The Traditional Real Estate Model May Make You Money, But It'll Bankrupt You In Other Ways w/Justin Stoddart

This is Real Estate Team Builders and I'm your host, Lars Hedinborg, the founder of Real Estate B School. The real estate team building world is driven by big egos who boast about how many homes they've sold or how much GCI they've earned. We don't hear much about their low profit margins, the long hours they put in each week, or the unbearable stress they endure. In fact, I've discovered that most real estate teams are losing money when you consider the amount of personal production their owners must do to make ends meet. I believe that if you want to profitably scale your real estate team without working crazy hours, enduring unhealthy levels of stress, or coming up short at home, then thinking like a business owner, building sustainable systems and empowering your team are absolute musts. You won't find any smoke and mirrors or hype here on my podcast, just the real world tools, systems and strategies that work. So if you struggle to balance growing your real estate business with focusing on the areas of life that truly matter, then this show is for you. What's up, Real Estate Team Builders?

Lars Hedinburg here, founder of Real Estate B School. And we've got Justin Stoddart on the call today. On the podcast today, international best selling author, business builder. His primary roles are husband and a dad of six kids, which I think we could probably spend the whole time today just talking about how you manage all of those things. But give us a little bit. Well, first of all, welcome to Real Estate Team Builders. Give us a little bit of an intro, a little bit of your background, what you're focusing on now. And we're going to unpack this upstream model today.

I love it. Lars, I appreciate the opportunity to come back. This is our second time getting to hang out. I love the first time. I can only anticipate that today is even going to be more fun. So thanks for the opportunity to be here. Big fan. Of what? Of what you do. I mean, I'll just say my story starts with my faith, right? And I can see that's a big part of who you are. So I love that. Well done. Secondly, because of my faith, it set me up to have somebody who's way out of my league agree to marry me. And so without my faith, I wouldn't. She would have never been interested in me because that made me better than I would have been otherwise. And then together we've had an ambitious goal to have six kids. That's what we decided upon early in our marriage, before we had any. And it's been awesome. Our youngest is four and yes, we are done. I know that's on everybody's mind. Yes, we are done. Youngest is 4, oldest is 15. And we are really getting to the fun stage. We were two weeks ago we were in Hawaii, we took everybody and we are like, my wife looked at us and said we are at that point where we can actually travel. Like this is going to be fun. So yeah, life's getting really fun. As far as my professional story, I grew up in a very entrepreneurial family. My parents essentially said that unless you own it, then it's not worth it. And I've been an entrepreneur most of my career. I was a high end home builder from early 2000s till 2009. But everybody here can guess why I chose 2009 to exit out. At that point I realized that my passion was not building homes nor developing land. It was developing people and building business. And I set out to figure out how I could do that and how I could make a living doing that. And for seven and a half years I worked as an executive for a title company, developing people there, developing the customers internally and realized that I was thinking bigger than what the title industry would allow me to do. And so I started on the side of coaching company, which is what I get to do full time now just as of recent. So really excited about that. And my mission and my passion are to help people to think bigger, which means to me, Lars, to wake them up, wake us all up to our own potential. I believe that the greatest untapped natural resource in the world is not oil, not diamonds, not natural gas. It's human potential and it sits dormant inside of all of us. And so my passion is to wake people up, to help them get a glimpse of who they really are and what they could do, all the good that they could do, and then to inspire them and help them to live in pursuit of that so that they can live, give and serve abundantly. That's what I'm about, that's my story. And I get the great privilege of serving the real estate industry almost primarily. And it's been a great journey and we're just getting started.

So awesome the book. And we're going to kind of lay out a little bit of a framework for your model. What I love about it is that it's based on leverage. So a lot of times in real estate we're either paying someone a bunch of money to do our jobs for us and just buying leads that may be good quality or not, but those companies are extorting as much money as they possibly can from us. So it's out of economic model or we're just grinding to get like these one off transactions. So maybe start off by giving like an overarching explanation of your model and then let's kind of break it down into a few sort of bite sized pieces. And then for sure I want to get, you know, you're also giving your book away. We'll definitely get to that at the end as well. So kind of start big picture, break it down into a few chunks.

Perfect. I'll start off by saying I think what we've all been taught about sales isn't necessarily wrong, but it has put a lot of us in a situation where at the end of the day we don't have a lot of time and energy for our faith, for our family, for our fitness. So you get people that maybe have built a good business, but the rest of their life is a little bit bankrupt. Right. Like the relationships are kind of approaching E. Faith is like back burner, out of shape and just not in a good spot. And I think part of that is because we've subscribed to what I call the traditional models, which is it's a numbers game. Now this can be applied to whether you're talking about your sphere of influence or whether you're talking about geographic farming or Internet leads. But like you think about that said everywhere, it's just a numbers game. Just do the numbers and you'll get there. And so we just kind of buckled down and we do that. But I believe that that philosophy has again caused us to be bankrupt in other areas. It may have worked from a business standpoint, but it doesn't leave us a lot at the end of the day. So what I uncovered as a high end home builder was a way to not shortcut the system. I don't believe necessarily in shortcuts, but it's a better strategy in which folks, instead of focusing on numbers, you focus on individuals, but the right individuals. And I'll put it this way, Lars, if I were going to be an investor in your business, let's say I'm going to put in a million dollars. I believe that Lars is the next big thing and I'm gonna put in a million dollars. I would probably wanna know as an investor, like what you're doing with your time. Right, Fair enough. In that process, I'm probably gonna wanna say, what meetings did you have and are those meetings with people that are actually gonna create a return on our business and that's just like common sense, right? And I think all of us have to realize that we are, in essence, investors in our own business. And we've put, you know, we will put millions of dollars, whether it even be an opportunity cost or an actual dollars, into the business. We have to realize, like, how am I spending my time? Am I actually having meetings? Am I meeting with people? And more importantly, am I meeting with the right people that can actually create a big return? Because not all. Like I believe, in the eyes of God, all people are created equal. However, in the world of business, not all people can create an equal return to your business. So that's kind of the fundamental essence of the upstream model, is that there are certain people in the marketplace that can help you a lot. They can send you a lot of referrals. And rather than focusing on the masses and having it be a numbers game, go find the right people and watch them light up your world and leave you with time and energy at the end of the day to be able to focus on things that are way more important than just your business.

Awesome. So let's break down a little bit about the numbers. So just give like, you know, an average or a typical agent, you know, approaches their database this way and it's like a one out of whatever and, and how your model is different just so people can wrap their heads around what we're talking about.

I think probably universally accepted as a pretty good book when it comes to real estate is the millionaire real estate agent. Right. Regardless of what brand you're a part of, what company, like, like, like knowing your real estate agent, it was really a pretty solid, almost kind of like textbook on what it looked like to build a real estate business. And it's a little bit older, but in there it says that 10% of your database will turn into either a deal or a referral to a deal. Right? So if you have 100 people in your database, you can count on from that database. Now, I'm not talking about a bunch of cold leads. And you don't know who these people are. A database is defined by Brian Buffini, which I love. This definition is it's not a mailing list. It's definitely not just a list of cold leads. It's a list of relationships. In other words, if you were to pick up the phone and call them, you know who you're calling number one. And they knew who's calling them. Right? So 100 of those people in any given year, 10 of them. Now, that book was written decades ago. It's been updated that in our noisy world, it's probably closer to seven. So you can count on about seven pieces of closed business from 100 people that you're keeping track of. Right. You're in contact with them. So then if you think to yourself, okay, I really want to work now, again, that's using your sphere. The number is much larger. If you're doing cold market, right. Because the relationship isn't in place, then you have to ask yourself, okay, if I want to, let's say, add another 10 transactions this next year, I need to add, what, 112. I don't know the exact math, but it's over 100 people to your database. Using the 7% number, that's like, wow, 100 people. Now, let me just reference back to what I said before. I think we can all see when maybe we don't have deep relationships with our spouse or with our kids. Like, why not? Well, maybe it's because we're trying to have relationships with 100 new people every year in order to create the business, to help put them through college, et cetera. And yet we put kids through college we don't have relationships with. There's a problem there. Right. So that's kind of how the traditional model has taught us. Again, it's a numbers game. Go into it, just add lots of people, and from those lots of people, you'll find a golden egg. You'll find seven golden eggs. Right. So I don't know if you're ready for me to kind of transition into the upstream model and kind of tell you what, that.

Yeah, for sure.

So the counter to that. Right. Which again, anybody that's doing something that works, don't give it all up and say, well, I'm going to do this now. No, that's. That's not a recipe for success. Right. But I would say whatever you're doing, keep doing it. But I would encourage you strongly to start to think about potentially right away and over time having this strategy that I'm going to lay out to you. Eclipse the older traditional models or at least have a large, like a lion's share of your attention. And that's this, that instead of chasing golden eggs, there are golden geese in the marketplace. Okay. Now, this may come in the form of estate attorneys, lenders, builders, developers, CPAs, financial advisors, divorce attorneys. Right. We've all heard this. Right? This isn't like, oh, wow, yeah, this isn't some new concept. But I'm going to get to the new concept here in just a second. But rather than again going out and trying to court all these people, go find the people that can actually help you. Those upstream partners then become an extremely valuable, what I call not just a center of influence, but a sender of influence. And in other words, it's not just that they're influential, it's the fact that they're positioned in the marketplace such that all the people that they're dealing with day in and day out, they have the potential to, and maybe already are uncovering the fact that they need a real estate agent or they could be with one or two more questions, and in so doing, they would be able to send, you call it 10 to 12 referrals a year. Now, ask yourself the question, okay, if I really want to a, have great income and have great freedom from my business so I can actually build relationships in my faith and with my family, et cetera, then I'm going to need money and time. And if you can cut out 99 plus people that you're trying to add value to and pour deeper value into one person to get those 10 to 12 deals, does that not make better sense if you're trying to have time and money together? So that's the essence of the upstream model. And again, many people are like, oh, yeah, estate attorneys. I've heard that before. And I always counted that to see, are you getting business from an estate attorney? Are you getting business from attorney? Because people are like, oh, I've heard this before. Yeah, yeah. I'm like, okay, well, how's it going for you? Well, not that good. Sometimes they're like, I'm getting, I get a couple referrals a year or maybe a couple deals a quarter from my lender. Some people have figured this out, don't get me wrong, but most people are like, oh, yeah, that's a good idea. I already got this figured out. But then I ask them, okay, so how's it going? They're like, well, I haven't really figured it. I met with an attorney. It didn't really turn into anything. And that's where kind of the new concept that people need to understand is that this isn't about going and adding these people to your database and treating them like a consumer. While they are a consumer. You're not approaching them as a consumer, you're approaching them as a business owner. And you going in tongue in cheek, saying, oh, by the way, I'm never too busy for your referral. Here's my cards, here's my brochures. I'm like, I'd love to receive your referrals. When you think about that, when was the last time you had somebody, maybe it's a home inspector come in out of the blue, solicit into you, give you a stack of business cards and brochures and say, I'm never too busy for your referrals. And you're like, first of all, who are you, how did you get in here and what value are you giving me? I probably already have a relationship in place. There's kind of this disconnect that we can treat everyone like consumers. When business owners, that's not their primary concern at that moment. Right. There isn't a relationship in place. And we're not trying to take an approach where we want to have these deep friendships with people before they'll send us business. This is a very specific strategy to start getting referrals right away from these people. But it never works if you go in with your hand out looking to get something from them. So within the upstream model, what I teach is a five step strategy to unlocking that and getting these people wanting to send you business, not because they know you, like you, trust you, and you took them golfing or you drop something by their house. That may work in your sphere and if it's working, keep doing it, but don't use that strategy. Don't use a B2C like you're the business, you're marketing to a consumer. Don't use that strategy in a B2B model. Right, because it's different. It just, it won't work. And that's when people are like, oh yeah, I know that concept. And I ask them, how's it working? Not that good. It's because they're taking the same philosophy, the mentality of B2C and they're trying to apply it in a B2B setting and it's just, it's not set up for. That doesn't work.

Yeah, that's awesome. You know, you're one of these potential, you know, folks that can send you 10 or 12 referrals a year. Like they don't want an Apple piece, you know, but, but we almost put them on the same mailing list. Like literally I've done this. I'd never cracked the code on this.

What?

Maybe because I want people to get a copy of the book, but, but maybe like talk through like one or two case studies just to get an idea of like what this looks like. If it's like a 12 or 24 month process, if it's a mindset, shift Perfect.

Let me start with actually how I uncovered this. That'll be kind of a great case study. It'll tell you what not to do and they'll tell you what to do. So I was a high end home builder. I had worked for a very charismatic individual that just kind of made it rain all the time. People just lining up the door. Well, he and I parted ways. I purchased his book of business. He focused on land development. I just assumed it was going to be just as easy to go get business as he had made it appear. And all of this I got a kind of a rude awakening. I was 25 years old at the time, trying to get millionaires to entrust me to with kind of their dream home. And it wasn't as easy as I had anticipated. And so I realized that the shoreline, if you will, if you could picture, and hence this is where the upstream kind of wording came about, is you can picture a very busy kind of fishing hole. Everyone's got their lines in the water. People have this thing kind of blocked off, like they got their fishing hole. This works. And it was crowded for me. I'm trying to get my pole in the water now, right now. Real estate agents can relate to this. They're trying to get listings and it's like, man, it's crowded. And I just realized, I looked upstream, if you will, and I saw that there was an architect, that architect, all of his current clients were going to need a builder next. And so I thought, why don't I just go talk to him instead of kind of hanging out down here in these competitive waters. And so I went up as a solicitor. So I showed up at his door unannounced, had a stack of cards, brochure, everything that I just described that agents shouldn't do. That's what I did. That's how I learned so specifically what not to do. Because I could tell in that moment that he was entertaining me at his front desk, that he was just eager to get back to work. I had interrupted his day. I was bringing no value. I came to get value. So I was emotionally unintelligent enough to do that, but I was also emotionally intelligent enough not to do it again. And I took some good notes of what happened there. And I my next step, I didn't cold call in, I didn't cold market in. I got introduced in from someone who had a good relationship with the architect. At that point I went in and sat down. I didn't have to pitch myself, I didn't have to give cards I have to bring brochures. She had already done it for me. So we sat down. I could step in as a business consultant. I could sit and listen and ask questions, right? Those that I work closely with on this, I have a coaching group that I help them walk through it. I have an entire list of questions you should ask that positions you as a value add to that person. And at the end of the conversation, they love you because they have to talk about themselves all the time. And more importantly, you walked out of that meeting with the most important thing, which is their pain point. Success is not I put a stack of cards on their desk that are probably going to get filed away in the garbage can. Success is you walked out with something that's painful to them and then you can then go to work on solving it. And then over time, which is what I teach, which is the more advanced strategy is you take your knowledge and your value integrated into their client experience. So you're coming up all the time, right? Not because you drop some by their office and they like you, because you've made their client experience better. You've integrated with them to where you come up because you're giving them reason to and they want to because it's a value added, their clients. So that's one example of how it worked, of how not to do it. Show up as a solicitor looking to get something, whereas show up as a peer, edified, introduced peer, and you show up to. To give and learn how you can give. And then over time you begin to integrate. That process only took probably 30 days with that potential architect before he quickly realized, this is different, different builder than I've ever experienced. Can I see some of the homes that you've built? Okay, great. And then pretty soon he was starting to introduce me as I'd integrate with him. I'll take an example of an agent that I work closely with here out of Portland. Her name's Kim. Kim sells over 100 homes a year as a solo agent, small team, as like a buyer's agent. And people are like, how does she do it? Kim has over 20% of her business comes from one client, one professional. And so if you want to scale your business and have a life, it's not about necessarily more being better, it's better being better. It's finding the right people. There's a couple examples of how we've done that or how I've kind of seen that come about.

Awesome. It's really good. I mean, it brings up so much. There aren't a Lot of really good resources that tactically teach. Because if you've been in our space for a time, most people have heard of this, but I've been as deep in the space of real estate growing and scaling and team building. And I've heard of it, and I never actually implemented it. So I never actually took the time nobody ever taught me and broke down. Like, how would you go about, you know, like, we feed, like feeble attempts to launch a vendor program, but in the vendor program, we were looking to extract money from people, you know, so that's the thing that's more widely taught in our industry is like, how can you get a bunch of vendors to give you money to pay for your marketing, you know, versus, like, how can you truly come into these folks lives as a brother to a brother, or a brother to a sister, or sister to a brother, and you're just trying to help solve problems because we're all, you know, we're all running a race. That doesn't make sense.

Well, I mean, I'll point to this, Lars, you and I have a lot in common when it comes to faith. And I'll use this. Whether or not you're a person of faith, listen to this. Or not, you look at probably the most famous person throughout the history of the world, arguably Jesus Christ would be that person, right? And he came. Now, again, like, whether you believe he was just a man or you believe he was more than that, that's not the point of this. The point of this is people documented his life and it was about entirely there to give. Entirely there to give. Right to give and to serve and to bless and to help other people. Same thing with, like, Mother Teresa, right? Like, these people who have had, like, serious impact, they didn't come to get. They just didn't. They came to give. And I think somehow we forget that when we're in business because we need to get right. That's what pays the bills. But the paradigm shift is if we. If we genuinely come to give, and specifically the right people, right, you know, Mother Teresa nor Jesus Christ didn't necessarily operate that way, or they weren't looking for the right people. For us, in business, when you look for the right people, we add, we come to truly, genuinely give to the right people, then it's. It's amazing what happens. How those principles are really universal truths that open up massive doors of opportunity.

Yeah, but it was to serve. And it wasn't through, like, Jesus having a big database and, like, you know, adding 100 people so he can save the one right. It was.

Yeah, he went, he actually went after like left the 99 and went to the 1 right. It's a great analogy.

Yeah. Really cool. All right, so how do we get a copy of your book, which I think everyone should pick up and then we'll close out here.

Yeah. So if you're looking here, there's a couple ways to get it. I think the best way if you're actually a reader is go to it's my name, Justin J U S t I n Stoddart s t o D-A-R-T.com book so you can get it there. It's also available if you go on audible. Like I know a lot of agents are in their car a lot. They prefer to listen while they're working out. Just search the upstream model. It's on there. You get to hear my voice, whether you like that or not. But that's an easier way to get it. And then in there, both ways you get it. There's ways for you to reach out to me and allow me to help you implement this model. Right. There's a lot of things that some caveats that you know that can be helpful that I'm, I'm actually coaching, helping people to do that. So let me know if I can help. Probably a great way also is just follow me on Instagram at justinstoddart. It is a great way to kind of get little snippets of kind of what I teach about scaling a referral business.

Awesome. That's. People ask me all the time like, how do you read so many books? It's like, I don't read books. It's like, wait, I thought you said you read. No, I listened to books. So I think that's awesome that you went through the effort, but now you've maybe inspired me to get my book on Audible as well.

Totally, man.

All right, brother. Well, I appreciate your time. This is something that I think everyone looking to grow but not give away their life in the process. I mean that's the, this kind of double edged sword that we live in in our industry. Like once you get past 20, 25 sales, like there, there isn't a way to scale without, you know, sacrificing all the areas of your life that matter more than just slinging, slinging more homes. So I appreciate your message and your heart and yeah, if there's anything I can ever do for you, you just let me know.

Okay? Thanks, man. Same here. Really appreciate the opportunity. Thanks everybody.

Yeah, we'll see you. Be good.

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