Erik Hatch on The Blueprint for Scaling Your Real Estate Team the Right Way

Welcome back to Real Estate Team Builders. This is Lars Hedinburg, founder, Real Estate B School. This is going to be epic. I've sort of known my next guest, Eric Hatch from the Periphery. You know, I know guys that, that know Eric and have been in his world, been coached by him personally. Eric, last year sold over 1,000 homes with his team in Fargo, North Dakota. And I don't know much about Fargo, except there's a movie and the movie was like, it was all in snow and it just looks miserable. So you'll have to tell us something good about Fargo, and I'm sure there's lots of good about Fargo. But then Also, you've got 500, you know, members on a recurring cycle between technology and coaching in your coaching business. So you play the game of business at a very high level. And I've just seen you lead with an open heart around, like, things that have worked really well and things that have not gone really well in your world. So, Eric, give us a couple minutes, like, just give us an intro, you know, and we are going to have the conversation today. You and I both share one thing in common. We have made all the mistakes. We have done it multiple times. And we are going to talk about today, like how to. How to scale a real estate team the right way and some of the mistakes that you've seen in your clients, some of the mistakes that you've made yourself. You've got a new book coming out as well, the Perfect Real Estate agent blueprint, which you said is gonna hit pretty quickly. So give us a couple minutes on your background, who you are, and then we'll take it from there.

Thanks, brother. It's really fun to be here. And I as well, have been a fan girl of yours from a distance and just seeing and admiring what you've done. So it's great that we're able to do this together. I, first and foremost, am a child of God. I married up to a great lady named Emily. I have two kids, Finley and Simon, who are 7 and 5. They are my life. They are my everything. And it is the reason why I do what I do. My background is I was in ministry before I got into real estate and I was flat broke. I loved the career, but I was an entrepreneur at a church. It's a really complicated thing to try to build things at a place that's all about tradition and, uh. And so I got into real estate full time in 2011 and had a great first year. Sold 52 houses my first year in 2012, I started a team because that's what you're supposed to do, I guess, is you start a team. And I did every single thing wrong. I hired poorly. I hired my friends. I didn't have any standards. I just threw people in. I expanded to two markets, one 70 miles north and went five hours west in a town I had never even been to before. Within six months of starting my team, nine months later, I was kicked out of my brokerage. I failed completely. My team of 13 I invited to come with me as I rebounded and only two said yes. I started over completely in 2013, having fallen flat on my face. I was selling personally 150 homes a year and my team was doing table scraps behind that. But we were selling a lot of houses and I learned from my mistakes and I recognized that I needed to build in a more intentional and strategic way instead of just hiring and hoping. Hope is a great thing to have, but a terrible business strategy. And so I got into it and I got really strategic at being a better leader, being more strategic with the moves that I made and who came into my world and from there opened up my own company, Hatch Realty. In 2014. We were independent until August of last year when we joined up with a national brokerage called Real. And so that has been my journey in real estate. We now in the last eight years have sold over 6,000 houses. I've hired a whole bunch of people. We built it on different models, primarily the showing partner model and the ISA model, which is not what is commonly used by everyone. But those have been cornerstones in our world. And I can proudly say that the agents on my team are over living their best lives. I have agents that are selling between 100 and 150 homes. For a couple of them, they're making half a million dollars net with very little risk outside of their time. And I'm able to help people live really big lives and I simply get to ride their coattails instead of me just having them jump on.

That's awesome. And we, you know, before we hit the record button, we talked about, you know, being influenced by mrea, the red book. You know, I remember I must have listened. I must have worn out the CDs in my car. I was a new agent and I knew that there's no way I could do. I didn't sell quite as many homes as you sold. My, you know, you, you sold 52, I sold 44. But it was awful. Like, it was just awful. It was instantly seven days a week. But in the Red book. They don't talk about, like, how does this really benefit the people around you? So we want to go deep in a conversation today about, like, how to build this out the right way, where, you know, you're not, like, just scaling for scale sake. And so let's kind of break down the conversation. You talked about, you know, the right couple first hires and this concept of just like scattering wide versus going deep. Kind of talk about that a little bit.

So you and I are both coaches, and there are strategic moves that we make. There are blueprints, blueprints we try to follow. I'm only preaching of the blueprint that works for me and my worldview. And certainly those. Those that have aligned with me have a similar worldview. But for me, I didn't want this really huge party in which I didn't know anybody. I wanted to be intimately and closely connected with those people. But there's also financial support. That's my emotional move. Right? My emotional move is I want people to come. I want them to stay for decades. I want us to do life together because I deeply care about these people. So for me, that is the emotional push. But the financial and strategic push also makes, I think, a lot of sense. Lars, the first hire you make, I think should be an admin. That person helps you to breathe, helps you to take on a lot more responsibility, and you're either buying back time to rest or you're buying back time to reinvest. Kind of rhymed. I didn't plan for that to rhyme, but I'm glad it did. So the first person helps you to rest and reinvest. The second person you hire is also an admin. And that's super scary for people all the time. I see folks wanting to go and hire five or 10 agents because they think that's what's going to make them a ton of money. And I'm going to push back on that and show you in just a moment why I think that there's a better model out there. But this second admin hire, if the first one helps you to rest and reinvest, the second person now tends to your honey do list that you haven't necessarily got to yet. They're helping you with marketing, they're helping you with past client care. They're tending to a lot of those things that are great ways for you to build your PC, SOI business, past clients and sphere of influence business. It's far better to earn business than it is to buy business. And that's a dangerous move. So many folks are making is they're trying to buy their way to the top. I see a lot of P and ls, Lars. I know you see a lot of P&LS for people that we coach. And folks are running really dangerous models of spending so much on too many people or too many leads or they really have a fancy car and a fancy office and none of that's really necessary anymore. And so as I see this, I. I'm left saying, I'd rather you reinvest in a who and that WHO should be able to help you to sell more houses as you're taking and doing these projects and reaching out in a more customized way instead of just a purchase. Does that make sense so far?

Yeah. And you bring up economic model, you know, the biggest business I've coached, and obviously I won't say names, but 600 sides, 6 million, top line, you know, maybe 800,000 of profit. But the team leader was doing a million of GCI personally.

Yeah. So you take, you take out that, that million to gci. Yeah, yeah.

Or even do it, even put a split on it. And you're not even. I mean, I think it was like 7, 8% when we replaced.

They're funding their business. Yeah.

So it's just, it's just wild. And there's so many good things like earn versus buy. So, so talk a little bit about that before you, you know, this goes along the theme of, you know, going deep versus wide. You know, you get into someone's business and you see that, like whatever it is, you know, they're, they're like addicted to mass media or, you know, they're spending money and there's no tracking or their Zillow flex is the best idea ever, you know, or whatever. Talk a little bit about the deep versus wide when it comes to Legion. Since you, since you brought it up.

Yeah. I think that there's four legs to the stool of where you can get business. The first leg is pcsoi, past clients and sphere of influence. And that's the only thing that can actually stand on its own. If you have a business that's pcsoi, that is financially your biggest opportunity. MREA says that you have a 2 in 12 chance of getting business from your sphere. Those that are super in your inner circle. Right. And the reason why it's not one in six instead of two and 12 is they say one comes from or one will give you a referral and one will actually do business with you. MREA 2, which has been, I think, written, but not released, they're now saying 2 and 20. So 10% of your PC soi should produce for your results. And that's why it's so important to go deep with them and to have massive touches and massive intention that are customized and not just generalized. It is so dangerous to send to that person that just bought a half million dollar house with you. It's so dangerous to send them a generic newsletter every quarter and that's the only communication you're doing. It's just, it's why so many people are messing up on their PCs soi. So go super deep with that. The second leg of the stool is low hanging fruit. That's Zillow, Trulia, Home Lights, Veterans United. These are really expensive referrals or and we're going to see that continue to compound in this industry. They're going to take a larger and larger portion of that. Right Now Zillaflex is 35% but I promise you it's going to be 40 and 50% in upcoming years if they don't go and open up their own brokerage and just push us up completely anyways. But Zillow is not the enemy, they're the capitalist and we have to jump on that and move and adjust accordingly. Now the third leg to the stool are long term nurtures. These long term nurtures are pay per click. Are farming are these efforts in which you're planting a seed today knowing that the harvest will reap in seasons from now? Most people are underwhelming this. You're trying to buy today business when really you need to be planting seeds for tomorrow business while you're procuring today business. And then the fourth leg is reputation. Reputation, I believe is your Google local services. It's your reviews that you have online, it's your YouTube channel, it is your radio, TV, your billboards. Those things in which those are really easy to convert and those oftentimes take a lot of energy to earn. Now those that are going wide are simply trying to find transactions for today. But those that are going deep are trying to find all these opportunities. And most of the time it's going to take a key who to help you with that marketing instead of you going and buying that business.

Awesome. Really, really good. All right, so in terms to talk.

About, I need to talk about this third hire because it's the most important hire in this process. First one is admin. Second one is admin as well. First one helps you to get some time back and to reinvest that time into lead generation. The Second person helps you to launch and to do big things. But this third person is a licensed salaried agent partner. It is a showing partner, it's a listing partner. But this is the nurse to you being a doctor. And this is why it matters so much and why I don't think you should hire agents. I think you should hire partners. Financially it's scary, right? And so before we even start, I'm going to tell that person, Lars, if I were to hire you to be my partner, I'd say, Lars, I'm going to be paying you 30,000 bucks a year. But if the market shifts, you got to go full time commission right away, right? I'm going to, I'm going to protect myself. My agents pay for my, my partner's salaries anyways. So that's not a responsibility on the company because I don't want to be tied to that risk. But I'm setting myself up for if the things shift and if they change, that person knows immediately that they're on full time commission. But here's the five types of people that can actually go full time commission. The first is the person with a sugar daddy or sugar mama. The second is somebody with a trust fund. The third is somebody with a part time job. The fourth is somebody with terrible financial habits. And the fifth, which is left for my pinky intentionally is somebody who actually has six months of savings and they can jump into real estate without fear. And what happens is we're setting people up for failure when they're jumping into a full time commission role because they're either not the motivated type or they have other commitments or they financially can't give all to real estate. And we need to change that philosophy. And so here's the win, win, win that happens if you hire somebody who's an agent and they're now making a base pay plus the opportunity to earn some commission. You now have the opportunity to hire that office worker, to hire that teacher, to hire that barista, to hire that bartender that couldn't get into real estate other so you've opened up your talent pool. First of all, I think that if you're putting somebody on a salary, you're much more strategic on who you're hiring. You pay a lot more attention, but an agent actually costs you more. And so as you bring that person on, you're going to be much more strategic on how they come on board. And now they are leveraging you as a nurse would leverage the doctor. You're the daily communication and conversation with the agents and they're the daily conversations and communications with the, with the clients. And so the win is that agents now is getting their MBA in real estate while working under a top agent. They're getting better educated, they're getting better support and they're being shown a Runway in which they will earn their chance to be full time commission. In my world, everything is earned and nothing is given. And if you want to make doctor pay, you better start off in residency for a while. And so we're starting people off in this role and they're in the role for one or two years and they have to earn the right. They have to earn the right by bringing in their own deals, by showing competency and by training massively. So that's a win for the agent. It's obviously a win for us because we now have leverage that's working for us. Think about this, Lars. If I throw a new buyer agent, five quality leads that I know we're all going to sell and each one's worth a $10,000 commission on a 5050 split in my head I'm like, I'm going to make 25 grand and they're going to make 25 grand. But you and I know that that person is not going to convert all five of those and they're probably not even going to convert four or three, but they're going to convert two out of them. So I just made 10 grand and they made 10 grand or did I lose? Right? Because if I was the one to do all five of those deals, if I negotiated the contracts, if I spent the time setting that buyer up for success, that's 50 grand. And let's say it takes two months to do that. That cost me five or six grand in salary, so I just made 44 grand instead of making 10 grand. So now I win as the agent, they win as the partner, but the client wins as well because they get two for the price of one. And so take the mindset. If you're trying to build something really big, you need to think small. You need to think, what is my micro team? What is my own personal production? Because the greatest chance for you to have wealth is and time is not by hiring a bunch of people, it is instead by building a barrier around your own personal business, because that's the highest dollar per hour things you can do until you get to the point where Lars is bringing on these big bucks by bringing on people and everything else. So your chance, especially when you're building, is to build a micro team and then teach your Team members how to do the same. It's the retention tool of all retention tools that keeps people around, is when you continue to build businesses with them and for them, they will leave when they run out of Runway. And we need to be building runways for our team members, and we have to be oftentimes the first to go in to do it. When I got out of production, Lars, my daughter was born in 2014, and I got out of production, I was doing 150 sphere deals a year, and then I went to zero, and I referred those off to people on my team, and most of those people are with me anymore. And what I did is when I referred it off, I told my clients, I'm not your realtor anymore. I handed off the transaction, but I unintentionally handed off the relationship. And when that happened, I went and did the math. This doesn't count. Referral business only comes business for my Sphere. I've lost over $2 million in the last eight years by referring off this business to people on my team. Had I kept it on my micro team, where I have somebody running that transaction, or I'm still in the production role, but I'm not doing the majority of it, I promise you, I would have so much more cash, so much more hair, and so many less chintz. It's awesome.

All right, so let's talk about maybe combining the best hires in terms of personality profile. We talked a little bit about Hunter versus Gatherer and maybe some mistakes that we've made along the way. So talk about that in. In your journey, you've. You've had lots of success, but you've also made lots of mis hires. I'm hoping and assuming if you're anything like me. So talk about the best hires. And like, if you were to say, like, man, these three or four things, guys, if you just look for this, you're gonna. You're gonna protect yourself.

So there's three types of people who are going to want to work with me and three types of people that are working you. And they all start with R. The first is somebody who has a relationship with me. They know who I am. They know the rhythm in which I operate, and they're drawn to that. That's a big deal. Every person I've ever hired because of reputation has been a great hire. They knew who I was. They knew what they were getting themselves into. The second hire is somebody who comes because of reputation. They know that we produce really successful people, and they want a piece of that. They know that we March to a different drum. And they're okay with that. That's a really good hire as well. The third is somebody who wants to come because they love real estate. They love hgtv. They're drawn to wanting to make money while being their own boss. Those are my least favorite hires are the people who really want to be in real estate. I don't want somebody who loves houses. I want somebody who loves people. I don't want somebody who wants to come and work so they can make a ton of money. I want somebody who is going to earn their way every step of the way because they want to be a part of something inherently special and they're willing to be a role player before a star player. And so I first look to hire people if I can because of reputation and relationship. I want those to be the winners. We have hired people who are interested in real estate. 5050 bag for me. Have they been really successful? Some yes, some no. But I feel really confident in the first two. Now when it comes to the actual hiring process, we follow a nine step hiring process. It takes a good three weeks probably to go through this process if we're fast with it, because I don't want to get married after one date. People are really good at faking and showing like this is what my resume says and I'm going to answer all the questions. And most people aren't asking enough questions. They're not diving deep enough. Lars, we're both from kw, right? We learned this recruit select process that is to dive in to find their life story. And for me, there's a couple of nuanced things that I love. I love doing a group, a group interview. Not that everybody comes, but that I talk to them all. You get everybody there for a group gathering and you can immediately tell who your favorite three or four people are. Are. In addition to that, I love a spousal interview because when somebody's coming into real estate, they need to understand that this is a lifestyle. And there's massive interruptions, nights, weekends, and there's so much uncertainty with what happens in our business. And that spouse oftentimes turns a blind eye because the person that's interviewing for the job doesn't talk about the crap with their spouse. They only talk about the opportunity. And we need to make sure that we're protecting ourselves with that. Now the final piece that I'll say, Lars, is percentages and disc profiles and that sort are helpful to know, but they certainly don't drive the decision. I take somebody's personality Profile I'll use. Disc is a pretty common thing in the industry. I think that makes up about 15 to 25% of our decision making. Jane Niblick, who's the guy who founded Wisehire, he helped to create a lot of the Disk Values Index. A super brilliant guy. He says it like this. He's like, if you hire somebody in a role that they're not designed for, think of it like a stock boy at a grocery store, that they're supposed to stock these shelves, and it's really helpful if they're six feet. This guy's only five, eight. And so he can stand on his tiptoes for a while and stock the top shelf, but eventually his legs are going to start shaking a little bit. And so you need to be cognizant and concerned of, are you putting somebody in a role that they're not naturally designed for? So 15 to 25% of that of our hiring decision is, are you a natural fit for the role? 25 to 35% of the decision is, are you gritty? One of my favorite words is a great book by Angela Duckworth called Grit. And in there it talks about, is this person resilient? Do they have a chip on their shoulders? Do they have something to prove? And those are some of my favorite hires. I find such great success from people who are climbing a ladder instead of sitting on a throne. So I love that. And the final 50% is the most overused word in business today, but I don't have another word for it. And that is culture. Is this somebody I want to be aligned with? Do I vibe with them? Do we see the world through the same perspective? I'm a guy where my family and my values matter a lot. I also want to laugh obsessively. And if somebody comes in and they're not transparent, they're not willing to talk about the things in life that really matter. If they're. If they're coming in and they're not fun, I just don't want to work with that person. They're going to be miserable. I'm going to be miserable. And so that makes up about 50% of our hiring decision. But ultimately, we go through a really long process to find the right people. And I'll say this as a final piece. When it comes to hiring, I think most people are hiring because of need and not because of want. We as business owners and team leaders, need to be 12 months ahead on vision, casting, and hiring. 12 months. As we record this today, it's May 2020. Two, and I need to be thinking, what does May 2023 look like? Because I got to place an ad for 30 days. I then got a hire for 30 days, and the person has to get licensed. A lot of situations. So that's going to take four months. So now I'm six months in before they ever show up on day one. Then they're going to get trained and developed for a couple of months, and then they get a buyer. That buyer is going to take two months to find a house, in two months to close. So they're not going to close for 12 months. Months. If I decide today I need a new hire. See, we got to get farther ahead on our vision, casting and our planning, because most of us will come and say, oh, crap, I need somebody today. And in a rushed timeframe, you make rushed decisions and you make bad decisions when you're rushed.

Awesome. So, so let's, let's end with, with a question like this. So there are folks that are in it. Like, if they could unwind it and go back and follow this blueprint. Yeah, maybe they could do that. But there are folks that are in it, you know, they've got the overhead. They have, you know, agents that they're. They're trying to. To lead and who can hardly, you know, get out of bed in the morning. And they're all. And they're doing. They're all doing their own production, you know, so they didn't have like the, the benefit of, you know, I guess, crashing and burning so they could build it the right way and having a.

That was going to be. My advice was get fired. Yeah.

What advice would you give someone, you know, who's kind of. Two questions. Someone who's, who's in it, you know, and they're kind of in it, and it's not built the right way, but then also someone who is just starting. So start with the person that's in it, and it's maybe a little overwhelming what's advice for them. And then the person just starting to build.

So I have it in my book and the book that's coming out hopefully soon. The Perfect Real Estate Agent Blueprints is my second book. My first book I wrote with this handsome devil here is called Play for the Person Next to youo. It's a servant leadership book. And in both books, I use the same example. I use a pyramid of priorities. And so at the base of the pyramid are three things. It is God, family, and self. The things that should take all of our time, all of our attention. The next step up above God, family and self is your team. Above team comes clients, and above clients comes community. And when you build it right, you have your pyramid of priorities in order. And so to your question, Lars, what should people do if they're in it and their pyramid is not in the right sort of way? They're not making money and they're not living the life that they want because their pyramid is messed up. This is not worth sacrificing and losing your family over, and it's not worth sacrificing losing yourself over. And the first leverage piece you should bring is for you if you're in it. I would challenge you. Go to our hatch coaching YouTube channel. We have hundreds of videos that are up there. We talk about the showing partner piece a lot. Get yourself a partner that's leveraging you. Get yourself an admin that's leveraging you so that you can breathe. Because the only way you can now tend to your team, that next step up on that pyramid, is if you first have yourself in order. You have to get your house in order. You have to serve yourself. You have to put the oxygen mask on yourself before you help anybody else. And the best way to do that is if you're breathing with financial health. And the quickest way to do so is your own personal production. So get yourself into massive production and build leverage around that so you don't lose all your time. You then reinvest your time not into your clients, but you reinvest your time into your team members so that you can help them to be successful. Because if you take great care of your team members, they will in turn take great care of your clients. So that's what I would say for those that are in it, for those that are new and you're looking to do it, I would say lead with an oxygen tank. Make sure that you have a healthy enough business. And I think of money like I think of oxygen. It's not the purpose of what we do, but it's necessary to fuel our lungs and it's necessary to fuel our business. And so you need to make sure you have an oxygen tank. If you're going to go deep, you have to make sure that you are prepared for that and that you have at least. Lars, I know you and I are teaching on finance all the time. I say you have to have four months of expenses at any given time readily available for both personal and professional in order to go deep. And so if you have that, make the hire, make the strategic move, but don't go and hire a bunch of agents because it will cost you more than you know.

Awesome, awesome, awesome. What's the best way that folks can kind of enter your world? Can they get a book? Can they opt in for a free blueprint? What's the deal?

Yeah, we have a ton of stuff that we're giving away over at hatchcoaching.com we have free training, trainings, dozens and dozens of masterclasses that we've created to help you with lead conversion and growing a team and everything else, and then go to us. So sign up there, get all that information, and then also please go over to our YouTube channel where we continue to put out content, usually about twice a week right now, where we're continuing to try to teach and impact this industry.

Awesome. I'm going to put you on the spot, and I've never done this before. I'm going to have you pray for our listeners if you're up for the challenge. And I'm going to put a little context around it. You know, we're in an industry that is just hard. There's no easy way. Right. We chose the path of leverage, and we failed along the way. And I know I hurt people along the way, and I didn't intend to. And so we kind of chose the journey of leverage and impact and scale. But there are others that are listening that. Man, I just wish I could, you know, make that kind of money, maybe have those vacations or. And. And they're. And they're struggling, you know, and we've had guys in our industries, in our industry at the highest level, think that taking their life was the only option, you know, so.

So there's just. It's. It's so ironic that you bring that up. I don't know. Did you ever know Kevin Blaine?

No, that's the one I'm referring to. I never.

Kevin Blaine was a dear friend of mine. He took his own life five years ago. No, excuse me, four years ago yesterday, as we record this. And so I had some Facebook memories going. Let me share quickly about Kevin Blaine. Guy sold 1500 homes a year. So successful. And he came to a summit that we did in Fargo, sat next to a guy on my team. His name's Kyle. Kyle's in his second year of real estate. And Kevin asked Kyle 40 questions to figure out, why is Kyle so special? And Kyle walks out, puffing his chest like, this guy took such a great interest in me. And I said, you know who you were sitting next to? I'm like, that's Kevin Blaine, he's our keynote speaker. And he's this guy that does this. He's like, that guy didn't brag one minute, one iota. All he did was take an interest in me. I think we all need to be a little more like Kevin and take an interest in the people that are around us instead of just beating our own chest and talking about how great we are.

Yeah, I didn't know he was a dear friend of yours. That's why I just referred it. And, you know, but, but, but given. Given that there is suffering just in the world and in our industry, I feel like with, you know, there's definitely a pending shift. The market's squirrely, interest rates are double. You know, I think Jesus is coming back any minute, so I feel good, you know, generally. But if you could lift us up in prayer, that'd be amazing.

Thanks for that opportunity. Yeah, let's pray. God, there are some things that make us massively uncomfortable right now, and yet you are the one that brings comfort. It is hard at times in the noisy world to hear your quiet voice voice. And in a world in which we are pursuing riches, I want to challenge the people that love you and the people that follow you, that we pursue wealth. That is, of course, the abundance that you call us to, but that is also the abundance of time, and that is the connection of culture, because you were calling us to serve. This world doesn't need more pastors and churches. It needs more pastors in real estate and in mortgage and in title. And you are calling us to serve and to love people. So when we take care of our clients, that is doing your work. And when we take care of our team members that are doing your work. And we are called to be your hands and feet. And so, God, we invite you into our businesses. This is an uncertain time, but you are the only thing certain in our world. And so help to be the calm in our storm. Help us to know what we're called to. We pray and beg for wisdom and discernment. We invite you into our lives, into our businesses, to make it all about you, because it always has been, and we've just gotten in the way. We thank you for your son, Jesus, and we pray in his name. Amen.

Amen. Amen. Appreciate it, brother. And just appreciate your heart of service and your willingness to kind of bear it all. And if there's anything I can ever do for you, you just let me know.

Thank you. And I sure appreciate it.

All right. Much love.