaves clues. No need to reinvent the wheel when so many have bone before you. Find what worked for them and repeat it. In real estate, there’s already a model for just about everything. Don’t be a fool and rely on your personal genius. In MREA, the book I suggested earlier, you’ll find great business models that are written systems to follow. They include an economic model (how you earn money), a budget model (how you spend and keep money), an organizational model (how you pay hires), and a lead generation model (how you generate leads to feed your business). You’ll also want to find real life human models. People that have ‘been there and done that’. You can interview them or watch them from afar, but whenever you can directly learn from them, you will benefit. Find people that excel in exactly the area you want to focus on growth in at that time.
6.) Document your methods – One day, when you decide to build yourself out of your business and collect passive income (the ultimate win), you’ll want to make sure your systems and procedures are documented and duplicate. As soon as you can, begin video taping your presentations and calls. Use screen capture on your computer and record how you are doing your marketing, transaction coordination, how you handle email etc. and save them all on a backup hard drive, or in the cloud for later reference. Document them well. When you go to make a hire, this will be a very valuable library that will save you time and money and will get your talent up and running quickly.
7.) Create your brand. Take the time to figure out who you are as a business. Create an MVVBP just like a “real” business would. MVVBP stands for Mission, Vision, Values, Beliefs and Perspective. It’s what you, as a business stand for, believe in, and represent.
Create a tagline and slogan that represent you. Add in a logo. Your log does not need to replace your photo, but it’s a nice addition, especially as you grow if you decide to build a team.
Decide your flavor and PROVE it. If you are a high energy, over the top, flamboyant person, be OK with that being part of your brand. After all, if it’s who you are, you’ll wear it well. You will fid that you begin to attract clients that are similar. If you are the quiet type, analytic, more of a ‘let me give it to you in the data’ kind of person, OK with that. Use it in your branding. Always make sure you tie in benefits to the consumer, meaning ‘what’s in it for them’
8.) Generate referrals using Social Media – One of the quickest ways to start generating income is through agent-to-agent referrals. Get on Social media, engage in Facebook Groups and start making it known that you are an agent in city, state and would love referrals. Don’t go in and “sell”. Offer value of some kind. Even humor can be value. If you do something really well, share it. Talk about it. Don’t be afraid to share. It will come back to you tenfold!
This should get you started. As you grow, you will find new “things to know” such as who, when and how to hire but for now, if you master these elements, you will be a force to be reckoned with in your industry!