Systems Drive Everything: How to Harness Your Inner Manager & Let Leverage Do the Heavy Lifting
Lars Hedenborg walks through Michael Gerber's E-Myth framework for real estate: the technician does the work, the manager builds systems, the entrepreneur designs the business. He shows how to map your tasks on a passion-versus-pay grid, then delegate the low-pay work so you can focus on what only you can do.
Welcome back to Real Estate B School. My name is Lars Hedenberg. I'm the founder of Real Estate B School. And here in the podcast we like to not believe the hype. And a lot of these ego driven real estate teams that are posting these big numbers don't always have the highest profit margins. Typically those team leaders are selling a ton of real estate themselves to make enough money to live the lifestyle that you're probably seeing online. And here at Real Estate B School and Real Estate Team Builders, we are not about the hype and we're going to bring you the stuff that works so you can build a business that is systems driven and super sustainable so you can have more money for sure, have more freedom and ultimately have more impact at home and in your community. And no smoke and mirrors here, just the stuff that works. And today I want to dive deeper into a follow up conversation from the podcast I did with Stacy Peterson. So Stacey Peterson was literally the first client of Real Estate B School. So I launched my launched Real Estate B School, which is a business coaching company for real estate team builders in 2013. And she called me on a Friday and asked me if I could help her with something. I said, call me on Monday. I'm starting a coaching company. And I actually was, although we joke about it now. And so the follow up conversation I want to have based on Stacy's conversation about systems and how did she go from 100 homes, you know, to 300 homes and took herself out of production and she one year she closed 222 transactions with just her kind of running the backstage because she was out of production at that point and one administrator. And she did it because she understood the mindset around a business is simply a system of systems. And so that's the conversation we're going to have today is that how do you set your business up so that it isn't going to be all consuming all the time? And the first thing I want to talk about is simply mindset. One of the actually probably the first book that I read when I got into real estate was E Myth Revisited by Michael Gerber. And the takeaways that I have from that book still, I haven't read it in probably in 14 years at this point. But the biggest takeaways I remember that there's this question, how would I think about my business differently if I were to replicate it 10,000 times? And so it's thinking about it and in the book they call it the franchise prototype. How would I build my one business? And you may never have even a second location. So that's not the point. How would you think about your one, your one real estate team if you were going to roll it out to 10,000 different markets? That question became my obsession. How would I think and then act, and what would I build in the business so that I could replicate it 10,000 times? And so think of that if I, if I had to replicate my real estate business. Cause in 2007, when I read the book, I was a solo agent. I didn't even have an administrator. Here I am. It's like, well, how could I possibly, you know, put together this marketing postcard or how could I possibly, you know, follow up with, you know, Internet leads in 10,000 different markets? Or how could I possibly, you know, go on a buyer consultation, you know, show homes or go. Go on a listing appointment or negotiate contracts in 10,000 different markets? It's. It's impossible. And so from that moment and that question, I thought, I thought about everything differently. And the book goes on. E Myth Revisited goes on to describe that we have. Each of us in real estate has three people or personalities in us. One is the technician, the second is the manager, and the third is the entrepreneur. So we all like to think so. Everyone with a license probably likes to think of themselves as a business owner. But when you really peel back the curtain and if you were to follow a top producing agent or even most real estate team leaders, follow them around for a week or two, you would see that they're doing and spending most of their time on technical work. It's the technician, right? So it's doing the job of a real estate agent. They're going on buyer consultations or listing consultations or showing homes or running a lockbox here or there or taking pictures, entering a listing into mls. All the things, think of all the things you do as a real estate agent. And even if you're a real estate team leader, think of all the things that you're doing. Is it more technical work or is it higher level than that and most marginally profitable? Not sustainable. Meaning the team leaders working more hours and enduring more stress than they should be or could be. It's because they're doing too much technical work in the business. And so it's working in the business versus on the business. That statement, you know, in order to scale your business, you have to work on your business versus in your business. Everyone says it. Very few business owners do it. And real estate team builders in particular, I don't see a lot of them really Building systems driven businesses. And that's the thing that allows them to scale and live a life worth living. And you can only do that if you build a business worth owning.
Right?
So it's this mindset. So I'll ask you, as you're listening here, what mindset do you apply to your business? You know, and are you consistently checking yourself on that mindset? Are you doing too much technical work in the business? So contrast the technical work, the role of the technician, and that role is necessary, right? Even most real estate team builders or team leaders, they have to do some technical work depending on what stage you are in your business growth journey. Real quick plug, realestate business growth.com, you'll get the six stages of growth. As I outline them, it's a free report. It's like 15 or 16 pages. Tells you exactly what you need to know to navigate all these different stages. All right, just a quick plug. So technician, then the manager. So what does the manager do? The manager's in you, and most of you aren't letting the manager come out and occupy any time in your calendar. So what a manager would do, even if you're a solo agent, because this was me when I read the book. It was, I was only doing technical work. And then I'm like, man, I'm not spending any time as the manager. I'm not spending any time as the entrepreneur. The manager is someone that builds systems and has people run those systems. That's their mindset. So when you think about your week, your work week, are you spending any time thinking of the future of the business? With respect to, could I build a system to do this? Like preparing for a listing appointment? That's a really good example. Preparing for a listing appointment. Are you thinking about that as like, what If I had 10,000 listing appointments on a Thursday evening? How would I Prepare for those 10,000? You couldn't, right? But you could put together the system that these are the 10 steps to prepare for a listing appointment. These are how you pull comps, how you put the equity evaluation together, how you, you know, whatever you do, what you do with the listing packets, having those all together, you got to build the system and then you have someone run the system. A manager thinks like that, how can I build the system? You know, build it once. It may take you 10 times longer to build a system than actually do it. And that's where a lot of folks go wrong. They're like, it's only going to take me an hour to prepare for this listing appointment. It's going to take me 10 hours to build this system. Like, why would I spend 10 hours doing that when it only takes me an hour to prepare for it? But the ROI on that, 10 hours, once you put it in and you get someone at a fraction of what you want to make per hour that can run that system, the return is crazy, you know. Yeah, it may take, you know, 10 weeks to actually surpass what you would have put in on the individual hours prepping for listing appointments on your own versus building the system and having a part time administrator come in and do that one task. But the return, it crosses over pretty quickly. And so that's how a manager thinks and a manager thinks and it's not a literal manager. So you're not going to hire a manager duelist. This is the person inside you, the little slice of you that's going to spend some time every week and have time blocks in their calendar to work on the business. Build systems for things that you do repeatedly in the business so that you don't have to do them in the future. What's another good example? Entering a listing into mls. If you're spending time entering listings into MLS and you're not making the kind of money that you want and you're working too many hours and you're stressed, that's like $5 an hour work. If you can have a VA, do it in a different geography if you can. If your MLS doesn't allow it, then it's like $12 an hour work in most markets. We're in a major metro market and we can hire a decent junior administrator for about 12 bucks an hour.
Right.
So you build a system. This is how I like it to be inputted. This is how you order the pictures from the photographer. This is how you write MLS remarks.
Right.
And you may approve that listing when it's done, but you don't need to have the two hours into or more into into doing it. It may take you another 10 hours to build a system to enter a listing into the mls, but you won't personally spend two hours every time you do it anymore.
Right.
So another system, you know, done and you can move on to other things in the business. You know, when I look at my journey, and I'll give you some quick examples, I got into real Estate in 2007. In my first 10 months, I sold 27 homes. And then 2008 was my first full year. I sold 2044 homes in 2008. Early that year I hired my first administrator and she Was responsible for the, generally speaking, well, four areas. Marketing coordination, listing coordination, closing coordination. And she did a lot of running type activities for me. So she was a courier and a runner and, you know, ran signs and picked up lockboxes and tenant closes and closings and getting, getting checks from here to there and all of that stuff. And so my role, because I was harnessing this inner manager in me was for marketing coordination. I would build the system, our clients for life system, where she could come in and she could send out the postcards, or she can send an email to the database, or she could take a video that I shot and get it out to our database or she could whatever all the stuff we do. So I built the system and then she coordinated the system listing coordination. I gave some examples there. But closing coordination before I had an administrator I was holding, you know, bringing these files with me everywhere. And I was involved in repairs and inspections and all of that stuff.
Right.
That's not. It's critically important work, right? Mission critical to get from contract to closing. There's really nothing more. Well, I mean, there are things that are more important, but you don't need to be the one doing it.
Right.
You need to design the system of how you want it done. And then there may be exceptions. Maybe 80% of the time a licensed administrator can. Can run with that system. Maybe 20% of the time, the producing agent gets pulled in.
Right.
So it's this mindset. And then. So that was my first year when I was stepping out of me personally doing things. The next year, 2009, we did 58 transactions. I did like 95% of them. I hired my first buyer agent. And so in order to hire a buyer agent and get out of buyers, which took me a year or so after that, I exited buyers. I had to build the system to work with buyers. So this is how you set the appointment. This is what you say to set the appointment. This is how you follow up once the appointment sets so you increase your show rate when you meet with somebody, this is what you say to get them to be okay with you presenting your services to them. And this is the buyer loyalty agreement and the buyer packet you use to get them to sign up to work with you before you show them a house.
Right.
And this is how you show houses. And this is how we put the showing packet. We had a cover page and MLS sheets. And this is the system and the page that they use when they leave the house and they critique what they liked about the house and what they did. And when you write an offer, this is our offer summary sheet and you fill in the blanks. And all of that was a system. I did it first, then we did it together, and then they ultimately did it. And so you have to think about all of this as, yeah, you can go on doing all the technical work. You've got to carve out three to five hours a week to be the manager in your business. Build the system, get someone to run the system. And then let me see if I want to give you another example. 2011 we did 118. 2012 we did 1. Now 2008 we did 2,48. 2011 we did 178. So it was in there. I was, I was transitioning out of buyers and then also sellers. Same thing on the seller side. Like many people think it is suicide to give up your listing. I wasn't attracted. I didn't really see myself being in production, personal production. And so it was. I was committed to getting out of production. Last home that I sold was a listing $1.2 million, highest price point ever sold, January 2012. And so I was out of production. I've been out of production since then. I will never sell a home again. It's just not in my DNA. It's not my happy place. And so an example of a system to go from in production to managing a team. And now I have agents that are doing activities. The system for accountability. I just covered it on, you know, John Mikish went into agent accountability. That was last week. Depending on. When you're listening to this, go back and listen to it. Then I did a follow up episode of how I broke down accountability and the things that were important to me. Accountability is a system, right? In order for me to step out of, you know, parts of the business, I need to make sure that I did the thing I'm asking someone to come in to do. I documented it and now I can have people come in and run that system. That's what a manager does. So let's now talk about the entrepreneur, right? That's the third part of it. Very few of us, and you spend time as the entrepreneur, meaning the entrepreneur sits down and thinks about where they want to be in the future. And now that because we've done the technical work, we've built out systems and we've had some people, you know, run those systems, now we can really start to think about how could this look in the future. You know, if I want to go from 50 transactions to 150 transactions in three years. What has to happen, what systems need to be in place. I need an agent onboard system. I need an agent attraction system, you know for recruiting. I need a cadence, you know, with meetings. I need to know how to run meetings. I need tracking tools and a way for agents to get their numbers. And I probably need some, you know, a good CRM that has the text sequences and the email follow ups and a lead management policy. Like all of these systems you need to build out. When you spend some time as the entrepreneur, you're forcing yourself to think about the future co, like future co, future company. And you're looking at where you are now. And the entrepreneur tries to figure out how do I bridge the gap from where I am today to to where the entrepreneur in me is constantly and typically if you're an entrepreneur, this is the telltale fact is that you're constantly looking out into the future and you're constantly thinking about what's possible. If you're a successful entrepreneur, you have the ability to bring that. Okay, let's say this is where I want to be in three years and this is where I am today. You have the ability to bridge the gap and then you come back into those manager work on the business time blocks. Okay, I don't have an agent attraction system. I need to for recruiting. I need to put that in place. And that may be a rock that spans several quarters.
Right.
We talk about in real estate B school, our way of achieving at a high level in terms of growing our business going from 100 transactions to 300 transactions in three years is what we call a 3190, a three year vision.
Right?
That's the entrepreneur, the one year plan, that's a little manager type. Then it's the 90 day world which we break down into weekly and daily which is more technical work. So in our built in process in real estate B school for achieving growth that we want to achieve, it's this three year vision, one year plan, 90 day world. And then you have to have a system for setting up your week to win at a high level and then on the daily to be able to dominate every day, dominate your day, win your week.
Right?
Last thing I want to talk about. So that is the journey. Uh, the year I did 248 transactions, I did one transaction, then I went to three 10 or three 12 and then 400 plus and then it went down to one day a week and it was super awesome. Uh, and, and it started with that mindset. How would it look or how would I think about the business differently. If I wanted to replicate it 10,000 times, I built the franchise prototype. I didn't love to do it because it was typically on off hours. I was doing the job of real estate agent during the day, 50, 60 hours a week. And then I was working 10pm to like 2am at this point, real estate B school, all the tools and systems are turnkey. We didn't have real estate B school back then. And the coaches I was aligned with didn't really have the exact systems that I can rip off and duplicate. And so that's the journey. The last thing I want to cover is how do you go about it, right, Lars? It's easy for you to say, you know, the franchise prototype and the manager, technician and yeah, all that sounds really great. And so when I talk about the 3, 1, 90, the 90, an exercise that we do in real estate B school, and you could do this as well, is how do you delegate so you can elevate, right? We have this saying where you delegate or die. You know, as your business is growing, if you don't have this system for delegating, you will, it will not end up. You will not grow and you'll be super stressed all the time. And that stress will get the best of you in your relationships, in your physical body, in your walk with God, right? It will just get the best of you. And we don't want that to happen. So this system, again, it's a system of identifying where you're spending your time and then a system to take those things that are low passion and low pay off of your plate. And even high passion, low pay activities in business, you need to get those off your plate. And so we go through this passion versus pay exercise and I'm going to run, run through with you real quickly every quarter. So every quarter I encourage our members to do a time study. Those are a little bit painful. They're super profitable and a little bit painful. Take that time study and then do a passion versus pay. And passion versus pay is. It's straight up a quadrant where there are high passion, high pay activities.
Low.
Passion, high pay activities. And both of those are okay, right? If all your time could be spent in high pay activities that are the high passion or low passion, the low passion, low pay, and the high passion, low pay. If you want to scale your business, you cannot spend time on activities that are low pay. In a perfect world, you want to spend all of your time on things where you're highly passionate about the activities you're doing and they compensate you or pay you really well. So high passion, high pay, that's where you want to be over time. And this exercise of delegating to elevate is something you do every 90 days. So you're looking at where you spend your time every 90 days. You're bucketing different kinds of tasks into the quadrants. The passion versus pay. And then you spend the next 90 days working to get the things off of your plate that are low pay, low pay, low passion for sure has to be eliminated. Like, if you're, what's a good example of low passion, low pay, like getting in the car and running a sign out to a property. Like, it's super low pay. And I mean, how can you, I mean, I guess you could be passionate about it if you don't want to work and make money, but you can't have passion about that activity, right? Most real estate agents, half of their time are spent doing courier activities. Like they're in their car driving around and they're getting nothing done that's of any value. They're not spending any time in high pay activities. And they justify that. Man, I had a busy day. Like, I had to jump from this side of town to this side of town. I had to deliver a lockbox here, pick up a check here, visit, you know, meet an inspector here or contractor there. It's like that is not business owner high pay activities. And not a lot of it sounds like stuff you can really get passionate about, right? So you've got to install a system into your, your life. And this works in your personal life as well, right? Are you really passionate about mowing the lawn? Like, but I always mow the lawn. My dad mowed the lawn. And like, why would I pay someone I don't know, right? But if you're telling me you want to make seven figures a year, take home, and you don't want to work 70, 80 hours a week, then you have to stop doing things that other people can do for a whole lot less money and start to value your time at 500 bucks an hour. You'll view the whole world differently if you view your time at 250 to $500 an hour and probably a whole separate podcast episode. But it was very simple calculation to know what your time is actually worth versus where you want it to be. It's your adjusted gross income from your tax return divided by an estimate of the number of hours you worked in a year. And that gives you what you're making per hour. So let's say your AGI was 250 all in. 250,000. And you worked roughly 50 hours a week. That's 2,500 hours. That's $100 per hour. @ Real Estate B school, we call that our business freedom index. It is not only possible but predictable for you to go to from 100 to 250 to 500 to 1000 plus. Our most successful members are at a thousand plus. I got up to $2700 per hour in my real estate team.
Right.
So if you're not viewing your business as this system of systems where the systems do the heavy lifting and then we empower people to run the systems and then we're just, we're just managing our systems versus you know, trying to manage a bunch of wild cats, like herd cats in our business all day long. That's just not something that you want to do. So if you're at the point in your journey, I mentioned it earlier, where you want to know what these stages looks like and you're starting a real estate team or maybe you're running a real estate team, but it doesn't feel like it's giving you a whole lot of freedom. It's not making you a lot of money and you can't really have a whole lot of impact in the areas of life that truly matter. Go to realestatebusinessgrowth.com grab a free copy copy of our real estate Business Growth Navigator. This is going to take you through the six stages of growth to go from start where you're under 100,000 GCI to own where it's 2 to 3 million plus. As a real estate business owner on the right economic model, systems driven business, super sustainable model that we teach at real estate B school, it's going to give you the questions you should be asking yourself, the tools and systems you should be implementing, what your team is going to look like along the way and also what you'll be making. So head over to Real estate Business growth com and we'll see you over there.
