4 Principles to Building a Profitable Real Estate Team (PART 3 of 4)

Welcome back to the Business Freedom Podcast. This is Lars Hedinborg, founder, Real Estate B School and co founder of High Performance Real Estate Advisors. We are in Charlotte, North Carolina and I am in the midst of probably the thing I'm most passionate about in all the land when it comes to business is building a profitable business. And it seems like it should go without saying that when you're building a business, you should build it profitably. Although it escapes, I've got to believe, probably 80%, maybe not 80%. Who knows how many real estate teams today are running on slim to very little profit. And that's why I'm into this series. So we're in part three today where it's really a conversation around what I'm seeing in the industry. I'm seeing a lot of team leaders chasing growth and it seems to be they're chasing growth for growth sake, not I'm talking top line growth and not profit growth. And I don't see a lot of team leaders when I talk to them about a plan, about moving money around and net worth and like what's a three year plan? What did you want to achieve three year goes three, three years ago with your net worth and are you on track? And not a lot of really responsible practices in terms of team leaders when it comes to focusing on the thing that matters in business, which is profit, of course, culture, of course, happy customers, and at the end of the day, you need a really solid sustainable profit margin to be able to do all those things long term. So that is the conversation today. If you missed part one and part two of this series, part one, we talked about beginning with the end in mind and really having a laser focused and intentional path to follow when it comes to building a real estate team the right way. And in part two we talked about sticking to the model which assumes that you know what the model is. So actually broke down what the model, the economic model looks like and just rules of thumbs or rules of thumb around what you're really after in terms of where you need to spend your money, in terms of salespeople, in terms of marketing, in terms of administrative staff and in terms of overhead. And for a fully leveraged real estate team, what should be left over for the team leader to split with the government? And when I say fully leveraged, I mean the team leader is not in production. So many team leaders have to be in production because the thing ain't right from the beginning. They did not begin with the end in mind. So today, don't chase growth is the title. And we're going to talk about knowing your numbers. And when I talk about knowing your numbers, I have like a natural inclination toward, you know, I just have a quantitative mind and I like spreadsheets and you know, I could spend two hours in spreadsheet and sometimes a 15 minute conversation with a person, you know, takes longer than a two hour sort of me just being in a spreadsheet and it's just the way God created me. I'm not a bad person. Do not judge me. You know, when I say knowing your numbers to a team leader, many team leaders, they sort of, they're good at, they built a team because they were good at the job of being a real estate agent and the job being real estate agent generally it's a high ID personality. So you know, sort of a driver type, an outgoing influencer type person. That same mindset isn't really great at the quantitative, more of the C, the compliant part of the brain. So I'm sort of a rare breed, a DC high D, high C personality. So I can drive hard and I can also look at numbers and disappear into a spreadsheet. So when I talk about knowing your numbers, I'm talking about all of the numbers in your business. And you know, we set up our business in a way where you could really run it from the beach. And what I mean by that is that we have this process and we use this process in real estate B school where we have a three year plan. We break that three year plan down into a year at a time. We break each year down into 90 days. So a quarter at a time, then each quarter into a week at a time. So in a given quarter we are tracking 12 to 15 high level metrics in the business. Some are leading, some are lagging. You know, leading indicators are, you know, seller set to met ratio or a seller met to signed ratio or how much seller volume did we bring in this week? Sign, sign, seller volume. Those are leading indicators. Lagging indicators are, you know, what's our net cash balance or our net cash flow this week? Like literally how much did we make last week? We basically run a weekly P L and we're always looking at our cash position. So you know, do you have something in place at a, at a high level to know that you're doing the right things in this quarter? So you can stack four quarters, you can stack three years and you can crush your three year. And we talked about beginning with the end of mind, right? That's how we do it. And so that's what we call a weekly scorecard. And I challenge you to think about It's a real simple process, but it's really profound because it forces you to step out of the business and elevate above it so that you can manage the business from a numbers perspective. The second area that I want to challenge you on is agent productivity and this is a bigger conversation that I may even do a multiple part podcast series on. When it comes down to aging productivity, there are a lot of team leaders out there that have no idea in a given day or a given week or a given month if their agents are doing anything, generally speaking, other than they may receive an executed contract. The bad thing about that is you're really not serving the agents at a high level because you don't know if their activities, their daily activities. The leading metric there is the number of meaningful conversations you're having on a daily basis. How many of those conversations are leading to an appointment set? How many of those appointment sets are leading to appointments Mets appointments met? How many appointment mets are leading to, you know, new clients? Lead set met, signed by agent and by lead source is probably one of the most important things you'll ever implement into your business as a team leader. And if you're on a scale of one to five, if you're one, I don't do any of what you just said and five, you're crushing it. If you're a one or two, there is definitely a process to get you over to the four or five side where you have a lot of confidence and clarity around your lead set met signed by agent and lead source. If you don't set it up this way and you don't know what's going on on a daily weekly basis, you are not holding your expenses and your people accountable and you will not have a chance at being as profitable as you can be. Which leads me to my third point. So I want to make sure that's clear. Lead set met, signed agent, productivity and also lead source. You know what you're doing by lead source and each of those conversion points leads to marketing roi. So the amount of money you're spending to give your team the opportunity to have conversations that lead into, you know, a face to face consultation with a buyer or seller. Are you tracking how much you're spending on that lead source and how much those conversations are costing how much it you know it's costing you to set an appointment on that lead source, to meet an appointment on that lead source and to sign an appointment on that lead source? Here's a good example. So we've been doing radio for. I don't even remember when I started. Honestly, it probably was 2010, maybe. Maybe the year we did 2009, like 120 deals is probably the first year I was on radio back then. I mean, we flipped the switch on radio. I think I was the only agent on the radio. And I remember I had like 35 calls in the first month. I'm like, this is magic. Like, instantly, the return was on the one station. I tried other stations, really. One station has been the main one for us. And I remember it was like three to four hundred bucks to get me to the front door of a listing. I was the main listing agent back then, and which is not too bad back then. My average commission on a list, like on a closing was, you know, maybe 8,000, 7 to $8,000. So if you can get me to a front door for 400 and I had an opportunity to take home 8,000, you know, even if I only knocked down one out of three, which I was better than that. I was probably two out of three. But even at one out of three, I'd have $1,200 of marketing into, you know, I didn't sell every listing, but I sold a lot of them. And there are inefficiencies in all the conversion points. But you get my point. It was about 400 bucks. Now, I've got to say it's probably 15 to $1700. It varies. We're on three stations and it varies by station. It is. It's about four times less effective than it was. We're getting more commission now. So we're at about 11,5 average commission check. On the listing side, we're in a really good market. So more listings are selling that we list. And it's also more competitive. So we're going up against more agents. So I'm able to look at a lead source with that level of clarity and so I can make decisions. Another example here is, you know, we made the strategic decision two years ago to get out of paid home search leads. So we'll do 3.6 million this year on the economic model that I've described. And we don't pay for home search leads. I had a lot of confidence around that because I knew my numbers. I was tracking Zillow for the last. I've been tracking this way for six, seven plus years. So I knew all of the stats on Zillow and I had seen all of the price increases and the returns and all the conversion points just going down year over year. We got up to about 140 bucks a lead on Zillow. And it was like, I can't remember the exact numbers, but it wasn't one out of ten were converting, you know, it was like three out of a hundred, you know, so 30. What's 33 times our lead cost for like per closing was like 4,000 bucks. And we were paying a bigger split because it was a buy side. So the numbers just were not working. And so I had confidence to make a move strategically because we knew our numbers and that's really what I want for you. So marketing roi, super, super important. So there's the high level weekly scorecard. What are the 5 to 15 data points you have to track on a weekly basis to know that your business is healthy? Number two is agent productivity. Right? How many conversations are your agents having? How many sets, how many mets? Those sorts of things. Those sorts of things, they seem like sales management things to track, but teams that don't have that in place are less profitable because they have this complete missing. It's like such a shadow in their business that they're not shining a light on. It's just this big hole in their business that they don't actually know what's going on with the lead efficiency. And it's not even so much agent productivity as it is lead efficiency. You know, are you doing everything you possibly can to squeeze the lemon on every lead that's coming through your funnel? And then number three, we talked about marketing roi. I'm able to make really smart decisions in my business because I track everything that we spend money on. You know, at this point, we have really changed the business fundamentally where all we're doing are some smaller client events and a couple giveaways that most of it's offset by vendors. And we're doing radio, although the margin on radio is not what it used to be. And we're sort of really looking at radio. You know, it's still profitable, it's still nice to have, and we have the two best endorsements in our market. And in terms of the, you know, the most people that could possibly listen to radio in the morning are on these two stations. And it's still not quite returning that great for us. So again, I'm tracking the numbers like every week, every appointment that's set. You know, when a radio appointment is set, I'm able to look at what the dollar spent per set appointment looks like. And so it really does matter. So hopefully there's some encouragement here, hopefully. I know some of you team leaders are going to listen to this and be like, oh, like you get a headache. And maybe you didn't even get to this part. So maybe you're not even hearing me right now because you turned it off because your headache was so big already. I want you to take a breath. I want you to realize that everything I just went through, there's a process to help your business get there. The only way that you're going to have a business that is profitable and sustainable and a business that's worth owning so you can live a life worth living is to do this type of work. It's taken me every bit of six years. I founded Real Estate B School in April 2013. It's taken me every bit of six years to figure out with my brain how to translate it into tracking systems for team leaders that don't have a brain like mine. And there's no good or bad thing about having a brain like mine versus more of a, you know, a free spirit, extroverted type of person. It just takes you slowing down and reaching out for help. The only thing I have to offer you is a 45 minute conversation with me personally. So take me up on it. Just go to realestatebschool.com, click Business Growth Strategy session and just take that next step. You know, Real Estate B School may not be a fit for you and that's not the real driver for the, for the conversation as much as it is. If you don't have this stuff in place in your business, how are you going to get it in place? So we'll just talk about what's working, your business, what's not working, where do you want to go? What do you see two to three years from now, what's holding you back and what are the two or three things that we can get to work on right away to give you the biggest result in your business. So go to realestatepschool.com don't forget part four we're going to be talking about. The world is changing. The shift storm is here. How will you respond? And I'll go through all the steps that we've made over the last few years, respond to what is a complete shift storm in our world. So get back and listen to parts one and two of this podcast series and we'll talk to you soon.