The E-myth: What This Powerful Book Taught Me About My Business

Welcome back to Real Estate Team Builders. This is Lars Hedenborg, the founder of Real Estate B School. And I want to dive into a conversation and I've probably had this many times here on the podcast, but it is the conversation of the E Myth and that stands for the entrepreneurial myth. And what does it mean? It's a book by Michael Gerber and it was the first book I read after I got into real estate. And so I came into being a real estate agent from a corporate background and engineering undergrad and a business degree and kind of going down this corporate path and then all of a sudden like 180 degree turn and I've got this real estate license and the market is crashing and the first coaching program I was ever in, that was the first book they gave me to read and it changed everything for me. So if you've never read the book, I would say for sure it's worth reading. It doesn't give you the actual steps, how to go about growing and scaling your real estate business. It just set the mindset around what's possible. If you view your business as what they call in the book a franchise prototype, meaning if you were going to replicate your business 10,000 times, how would you think about it differently? Now I don't know if that question was in the book, but I've been asking myself that question since 2007. So I leave my corporate job. March 5, 2007 was the last day of a cozy with stock options multiple six figure corporate job and I got into real estate. And about three months after I got into real estate, unbeknownst to me, I wasn't really tracking what was going on with the economy or the subprime loan market or any of that stuff in June 2007. And this is looking back like two years later you can look back and like the inventory is going down in our market. Then all of a sudden in June, it goes straight through the roof. And like 30% of our market over the next three, four, five years or so are distressed sales, short sales and bank owned properties and all of that. And you know, the pressure was on, right? I was married in 2006, we had our first child late 2007. And here I left this seemingly great corporate job to get into real estate sales. And people thought I was just nuts and crazy. So the E Myth, and it's actually the version of the book, is E. Myth Revisited by Michael Gerber. The premise of the book is that each of us, if you're an entrepreneur, because not everyone in Real estate is an entrepreneur. An entrepreneur is someone that sort of has this vision of growth and they're going to like achieve growth no matter what. And they're going to get frustrated if they don't achieve growth. And if we fall out of momentum, we sort of go crazy. And we're very cranky when things don't go our way. And it's not the easiest personality type to reround. But an entrepreneur is someone that embodies these three personalities, but they only really, for the most part, they don't give a lot of time to the second two. So the first one is the technician, that's the person that does the technical work. So when I got into real estate in March 2000, 2007, it was only me. I was, you know, figuring out how to build marketing systems and lead follow up systems and nurture systems and sales processes and I was lead generating, I was lead follow, I was doing all the lead follow up, I was presenting, I was showing homes, I was running yard signs, I was designing marketing brochures, entering listings into mls, all the contract to close repair, like all of it, right? I was doing all of it. I sold 27 homes in just under 10 months and brand new to the business. So instantly sort of like the top 1% of my market. But a full 100% of my time was spent doing the technical work. Well, I won't say 100% of the time because really early on I realized that I needed some systems in place to like generate leads or like if I was going to give buyer presentations, which I gave a lot of them, I needed a sales presentation. So when you spend time building systems, that's the second personality. So it's the technician is number one. Most entrepreneurs, the E myth is that it's a myth because you spend all of your time or most of your time doing the technical work. The second personality is the manager. A manager sort of creates systems and then gets someone to run the system so they can help bridge the gap. And this is with all within the same person. So it's like it's not schizophrenia. It's like triple, I guess. Schizophrenia is multiple personality disorder. So it's definitely that this person, the inner manager in us and the third personality is the entrepreneur which we don't give a lot of time to typically. So the manager, their job is to bridge the gap between the technical work, the technician that has to go out there and, and you know, lead, generate and do buyer presentations, listing presentations, all of this stuff, negotiate contracts and show homes and all of that. And the visionary, which is the entrepreneur, spends their time thinking about, man, wouldn't this be great if, you know, we could sell a few hundred homes a year and I wasn't having to work with buyers or sellers and I could just encourage and coach my agents. And I had a great operations person and I had a great sales manager and I could run the business by numbers. That was actually the entrepreneur back in me in those early days was envisioning a future like that. And so I would spend time as the manager. The only time I could spend doing this was I would put my wife and my son to bed around 10, 10:30. And several nights a week from like 10:30 to 2, 3 in the morning, I would build systems, I would work on marketing systems. Like how can I generate leads while I'm out with clients? That's a marketing system. Expired were big back then. Get ready, coming back strong here soon. And we're working on that in our production mastermind. You can message me if you want details on attending our production mastermind. No charge to show up to those or anything like that. Just message me on one of the platforms. Actually not one of the platforms. Facebook messenger is the only one that I check. So the reason most agents fail to scale is that they're caught up like forever doing the technical work in their business. And like it's been said, and I don't know, I think all statistics are made up, but I heard this statistic a while ago and I've stuck with it over the years that 85% of real estate agents don't have an administrator. And I would easily, if you look at like average agents selling, let's say 1012-20 to 24 homes a year, that's about, you know, 90, 90% of our industry is not selling more than two homes a month. If you look at that as where those agents are spending their time, I wouldn't argue, I would probably be right, that 85% of their work is administrative in nature. So 85% of agents don't have an administrator. But 85% of the work that we do as an industry is administrative in nature. And it doesn't mean it's not important work, but entering a listing into mls, taking pictures, designing a brochure, putting a yard sign out, repair requests, contract getting initials on changes of a contract, showing homes, you know, running your books, like putting together tracking sheets or what. Like all this stuff that has to happen to keep a business running. In a real business, those activities are done not by folks that are the owners of the company. They're done by a set of administrators and managers that are putting the systems together and getting people to run the systems. The person that puts the system together is paid a little bit more than the person that runs the system. That's where the whole thing breaks down is that most agents never have a shot at scaling because they're not willing to look at to change their mindset around what's possible. If you ask yourself that franchise prototype question, they're not willing to ask themselves that question and they're not willing to be honest with themselves in terms of where they're spending their time. So in those days, I wasn't drawn to working with clients. So it wasn't that hard for me to envision a world where I was selling hundreds of homes per year and I was out of production. And so take those early years. 2009 sold well. 2008 was my first full year in real estate. There was 44 sales. A part time administrator that went full time. I started my team in late 2009. 58 sales. I did 55. And my buyer agent did three deals. That next year my buyer agent did like 27 deals, which was awesome. We did 118 as a team and I think I did about 55 again. And then the year we did 178, which was 2011, I did 66 deals. But get this, 2012 we did 248. The market is still crashing. It's still not a great market. We go from 15,000 agents to 5,000 agents in our market. And we went from 178 where I did 66 transactions personally to 2012, we did 248 and I did one transaction. So when I'm writing my business plan in late 2009 and I've shared it here in the podcast and some of you have actually got a copy of it and has like a lot of personal stuff on it. But my mindset in late 2009 was that I was going to build a business where the business didn't rely on me. And I predicted in three short years. So this is the business business plan I wrote for 2010 was the year one. But the three year vision in this plan was 2012 was the three year vision. I projected that I was still doing listings, I was out of buyers. But in three short years from when I wrote the plan, I hadn't even started a team yet. To three short years later, I sold 248 homes as a team. And by design, I sold one home that year and, and it wasn't built on this sort of shaky economic model where the splits are like way in the agent's favor and it's a loose collection of agents and the agents aren't like working hard and they generally. The economic model, if there is even an economic model with some of these teams, it's really not a well thought out economic model. So one thing I got right from the beginning is the right economic model. So take all of this and put it all together. The reason I was able to achieve what I set out to achieve three years after I launched my, hired my first agent, I was out of production and we sold 248 homes, is because I gave myself a little bit of room on a regular basis for my inner entrepreneur to cast this vision that my inner manager could build the systems around even if I was still doing some of the technical work in the business. And so if you have an orientation toward growth, you have to make room for these other two personalities and commit to doing less technical work over time if you want to make more time and less money. That's a big if. If you're totally comfortable selling 10 to 12 homes a year and there's no sort of crazy motivation around, you know, growing and scaling and making more money in less time and you know, making a half a million dollars a year working, you know, 40 hour work weeks, no evenings and weekends, that was my first target. If you're not motivated by any of that, then keep doing what you're doing. But if you are, you must make time for the inner entrepreneur. It could be a 60 minute time block, non negotiable once a week, early Saturday morning, early Sunday morning or Sunday evening, where you're just going to be by yourself thinking about what's possible for the business. And then during the week, three or so 60 to 90 minute time blocks where it says work on business. That's the time block that the actual manager in you sets up systems that do the heavy lifting in the business. I'll do a whole separate podcast on how to sort of build out systems in the business. And then you still get to do the technical work, right? So there's still technical work required. You'll never be a hundred percent entrepreneur. You know, a hundred, you know, between entrepreneur and manager, 100%. You might be 10 to 20% when this thing is fully realized of technical work. And then, you know, you're still building systems in the business because that's still really valuable. And then you're spending maybe 20 to 30% of your time as the entrepreneur. So I know that's a lot, man, I'm out of breath. If any of this struck a chord in a way where like, you know, you need systems or you know, you're just like head over heels in the technical work of the business. I would say, because I wrote this book with hindsight and when I grew my business I wrote a book called Scale or Die. So you can grab a free copy of this book, go to scaleordiebook.com that's scaleordiebook.com and it's appropriate because I built my business in a time such as this. Now who knows what this shift or crash or reset or, I mean, who knows what's going to happen? I think it's going to be there's a lot of sort of big things converging at the same time and a lot of like totally macro cycles are converging. Like 50 year technology cycle where they see like an 80 year demographic cycle and then like a 250 year like world order cycle. Like there's all this stuff converging right now, which who knows what's going to happen. But my point is I built my business in a very, very crazy and chaotic time. When everyone was leaving real estate, I just put my head down and got to work and took way my unfair share of business. After that year 2012, we did 248, we went on to do 312 and then like over 400 transactions in 2014. And I worked like one day a week in 2014. So I think I work. Actually I was only in town for like 40 or 42 days and sold like 420 homes. So it was wild. And so that's what's possible when you spend a little bit of time with your inner manager and your inner entrepreneur and just tell the inner technician to cool off for a second. These are the things that are really critically important but not always urgent. These two time blocks I described, the one is a 60 minute vision time block and then two to three times a week you work on your business and let that inner manager out. All right, go to ScaleOrDiveBook.com and if you want to talk about maybe a deeper conversation with me personally about what it would look like for me to partner directly with you to get mentorship not only around real estate, but around wealth building and residual income building on the EXP platform. I don't really care what you think about EXP until you have a conversation with me about it. So go to partnerwithlars.com. that's partnerwithlars.com. let's just have a conversation about it. Either way, grab scale or die. Book.com talk to you guys soon.