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In this excerpt from my recent B-School Coaching Call, I discuss what I feel is a huge problem with how we tend to measure success in the real estate industry.
What I bring to the table for most of you is the ability to give you some perspective on the path it takes to build a successful real estate business. Thinking back about how I got here, it was nowhere near a straight line. I feel like if I can tell you what I did, what worked and what didn't, you'll probably get a lot of value out of that.
I bring this up because I've been talking with a lot of people who are dealing with some of the same issues I've dealt with in the past, going to a lot of the same conferences, and focusing many of the same wrong aspects of the real estate business. I've been to every real estate conference you could possibly go to. I've seen every iteration of how real estate can be done. And I understand it can be inspiring to listen to these agents that are doing hundreds upon hundreds of deals a year.
What I've discovered, though, is that measuring your success by this number is 100% the wrong way to go about it. I know some of these bigger teams and I wish you could see what their financials look like. If you get a chance, ask one of these team leaders what their gross margin is. You'd be surprised how many people don't know the answer to the question, "What percentage of gross commission income is left over after you pay your agents?"
Our team is 14th in the country at Remax, and within a few spots of that I know a guy who has 50 agents on his "team", and his gross margins are around 10-15%. These margins offer no real value because he just isn't profitable. There is so much risk in a business like that because he doesn't have the margin to be able to support any kind of downturn.
So make sure you know what you want your outcome to be and to know why you're doing it. To go down this path with me, you should be very clear that you want a profitable business where your agents don't hold you hostage. It's all about tracking, accountability, and having the proper systems in place.
Unless you set your business up right to begin with, you're profitability levels will never improve no matter how much volume you end up doing each year.
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