I want to quickly cover value-based commissions. Before you start building a team, you've got to decide what the model looks like. We're doing a little bit more than 60 percent of our volume from listings, so this is dependent on where your business is coming from. But essentially, you've got to have a target for how much you want to pay out on the listing side and how much you want to pay out on the buyer side to agents and what the split between listing and buyer business is going to be so you can figure out your gross margin, and a very simple gross margin: what you bring in versus what you pay the agents. Right? To me, I want to be in the 65 to 68 percent range gross margin. So after I pay my agents, there's 65 to 68 percent left over for the team to make decisions on how to spend. And this is how it happens. We do 10 percent off the top. It ends up being 30/40/50/60 on the buy side, it's 27/36/45/54, and it blends out at 45 percent for us. And on the listing side, it's 25 and 35, which ends up being 22.5 and 31.5. And that's it. That's value-based commission structure. And if someone asks, you know, we provide a clear path to 100k on our team. There are very few agents in our market that take home more than 100k. Three of my four buyer agents, who are less than two years in the business, make between, I think, 110, 120, probably on the low side bridge, to upwards of 140, 150, the other two. One of my senior buyer agents is struggling with some personal issues, and that's why he's not hitting his goals. But he's made six figures before, and we have two new agents which, once we get them ramped up, their goal next year will be to hit six figures. Then we've got three listing agents.
So that's it. That's value-based commission structure.
One tool that I've found helpful is, when you look at your business, thinking about its holes. For any of you that have read the book Traction by Gino Wickman, this is kind of how your business needs to be set up. Don't think so much about that this has a potential structure, because some of you, it's just you and that man, or you and that man, like a couple buyer agents. But if your business is weak in an area, if you don't have enough leads, you have a marketing issue. Right? That's the first function that, even if you don't have a person to fill it, someone has to pay attention to marketing. Then if you have leads that are coming in, and you're not converting them, then you have a sales issue, either inside sales or outside sales. And if you're not getting any appointments to meet with buyers and sellers, then you have an inside sales issue. If you're meeting with people, but they're not signing, they're not being loyal to you or committing to being loyal to you, you have the outside sales issue.
If you're getting clients, but listings aren't selling, or you're getting buyers, and they're not going under contract, you have an operations issue. This is where the world-class service is delivered. And then most of you won't have a person that's sort of in charge of HR, IT and finance, but that's the last part of it. But everyone of you has to start thinking about your business as marketing, sales and operations, operations being the world-class service. So how do you create interest in what you have? How do you get those people, those leads, potential clients, to meet with you and then do business with you? And how do you service them at a level where they're going to give you referrals and they're going to want to come back and just tell the world about you? So you've got to think about your business from marketing, sales and operations. Right? So when you think about holes in your business, do you have enough leads that you're not -- it's not a leads issue. So for us, it's not actually a leads issue. We actually have a conversion issue on my team, so which is why a lot of you, if you're paying attention, you may see my name in the "Sales Manager" box. We have four rocks as a company. I'm going to go through them here in a second. The first two are about conversion, the first one being, how do we increase our listing appointments from 9 met per week to 12 met per week? And our conversion, how do we increase it to 20 percent overall? That is a rock I'm tackling this quarter. The second rock is, how do we increase buyer appointments met to signed by 25 percent this quarter? So my agents are meeting a lot of buyers, and they're not getting their commitment to be loyal to us. Right? About 50 percent met to signed right now. And I'll go through these in a second here so you guys can see it for yourself, but those are two rocks that I took on. Those are two really game-changing rocks, let's just say it, paradigm-shifting, game-changing -- changing the game, you know. If I can jump back into the business and solve those two rocks -- we're hiring a sales manager now, so this isn't forever for me, but if I can get back into the business and get our conversion straight on the listing side -- so set more appointments and convert more of those appointments into signed listings -- it's going to be amazing. So that's how you determine holes in your business. What's your issue? Where are you struggling? Do you have enough leads? Do you have enough clients? Are you giving world-class service? These are the three areas I would look at when you're thinking about your multiplier projects.
I look at this here, what would I have done differently. I look at the model I have set up right now and it's really there are admin, buyer agents, listing agents, and inside sales. It's just a slightly bigger version of what I started with. I started with Tia and Chris. Tia was an admin and Chris was the buyer agent. I hired a couple more buyer agents and then I focused on listings so I got out of buyers. That's it. That was the thing that got me to 178 sides. That simple structure. It was a little bit more difficult to go to 248, to 320, to 450, but more of the same. Me exiting production, I did it wrong the first time, but that's the process you want to go through. I hired a bunch of agents who were not the right fit. I didn't have core values in place. I have beaten that dead horse enough. If you haven't heard of core values, you need to go back and listen to any of the seven calls where I've mentioned core values and the process surrounding core values. Here's one other thing: I still find some of the best agents are new to the business or at least they didn’t have a preconceived notion about how real estate has to happen. Unless you're a strong leader, to hire a bunch of agents that are going to second guess you as a leader is pretty challenging. I wouldn't recommend that. You want to have confidence in your first few hires. You want to make sure they fit your core values. For us, they hustle, they work hard, they embrace accountability and discipline, they know what world class service is and they deliver it, they have a positive attitude, and they like to make things better.
And ISA's, I'm careful here with seller ISA, this was for inbound. We were never big outbound prospectors at all actually and then we had a buyer, this was a combo inbound/outbound. We had yard signs, calls, and just following up with internet leads and so forth.
Dan Ellison says “How do you keep your admin extremely productive? Their job is to take the reactionary work off your plate and thus can make their day crazy.” I do think these principles apply to admin. Your admin could have, if you did this exercise with your personal admin, what if you each did this together? At the beginning of the week you determine which three projects your admin are going to work on, which three projects you are going to work on. You put your 15 steps in there every day and make five copies of that, five for you and five for your admin. Every day you guys sit together and do your top six together. And you time block those. I know some stuff is reactive and you have to get to it, but how are you going to time block your day? What are the things, the people you need to hear from and need to reach out to today, Mr. or Ms. admin, and then end of the day, as you’re going through your day man, count the wins. Positive focus, go big, begin in gratitude or come home. Write down 10 ways you served at a deep level today. Dan, I feel like if you did this with your admin every day the tendency is to do this one day or maybe for a full week and then you get away from it and you never get back to it. Can you imagine how productive and engaged and enthusiastic and energetic your admin would be if you took this level of “Sure, let’s do this together.” It would change the game if you engaged with your admin at this level. You’ve got to do it in a way where you are coming at it from a humbleness. “Hey admin, I don’t have all the answers, I’m not doing this to micromanage you, I promise I’m not. Because you’re going to decide obviously we will decide together which projects are important, but we’ve got to carve out your time. We’ve got to focus on money-making activities so we can scale this team and there is more opportunity for everyone and then you know, I got to keep you positive. You’ve got to enjoy this work, I want you to come out every day and be like “man I ran out of room because I had like 16 positive things happen today."
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If you’re not independent, how does a broker-split to franchise fit into the agent’s split? This is a great question, and when I was an agent with RE/MAX I paid $750 per month as a desk fee and $439 for each of my agents. Then the split was 95-5, so the broker would take 5% and our team would keep 95%. Then, on top of that I did a 5% team admin fee. So, it was actually 10% off the top, and then we did 30/40/50/60 splits.
For my agents, at the time, if they sold $400,000 in the month prior, I would cover their broker fee for that month. I want a team where there are no out-of-pocket expenses for agents. All their expenses are baked into the splits, and if they’re productive it won’t matter. My conversations around buyer agent splits revolve around how much money they’ve earned in the world around the free market for services. If I’m talking to a recruit, I ask them this and how many homes they’ve sold as well as how much they made. I actually switched to the KW model of resume reviews for highs and lows in compensation. So, for everyone that joins my team now I know exactly what they did in their positions and what they made doing it. When we went from RE/MAX we kept the 5% and 5%, so it was still 10% off the top, but we gave 1% to RE/MAX. My former broker was keeping four and giving one, and now I was keeping nine and giving one. When we went independent, I kept the 10% as a broker/admin fee. We still do the 10% off the top, so on the buyer side it’s 30/40/50/60, which ends up being 27/36/45/54 and listing splits are 22.5% and 31.5%. The model is the whole 45/25 payout on the buy side and sell side. This averages out on 35 if you have a balanced 50/50 business, which you need to have for a healthy real estate team. If your agents are producing you should step up and be willing to cover some of the broker fees. However, if you’re paying too much money to the broker at the end of the day, you have to consider other options. One guy told me he was paying $23,000 to KW, and that each of his eight agents were paying $8,000. That’s a total of $87,000, which is too much in my opinion. I like KW, but I’d argue that their compensation model isn’t being put to good use. Everyone needs to figure this out, but I’d always base it off of your agents' production.
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I want to quickly talk about inside sales. It felt like it was a little worse last year, where everyone was offshoring their inside sales and even if they were a solo agent they were getting an inside sales person. In my opinion, you want to leverage yourself completely before your hire someone to make calls and that includes having an admin and having four to five buyer’s agents. I still believe that’s the formula. Yeah, you could bring in buyer agents and have them spend three to six months just in inside sales to cut their teeth. To have that, to have that inside sales be your 8-11am time block every morning, where you’re giving them structure and accountability, that sales are happening as a result of that.
I said three to four here but I really think four to five is the right number. When you have four to five productive agents, you are doing eight to 10 sales outside of your own production every month. If you’re doing three or four sales per month, that’s 12 sales a month on average. I think that’s when you need an inside sales person. You can do it before that and it will work, but you're just training your agents to have bad habits and not lead generate for themselves. Team leaders think, “Well if I teach my agents how to lead generate, they’re going to leave and do it on their own. They don’t have the capacity to hold themselves accountable; that’s the whole reason they are going to be successful on your team. They don’t have the mental capability to realize a $1,500 a month platform that they can do that on their own. Ultimately, if you can master this lead generation conversion management, you control the game. There’s all the accountability metrics and measures in place. Daily tracking; we’ve got the daily tracking on the 16 measures in KDNA, and we have the same for our ISAs as well.
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I’m going to go through this one slide. I want you guys to play all out for this. This is one of those times where a lot of you check out, and this is not the time to check out. At least three or four of our Boardroom members are certified high-performance coaches. These team leaders thought highly enough of this work to go get certified to become a high-performance coach.
Play along here. Go to the question box and type out some thoughts to these questions. Tell me what courage means to you, and about a time in your life you felt you were really stepping up. Are there any areas of your life, or people in your life, that you feel like you are backing down from or avoiding? I find this a lot with team leaders and their teams. They don’t step up and lead and confront their buyer agents that aren’t putting in the effort, aren’t answering the phone, not doing the basics of real estate and the team leaders are sort of sheepish about it. If you had even more courage, what would you stop doing right now? What would you start doing? I had a call earlier today with a board room member and really challenged him on this. For him it was an overhead, worrying about some overhead he was trying to cover with one effort and he wasn’t putting as much focus into a potentially more profitable situation. Either print this out, or these are fillable PDFs, and I want you to go through all of the sessions. Where does courage come from? How do we start to gain more confidence and courage in our lives? The answers lie not only in moments of crisis, but in how we live each day of our lives. Consider the concepts below and respond to the questions. So, first off, it’s an awareness of what we fear. Awareness of What We Fear Outside of fears for physical health in dangerous situations, what we most often fear are three things. First, we fear loss pain - that by changing or advancing in our lives we will lose something important to us. Second, we fear process pain - that the mere act or process of changing will be too hard for us. Third, we fear outcome pain - that all the effort we put into changing may not lead to a better outcome in our lives, that the “grass might not be greener.” First part of this is think of a change you have avoided making or a dream you have not moved towards, and complete the sentences below for greater insight. Ask yourself, “I haven’t changed or chased my dreams with more courage and commitment because I’m afraid I might lose what?” “I haven’t changed or chased my dreams with more courage or commitment because I’m afraid the process might bring these hardships in my life…” The last part is “I haven’t changed because I’m afraid that despite all the effort the outcome might be not-so-good and I could end up…” What are the loss pains, process pains, and outcome pains around something you’ve avoided chasing and something you’ve not moved toward? When I overcome all my fears and have the courage to take action and improve, my life will be different in this way… For some of you, it could be the commitment to build a business. This is something that the industry is not doing. There are not a lot of folks like you that are building sustainable businesses in real estate. I mean like real businesses, not just doing 100 or 200 sides and you have to show up every day. We’re gonna do that and plus it and build something that’s truly sustainable and you can be the owner of. What are all your fears around that? Expressing our real thoughts, feelings, and ambitions to others. It takes courage to tell the world what you’re about and how you’re thinking. Doing it more consistently will forge a stronger confidence in your heart and social world. Consistently creating and responding to challenges in our lives by taking action. A person of action develops a sure sense of who he or she is and is also more likely to be bold and resilient in tackling life’s major challenges. Commit today to taking a few bold leaps forward in your life. If you did nothing else on this call, I’m requiring you to do this part. Three areas I’m going to take more bold action in in the next 60 days are, and here’s what I’m going to do. Could it be in your relationship with your spouse, with your children, your faith, your health, your business? What are the three areas you’re going to take bold action in in the next 60 days and what are you going to do? Write those down.
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What Does “Raving Fans” Mean? With increasing importance of word-of-mouth marketing, could you imagine providing a level of customer service not to some customers some of the time, which is kind of what happens in our businesses, right? Most of you can go “No no, we’ve got this covered, we do the reviews and we get 10s.”
I would venture to guess, because it’s true for my team, that some customers some of the time get world-class service from us. But this is to all of the customers all the time, that is so unique that your customers become raving fans of your business, talking about their fantastic experience with your business at every opportunity. Three Secrets of Raving Fan Customer Service
Decide what your organization wants is the first thing, by determining the type of people focused service your organization will do and will not do. The individuals in your organization develop their own personal touch that is in line with what your organization wants.
Discover on a continuing basis what your customers want, and think about what and how you provide their solutions.
Then implement and improve procedures and policies in order to deliver a little more or “plus one percent” as the book calls it, service, that your customers expect.
So step one, decide what you want. The first step in creating raving fans is deciding what you want to provide your customers and create a vision of perfection set on the customer. Imagine you are the customer and identify every detail of what would make a raving fan experience for you. Right, so using my restaurant analogy, I know at least 10 things that I could have - I guess I’ve become a bit of a restaurant, like a service snob. Not that I treat people badly, but I just notice great service, and average to bad service. So for each type of customers or each type of product or service, so for buyers and sellers, put yourself in the shoes of the customer from the moment you make contact with the company to the delivery of the service and beyond. What type of experience can you envision changing a customer into a raving fan? I’d argue that most of us probably have customers when we’re done, and we don’t have raving fans. So what type of experience would have to happen? The next part is just understanding the customer’s vision in the context of the company’s vision. And this one - we are already - consumers do not think highly of real estate agents, so even if you provide a better than average service, you’re still fighting that uphill battle. You’ve really got to understand what a customer thinks of real estate agents, but also what they want out of a real estate service. And your vision and their vision may be different. And then, just deliver “plus one,” this is doing everything like going the extra mile for your clients, to every customer what was promised constantly every time every day; promise and deliver. Level of consistency requires systems, processes, training - I don’t think any of us spend a lot of time training our buyer agents what level of care and standard of service they want delivered to clients all the time. Once consistency is established, a company should continue to focus on improvement. That’s the “plus one percent” of the guideline. This basically forces you to think about your customer and about customer service as the most important tool building and realizing a successful business strategy, and I think most of as wanting to build this big team, and we - this is true for me - we think of this as a secondary issue. Right? I just need more leads, I need better lead conversion, I need better lead management, but we don’t think of the service we throw these clients into as being the best service that it can possibly be. Your ability to deliver raving fan service on a consistent basis will determine your long-term success. So you’ve got to read the book. Get the book and read it. Ken Blanchard says:
“Your customers are only satisfied because their expectations are so low and because no one else is doing better. Just having satisfied customers isn’t good enough anymore. If you really want a booming business, you must create raving fans.”
The challenges is for all of you to think about the services you provide to buyers and seller and what you could do to make those services that much better. I’m talking the best real estate services in all the land. In the entire country. How can you provide the best listing services to your clients?
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The Listing System So I’m going to go through some material that I originally put together for the first iteration of Real Estate B-School and I want to sort of unpack the mentality: you’ve got to build the listing system as a way thats going to be consistent no matter what. Even if it's my best friend or my mom that’s listing her home- I tell my mom to call the office.
Essentially, that’s the thing. If I get in the middle of it, especially with past clients who have your cell phone number that are going to reach back out to you: you’ve got to say, “Hey, listen Judy, every time I try to get this set up on my own, we’ve got a process that gives us these awesome success rates and let me do this: let me get you in touch with Ashland in the office, she’s going to take all the information on the home, all your improvements, just set up a time for us to connect," and every time they’ll say yes. So it’s got to follow that process every time. Most of our leads - and we get a lot of people who come from phone-jockey / phone warrier standing behind a podium prospecting-type world - but most of our leads come through branded direct response sources. If you haven’t read some of Dan Kennedy’s books on direct marketing, especially his direct marketing, it’s kind of like the bible of direct response marketers; you definitely want to consume that book. Everything has to have a call to action, everything should have a USP, a deadline or some scarcity if possible, very strict guidelines for how you want your marketing to be. That’s the way that we work. We don’t have any outbound calling effort and we still maintain the margins that we maintain. People that are really hard on outbound calling, they’ll say, “oh you buy your business.” Yes, of course I buy my business, but I do it in such a way where it is a calculated return. Manning a team of inside salespeople is risky, and it’s not necessarily the easiest thing that you’ll ever do, if some of you have even tried to do it yourselves. Just the nature of the mindset around the call, no matter what the market is, you have to bring some doubt into the mind of the seller prospect, but if you don’t use us, bad things will happen. We always end with a question,
“Mr. Seller, if we come out to the property and you love the marketing and our approach, you know we’re going to do the best job and get you the best price in the least amount of time, and we agree on a pricy strategy and commission structure, will you be ready to move forward and get your house on the market?”
Doesn’t matter how they answer. Everyone should write down the question. That has to be the last question that the person that is doing the seller intake asks; because if it’s “yes” then you know it's game on, and you better be ready to close them. If they say, “well, we’re meeting with four other agents,” you’ve got to know that as well.
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I want to unpack for you guys what our process looks like. You have to have a process work. Open up a sheet of paper and take notes while I’m doing this. You have to create your own process when hiring buyer agents. The first step to identifying buyer agents or admin to bring onto your team is to develop a set of core values that are true for you. I know some of you are going to blow this part off, and that’s a big, big mistake. I’ve done it in the past where I’ve just gone and copied someone’s core values. I copied Barbara Corcoran’s core values, I made core value based on The Traveler’s Gift. It seemed like a good idea at the time, but you have to identify your core values. You are who you are.
If you’re small, you don’t have anyone on your team that really represents who you want to be, then you have to base them on yourself or people you admire. When we did this for my coaching company, we were challenged to do this for people who didn’t even exist but who we really wanted to model our core values after. For us, our core values are: accountability, discipline, hustle, and hard work, and positive attitude. We lean into those three favorites: accountability, hustle, and hard work. When we interview, we ask about accountability, discipline, hustle, and hard work. People say they want accountability, but very few - when we tell everyone that we prospect from 8 a.m. to 11 a.m. five days a week, we lose about 75% of people that we’re on the phone with, right, with that statement. Basically, the reason we can guarantee our agents success on our team is we embrace accountability and discipline, period. We want to achieve. We hustle and work hard. 90% of the population does not hustle and work hard. So your core values are there to exclude people from your world. You can’t - you cannot - get around that. Okay? Make sure instead of swiping this - don’t swipe my core values, because they may not be for you. If you don’t personally embrace accountability and discipline, if you don’t hustle and work hard (I doubt there’s anyone on this call), are optimistic and bring a positive outlook to work, make sure that these are your core values. The ones you generate are your core values.
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We know we hold our expenses accountable. It’s all about ROI. Even if you spend a few hours a week where you get yourself away working on your books, that’s a lower pay grade than you're worth. You could be working on other things that make you more money. Just prospect for an extra three hours a month and don’t do your books. Those are the decisions you have to make in order to climb this ladder. You could do everything and just be in survival mode all the time. The more stuff you can get off your plate and create a system around, that’s where this thing gets really, really fun. I want to do nothing in my real estate business. I want it to be a kick ass healthy business that’s growing and has an awesome culture and people get a great service. I just don’t want to do a lot for that business. That’s what we’re building.
It’s making those decisions about what you’re going to touch and what you’re not going to touch. Not everything can come off your plate at once, but it’s a process. When it comes to marketing, spending, and ROI tracking, you’ve got to take this deep versus wide approach. We had someone in the Boardroom who said he had $10,000 extra to spend a month on marketing. He really wanted to spend it. He wanted to go all-in on radio, but I really held him to not do that. We ended up spending $2200 a month with one station, the right station. And we’re going to monetize that one thing before we spend any of the rest of it. If it takes 6 months to monetize that spend, that’s 6 month of $7800 that he can just bank. The tendency is just to start four things at once, get moderate results, and you don’t really know what’s working and what’s not working. You’ve got to go deep in your marketing. For me it was buyer internet, raving fans, direct response and yard marketing in that order. Four Marketing Pillars
Buyer internet, no barrier to entry there. It’s just a process, you just work leads and get closings.
Raving fans, I was building up a database, worked on my database, people knew, liked, and trust me. I got business from that.
Then I became a real good direct-response marketer, which is why we have 600 appointments this year. We’re really good at getting people to contact us.
Then getting signs in the yard and having multiple calls to action on our yard marketing. That’s kind of the progression for me. You could do 50 closings from each of those, 200 sides a year just by having four marketing pillars.
Cash on cash, the way the Business Tracker does it is the way to do it. A lot of people just do money in vs. money out, which is fine. Overall, you just want to find out which ones are producing less and either raise them or get rid of them. It’s basically a year-to-date gross margin for that lead gen source divided by the total expense. Every deal must be sourced. This changed everything for us in terms of how we organize our business. Each lead source has a number. Buyer internet are 100 series. I had a distinct platform for a while when Boomtown sold like a billion platforms in my market, but we don’t do that. We just do Boomtown and Zillow. We don’t do Trulia. We just have two buyer internet lead sources. Yard marketing. I honestly need to do a better job of tracking the different sources of yard marketing. Radio, we just do the two stations. Shark Tank , we stopped. That was not profitable. The direct response marketing is all under the 400 series. This is the same thing as a bookkeeper, you’ve got to do it and if you don’t have this lead source document going, create one of these for your business right away. It’s a must. And then in the business tracker. You just wanna make sure you’re tracking even better than I’m tracking these. I haven't’ done a really good job of keeping the number of leads. But you wanna track these things. You want to go deep, not wide, on your marketing spend. When you spend a dollar, you want to make 10 dollars.
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Just like on the buyer's side, it's all about lead management. You've got to have a pipeline mentality, and the same system you use to reach out to people in your database is the same approach you're going to use to reach out to sellers in your database. And so maybe it's not the full 60-touch but it's the full Market Snapshot for sure, it's at least the Vyral videos for sure, and I would say the direct mail.
You probably don't want to invite them to an event. I would probably add them to the pies and to the chocolate giveaways, but make sure they're legitimate leads. Make sure your database is clean if you're going to do that. There is a seller email drip campaign that actually works pretty well; we run it out of Top Producer. So we use Top Producer for our seller lead management process. I don't care what you use; you can use Boomtown, you can use Commissions Inc, you just need something that can do email drips. I like the market snapshot feature because it has me as the - those listing alerts are pretty powerful if you've ever seen them in Top Producer. So here is what we use for drip emails. There's also a USP version of this. I've got two versions, it's real simple, you can just swipe and deploy these. I haven't gone deep and tested these to the extent that they could be, but this is something that works really well. This is in addition to the market snapshot, the 12 direct, and the 24 videos. So they're getting content. You're becoming an expert in their mind. And there's just a link to to buyer search engine and pretty much everyone has a testimonial on it, so it's a pretty good format. You can swipe at that. ABC steps in Top Producer, same thing. If they're hot to list it's every week, if they're 30 to 90, 14, and 90 to 180, it's every 30 days.
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I almost want to do a poll of you guys to find out how many of you are actually running monthly financials. It’s a small percent, it’s minute in the real estate industry and I would say, I wish more people did it here. It is the number one, first you have to do in the financial part is run monthly financials. And the bottom line is that you’re not going to have a real business until you do this.
It is like the only score that matters; it’s that one thing we can all come together and say hey, how’d your business do? Like, "Well, I don’t know, it’s May and I haven’t done my financials for 2015 yet." I say that because I know there are some of you on this that might be operating that way. Chart of Accounts You just have to make a decision on how you want your chart of accounts to look. And I’m not going to go through this in detail, but any bookkeeper will be able to take this. Someone made the comment that their chart of accounts isn’t set up in a way that’s useful. This chart of accounts is set up that way, so, Keller Williams has a Streamlined Business Solutions, which I've heard mix reviews on honestly, but any bookkeeper can take the chart of accounts there and tweak them to understand them. So, you want revenues and cost broken down by list and buy. And all of your operating expenses. Your listing, your marketing, advertising, technology, overhead, administrative. It’s not that complicated. Get that chart of accounts. Go on Craigslist, interview three certified Quickbooks bookkeepers. If you’re not running monthly financials, and you’re on this call right now, that is your number one multiplier project. You have to be producing monthly financials. I started doing this in 2008. I was new and it was my first full year in real estate and I was doing monthly financials. I knew I needed to know this. I was making money and spending money and I had a business background, and I’m like, what do businesses do when they make money and spend money? Well, they keep track of it. So this is just a bare minimum requirement. You need to stop everything right after this and grab that chart of accounts, that Excel document, open up, print it out, look at it, process it as it makes sense to you. You can make it more or less detailed, the whole point is that there are categories and number ranges. When you’re working with your bookkeeper on a regular basis, they’ll say hey, I’m not sure where to put this. You have that chart of accounts printed out already and can say to put it 55-15. Like okay, cool, thanks. All your revenues are all 4,000 series. Your cost of sales is 5,000. So 410 is listing commission for us. 420 is buyer commission. 430 is listing transaction fees, so I track my transaction fees separate from your commission income. It is way easier than it seems even if you’re a financial idiot. You’ll have that chart of accounts, Quickbooks certified bookkeeper. Okay? Biz Tracker Ryan asked the question, "Why isn’t your Business Tracker not enough for monthly financials?" I don’t care what size you are, I started in 2008. It was the year I did 44 transactions. You have to have someone put your books together, put them into Quickbooks. It’s a bare requirement. The report your bookkeeper gives you, that data goes into the Biz Tracker, but you could have a 100 transactions in a month. And who’s going to organize those transactions into the the chart of accounts? That’s what the bookkeeper does. I mean, I have a ton of transactions going through my real estate business and I only pay my bookkeeper $200 a month. For like a lot of transactions, based on how long it takes them essentially, anywhere from 25 to 50 an hour most bookkeepers will charge. It depends on how efficient they are. Mine’s pretty efficient so it doesn’t take her that long. Definitely Biz Tracker doesn’t replace monthly financials.
Transcript:
For listings, it’s more of a consultation because people are calling us. When you’re outbound dialing, it’s a sales call. You’ve got to fight them for an appointment and then you’ve got to do the seller info sheet.
Seller info sheet is step one of the process we’ll go into in a minute. We just assume the appointment. They’re calling us, that’s the perception of value and just that perceived authority that direct rate response marketing gets you. You want them to be reaching out to you. It doesn’t necessarily mean that you’re going to do it any differently. Once you say yes to the appointment, you’re still going to move them through that seller info sheet, whatever seller consult, the important questions you have to ask. We just find that we get the seller talking, find out their why, their big motivation. Because you're going to come back and circle back to that and reiterate it again. We have Ashlynn in the office taking the first call, then we have our listing agents calling to follow up and confirm the appointment. The first thing they do is reiterate the why behind the move. So they know what they're dealing with. Some sellers are indifferent to a move which I think is ridiculous. It’s a major emotional thing you’ll go through, one of the top three. You want to know that going into it. I think we still call ours equity evaluation but you want to call it something. It’s more in-depth, it goes deeper than most appraisal.s you want to have a big benefit for coming into an appointment. And then follow-up is critical.
Transcript: I want to start with the first part of getting this thing right from a financial standpoint, and it comes down to when you make the decision to build leverage into your business through administrative people and outside sales agents and potentially inside sales agents, through marketing and technology, all those are leverage points in your business.
When you make that decision you have to have some kind of model that you’re following. So the models around agent compensation, it is the the thing that I see wrong with all real estate teams. It’s the first decision you have to make in your real estate business - how you’re going to compensate agents on your team as you scale your business. And the challenge is that when your production is lower, you don’t feel like you have much to give to someone, so you don’t fully understand how it’s possible to pay out such low splits, but you’ve got to get over that very quickly and you’ve got to find people that are willing to work within your value proposition. I debated going into what that looks like; that’s a whole separate topic. It’s more along the lines of recruiting, but you’ve got to understand that that first decision is going to dictate how much money you have left over to cover your expenses. So if you take the most dramatic example, a straight up brokerage like Re/MAX or Keller Williams. In that model, their margins, like their business model, 450 agents, a third cap - so if you know Keller Williams, capping is about $2.7 million in volume in a market, a third they hope will cap and a third will never cap. That’s what real estate agents make, like most people aren’t going to sell $2.7 million worth of real estate in most markets. And $2.7 million, 3% of that is what, $70,000 or $80,000 before expenses? So at a Keller Williams office if you sell $3 million, you bring in $90,000 top line, you’re giving away $23,000 of it. And granted if you sell more it’s a lower percentage, but that’s the fundamental thing that’s wrong with the model, is that brokers don’t have very good profit margins. So switch it over to what our profit margins are, our target is really 70% and I’m pushing harder to get to that 70%, we’re at about 66%, 67% gross margin. So gross commission income, less agent compensation. And you’ve got to make a commitment to review your financials every month. Mine are ready by the 10th of the month prior and I set time aside where i review my financials. If there’s anything that looks a little weird, you know, anything that just doesn’t look right. And I want to let you guys know that what I have here, we have people in our group and in Boardroom that are even more aggressive with their splits. It’s all about value proposition right? So whatever you think a buyer’s agent is worth is what you should design your compensation around. To me, it’s a $30 to $50 an hour position, and as along as you have enough opportunity and you provide the structure, the accountability and the framework for them to achieve that level, you’re going to be able to fill people in that position, because there aren’t many $60,000 to $100,000 positions in most markets. We can consistently and predictably get someone earning six figures. That’s not a normal thing in most markets, OK? You’ve got to track buyer and seller commissions separately along with buyer and listing agent splits, that goes back to the chart of accounts. Buyer business gross margin is in the 55% to 60%, that’s gross margin, how much you keep, so you want to pay our between 40% and 45%. Right now I’m running at 45%. I want it to be less. I want to pay out less to my agents When people hear me say that they’re like “oh, you want to pay your agents less?” No. I just want to pay them a lower percentage, so my model tightens up more. My model is solid even though I’m on the upper end of these ranges, but for all of you I want you to know that what I do, I want to challenge you to do little bit better than what I do. Listing business gross margin 75% to 80% or 20% to 25% payout to listing agents, no salary there.
Transcript: Angel asks the question, “I have a buyer’s agent that wants to start going after listings." This is a cool question. "I think he is looking to go after listings to go out on his own. I fear that he is going to stop working the buyer leads as hard. Should I let him go, or is there anyway to fix this situation?"
Here’s the thing. On my team, we have positions for buyer’s specialists and listing specialists. The two positions are very separate. When you’re with my team for one year, you have the opportunity to work listings, but not in a way where you’ll prospect or farm or spend money. I’m not going to let them build their brand within their time. It’s not the way it is. It will never be that way. I don’t recommend it, but they can work their sphere. So for some of the 36s, not all the 36s targets, but some of them are 30 buyers and six listings. We actually tasked, challenged, put it in their goals, our buyer's agents that have been on the team for over a year to sell six listings and 30 buyers. I think one actually has 36 and six -- 42 in total, but 36 buyers and six listings. We actually challenged to go out and find six listings and bring them to the team to get them closed. I would just have a conversation, a very direct conversation. Hey Angel, I appreciate that you want to size the business. The position we have available on the team right now is for a buyer’s agent. After one year on the team, you’re allowed to work your sphere, but the responsibility for the position isn’t prospecting new listings or farming an area. If you want to do that, that’s more of an independent agent thing, which is cool. I respect that. You may, Angel, take the opportunity to coach this agent a little bit if they’re newer. They don’t really know how challenge the business really is and how much hard work and money it takes. It takes us over a thousand dollars to get us to the front door of a property. In our slower months, and we do radio which is more expensive, some of the more slower months we have about six or eight calls. One of our stations costs ten grand! That’s a dramatic example, but whatever you do to generate listings, it’s generally a lot of time and effort and usually expenses involved. This agent may not know what all is involved. If you like the guy or girl, you might just want to coach them. What’s really driving this? Do you want to be on your own? The position is clear, I only have a position for a buyer’s agent. I need you to be 100% focused on that and be the best buyer’s agent this market has ever seen. And then, in a year, on the team, you can have that SOI. Just have that open conversation to see how they respond. If they want to do both sides, and it’s just coming, half-grade quickly if you need it.
Transcript: Geographic Farming is a really great idea when you’re in year 3, 4, 5, or 6. It’s quite painful to start right out of the gate, and I really wouldn’t recommend it. I’m going to tell you what I did and warn you how painful it can be.
Discover Publications When I started I was sending out a 12-page color newspaper for 54 cents per copy and I was sending it to over 10,000 homes (Purchased from Discover Publications). I’d suggest going hyperlocal with your content and only sending out 2,000 to 3,000 copies. Pricing will be higher, but I think 3,000 is the minimum. It’s easy to get vendors to pay for them if you get creative. Talk to some local restaurants or businesses and strike up a deal. I stopped doing this, although I loved the concept. You’ll have to hire some local writers, and you can get them to work for next to nothing. Start as small as you can, and then commit fully to see if anything comes about. Listing Grabber We then shifted to Listing Grabber, and 9-10 months into the farm we got some good results. We’ve actually attributed nine listings to their service. You need direct response elements, and you want to build authority with the same homes. However, this is a 2-3 year process, so don’t attempt geo-farming if you’re not committed. We also just did a review with Listing Grabber, and apparently 35% of the homes were doing 55% of the feedback, so we’re actually cutting our numbers and targeting the correct homes. We were in 20 subdivisions and now we’re only dealing with seven. They advise that when someone responds to your materials that you deliver a packet to them. These postcards aren’t very sexy, although they do work. I’d recommend following their system and finding someone that it’s working well for. You can’t forget that farming usually comes later in your business. First you should focus on FSBO’s and expireds, the 60-touch system, and eventually you can get into farming. Once you have some traction with farming, you can begin to do some digital farming in order to supplement your primary farming.
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The 60 Touch Program is for anyone that knows you and likes you. You can roll out this program to anyone that enters your world. FSBO’s, expired sellers that aren’t ready to list, your sphere, past clients, or anyone else you want to stay in contact with. This is simple database referral marketing. You’ll constantly give to this database in order to get back.
If you’re not using Vyral, I highly recommend it. You can do a recruiting blog, a coaching blog, or an educational real estate blog with them. It’s all direct-response with calls to action peppered throughout the text. With your direct mail, you can do anything. Newsletters are a little more costly, but they do work well sometimes. You could also do a season’s greetings or a jumbo postcard advertising one of your services. Just make sure you’re sending something of value. When it comes to your events, it can get expensive so implement them last if you don’t have a large budget. Because these events are so costly, you really have to monetize them in the form of mining for referrals or testimonials for your service. You need to generate a lot of referrals, but since you’re giving your client something, they often give back. We give away pies on Thanksgiving and chocolates on Valentine's Day. We use generic postcards for these and they’re very low cost. The best thing about this system is that once you have it set, all you need to do is send it out. It makes everything else very easy once you have it in place. You just throw a contact in your database and they’ll be contacted 60 different times in a year.
Transcript: Sophie asks the question, "How can you tell that the buyer agent will not become your competitor once their clients and business reach a certain level?" This is an awesome question, because I think this is a common dilemma. I know others have input or experiences around this. Here's the thing I know: 90% of the world has no desire to reach their full potential.
So if you're willing to invest this kind of money in yourself and building your business the right way, I'm not talking to you. If you're on this phone call (or this blog) you're not one of those people. Real estate attracts the vast majority of people that are not achievers. There was someone on our team who thought he worked his butt off, but sold 44 homes for a 90-100+ homes position. He was with us for 3-4 years, so he obviously filled a purpose for us. My second listing hire did 72 sides for us in her second full year. I thought she would truly be my replacement. We parted on good terms. When I looked at her production, she hustled and she was aggressive. She really went after it, and never missed a transaction fee, etc. Now, she is only doing 18 closings in the last 12 months, and she has two other people on her team. So she's gone from 72 homes to 18, and she's an achiever. It's just a testament to our business model at The Lars Group. You don't have any competition, so hold true to that. The nature of the business that we're building here in B-School is such that a large majority of the business comes from your efforts. We're at 75% team-generated business this year. So one out of every four deals is from my agents' efforts versus my efforts. We're building your marketing system around the fact that you're going to be generating the business. Two years ago, 85% of our business was team-generated. We have agents that our loyal to our team, and we're building a culture that people want to be a part of. I would just eliminate the thought that you even have competition or that you're in some way training them, because they can't do what you're building out.
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Julie asked a question, "Can you give us an example of what you say to a buyer agent who is consistently not selling the amount of houses they should month after month?"
You should be in a rhythm where you're having weekly meetings with your buyer agents and they are running the meeting. This was a thread that Kyle and Andy put out there a while back. It will never come to the point where they are not selling homes month after month; they're just not doing the activities. If you are running your business with the Agent Performance Agreement and you're using the weekly tracker, there is no surprise. They aren't doing their activities and you're sharing that with them or the team. Every week, you're having a quick 10-15 minute meeting on that. The meeting is a 10 to 15 minute meeting where the buyer agent runs the meeting. This 60 or 90 days in, you would have 8 to 10 meetings with the agent. Every meeting starts with a positive focus, one thing personally and one thing professionally. Then you go through their weekly success tracker or KDNA. You know what they've been doing for the last 60 days, if all their activities are through the roof, you are having these conversations, "What happened when you met with that person? Did you present the loyalty agreement?" That's the level of service that's required for these agents. They're taking the pressure off of you, you just have to show up to that meeting. We went to 8-11am required new business development with our team on Monday and Friday in the office. Monday, Chari is holding our listing agent 1-on-1's and Friday she is doing the 15-minute buyer's agent 1-on-1's. We do a quick CRM review - if they were on calls did they answers calls? You have all the data to know why they weren't successful. Then just going through issues, identifying issues in their business discussing it, and solving problems. Ask them what they want to work on next week to make their business even better. Could you imagine a cadence of 15-minute meetings where you have a 1-page and are taking notes to put in their file? Jason asked the question, "What's an OT notebook?" It's just a green notebook we ask our agent to keep with them where they can have something to write in and they can talk about their OT time. We are particular about every call that comes in. Every call that comes in on a buyer line during the week is listened in on. Commit to Buyer Agent Weekly L10s. That's Level 10, a traction tool. And they're going to run it. Julie, does that answer your question? What you say is that there is nothing to say because you guys are coming to the conclusion every week of what's working and what's not working. Are you doing the activities? It's not this big surprise anymore. It's easier to run it this way than let it go a month or two or three, or just assume that everything is going fine. Have this printed out in a whiteboard in your office, and go through this list. They've got to be honest if they want to be successful, and you're just here to give them the tools to be successful. Systemize it to where you don't have to come up with anything to say, all they need to do is be in the office from 8 to 11 every Friday, you're going to pick the agents, they're going to come in to do their L10, this list will be on the board, and they're going to run through it. Boom. You're just keeping some notes in a file and when it comes down to having a difficult conversation, it's not difficult. "Hey dude, we've had 10 weekly meetings and every week we have talked about where your actives are not where they need to be. We talked about you have some challenges with your little kids, which is totally cool, I love kids, I love family, but you've got to operate at a higher level if this is going to work. I'm going to give you a 30-day action plan and within the 30 days, if I don't see your activity level pick up, I know you're not going to hit your goals and you're not going to be successful. We are both going to be frustrated, and neither of us will like that. I don't want that. 30 days, we're going to have four more weekly meetings. On the fourth one, we are going to have another conversation to see if this is the best fit for you. I'm rooting for you, I'm wanting you to make it. Are you up for it? Can you do this? High five."
