Profitability vs Durability with George Laughton and Billy Hobbs | Ep 058

While you do want to be vigilant about net operating income, you do not need to be cuffed to the idea of delivering a very specific profit margin at all costs. In fact, it may hurt the durability of your business. And that's a key idea you'll pick up in this conversation. Team leader George Lawton is focused on growing top line revenue. Chief operating officer Billy Hobbs is focused on managing expenses and delivering operational efficiency. Together, they're building a durable business. Around 200 agents, around two dozen staff members, five regional offices and 19% growth year over year. A down year in the Phoenix market. George and Billy were kind enough to be our first two guests in our popular Inside the Lawton Team series. Now they're back to talk about profitability, trust, consumer experience, video messaging, transaction coordination, the infinite game, and the EKG of your business. Here's my conversation with George Lawton and Billy Hobbs on real Estate Team os. No matter where your business is today or where you want to take it, you'll get there faster and more profitably with an operating system. Welcome to Team os, your guide to.

Starting, growing and optimizing real estate team.

Here's your host, Ethan Butte. You guys were kind enough to welcome me and John into your organization, into your team to produce an Inside the Lawton Team series. Thank you so much for that. I've got great feedback on it and I'm happy to have you both back for kind of a follow up conversation almost a year later.

Yeah, we're excited, man. It's been, it's been a fun filled, jam packed year with its ups and downs and so, yeah, excited to share with you and, and everybody else what's taking place, but it's, it's been, it's been a year of growth for sure.

Cool. There are a couple things in there I want to pick up on and, and carry forward. One of them in particular is the NAR settlement. I mean we recorded it I think like late March or early April of 2024. So it was like it was forming but it was all still like what is really going to happen? And so curious to know how that went and how that's going in your market. But we'll get there in time. We got a lot of ground to cover. Billy, I want to kick this off with a modified version of the question that I ask everybody and I asked both of you in that series which is normally like, what's a must have characteristic of a high performing team? But I'd love to ask you, Billy, what is a must have characteristic of a high performing leadership team in particular like an executive team or a leadership team in an organization your size.

Man, this is probably going to sound too easy and probably cliche, but I would say trust as, as we grow and scale the organization and the bigger we get and those type of things, you know, we got, there's some autonomy that's, you know, with that, right. We've got to trust that each other's out there, especially with some remote work. We're in five regional locations. Like we've got to trust that everybody's out there with the same goals, same energy, you know, same task in mind and that at the end of the day they've got the best interest of the agent, the company and, and everybody involved. So I would say trust. And I think that's honestly one of the things that I truly enjoy about our team is you get in that executive room and there just is a level of trust that hey, we all have, you know, the good intention, the best intentions in mind.

Anything you want to add to that, George? Either another idea or to double down on trust in some way or even speak to the idea of building trust. Especially as you've like, you've added members to that crew.

Yeah, I'll double down on the trust factor. I think, you know, trust is such a key component of having great synergy within your leadership group and knowing that, you know, if you hand something over to them that you trust that they're going to focus on, they prioritize correctly. I think the other thing that always stands out to me is when you have trust, it's also, you know, problems aren't that challenging, right. Like when you have a, you're like, okay, I know we have the resilience and we have the trust and you have the emotional intelligence here to, to know that a lot of times what we are dealing with is problems. Right.

And.

If you don't realize that's what your job is at a leadership level, dealing with problems, it can really wear you down really quickly. And you'd be like, oh, another contract issue or another, you know, dispute over here or this or that and, and, and you forget like, man, that's what we're here for, right? Like we're here to solve these problems. And I trust when a problem does come up and I give it to Billy of Billy's leading, you know, taking point on it, that it's, I know they got it right. Same with, with Justin and the other people in Michelle and in that group. And that's just a Good feeling to have is like, you got the people around you. And so building trust, how do you do that? Dude, I. It takes time. It takes finding the right people, getting the right talent. All of these people have kind of grown up through our systems and. And have earned the trust. And. And we try to. And I. And Billy and I both try to serve that back as well, too. Right.

So one of the most interesting dynamics about trust and one of the things that makes it so valuable is that. And this is cliche to. To kind of call out, but, like, it takes, as you said, like, a long time to build, and it doesn't take very long for it to be destroyed, you know, if it does, and it's difficult to impossible to recover once it has been, you know, damaged.

I find that if you trust your gut with that, a lot of times as you're trying to build, it's pretty obvious that whether or not that's actually a possibility. Right. And I find that if you trust your gut with that, you're typically right. And so we try to be patient with that, but at the end of the day, you know, you'll identify right away if you're in a group of people where trust can and will and is being built.

Yeah, that's the thing. Like, there sometimes we get that intuition, but also we're not. We don't necessarily act on that. You're just like, hey, Billy, we should probably keep an eye on this. And then you wait for validation of it. You're like, okay, yeah, we were right. But patience with people has served us well too. Right. There's been some instances where you go, you know, something's been said or something's been done and. Or like, the development of people, it does. It takes time. But the patience has served us really well.

That instinct for this person to recognize this person made a mistake, as opposed to this person is not trustworthy, or it's a character inconsistent with our core values, or these kinds of things. For folks who A, didn't listen to that series and or B, haven't followed your growth over the past year, characterize the team as it is today. Market, agent count, staff size, culture, structure, anything you want to share on. Like, what is the Lawton team here in early 2025?

Yeah, you know, Agent Count, we're still sitting around that 200, little over 2. We always kind of fluctuate between that. 2, 25, you know, 2, 15, 220. It's like that kind of range. So we're still in that range. Yeah. I mean, we were up over like 19% over last year. Our staff size is. We're down about 2, but we've kind of recycled and we're hiring a few more support staff on the back end. So we're still around that 25 employee staff count and still in the five regional locations. So a lot of that has looked the same. We've, you know, kind of managed through the market, but in general, you know, we. I think the value that we've seen over the last year is that we've maintained essentially, you know, the same staff size. We've grown a little bit in agent count, but we've also been up in production. So it's really nice to be able to see that, you know, we haven't had to grow staff and expenses and those things, but we've able to increase, you know, transaction count and income on that side.

What is your. I'm doubling back a little bit, but tying it together with what you just shared. I mean, just wanted to give people a sense of the scale of the organization that we're talking about. What is your formal or actually what is your process for working together? Is it formal? Is it like an eos or is it like, less structured, especially within that, like, leadership team? And how do you define the, like the core leadership team? Like what, what functions does it include? What maybe doesn't it include? And, and how do you all kind of like, what's your rhythm? What's your structure for, you know, being adding. I mean, what I heard was some efficiency in there, you know, up 19%, but with about the same, you know, staff. So what are a couple of keys to that?

Yeah, we've followed an EOS model for a number of years and actually probably modified it now to where it's our own. You know, it was getting a little redundant for us. We've done it so much right. Like, I don't think people were being as creative and thoughtful as they once could have been. And so we shifted it around a little bit. But essentially the, the, the framework is an EOS model. And in that, you know, in our leadership team is sales, operations, finance, marketing, you know, and so who. And sometimes you wear a little bit of both hats if you're somebody like Billy or, you know, but, but within it, you know, we have Justin McClellan, who really is kind of a sale. Our sales leader heads up our channel accounts like Flex. Dave Richards also heading up on the sales side. And you got Billy in operations and Michelle, who I would say kind of balances between the both like she is, I would say, an operational mind, but with the sales bend. And so we've got. I try to round all of those out, and then, you know, Billy makes sure we're always on budget. So we're following that. And mine is to try to push massive growth and vision, make sure that we're staying committed to what we set to do and creating those quarterly rocks and prioritizing correctly and making sure we have the right strategies to hit those rocks.

I'd also say just that, those sequence of consistent meetings, of making sure, evaluating this is where we were going. Are we on the right track? And if we aren't, what's getting in the way and trying to keep it simple? I think we spent a good amount of time this year trying to simplify. And sometimes simplification is actually more taxing because you're eliminating and you're still trying to figure it out. And I think that's. That was, you know, something we try to maintain within that organization, that cadence of conversation to understand what's getting in the way and try to eliminate those things and put people in their strengths to get it done.

Cool. Yeah. I was in a. I was in a company where we used scaling up, which is just a different version, you know, came out of the same school of thought for over a decade. And we. I would say, like, I love this idea of modifying it and. Or breaking out of it because we. It would ebb and flow. How useful it was. Like, there were periods, you know, they're like two or three quarters in a row where there's really good, healthy debate and, like, conversation and fighting to figure out what is the next right direction from a strategic perspective. And then, you know, the rocks all roll out of that. But then there were also other times where you just felt like, you know, half the room or most of the room is just kind of like showing up, and this is what we do. And so, like, that repetitive nature can. That's its strength and its weakness at the same time. So I love hearing how you guys are running that.

Yeah, it's not being afraid of hitting the issues. Right. And so I think in the EOS model, when you follow level 10 meeting all the time, you know, you're supposed to spend some time on the issues, but we'd inevitably, you know, you get caught up in the rocks and your transaction dashboards and reporting that we didn't. We didn't get deep enough to solve the problems. Right. And so that's what, you know, we're making sure that we're we're going deep on at least one aspect of the business or one. One strategy that we're working on and. And moving it forward, right? Like, hey, these things are. These things are progressing moving forward, and Billy and I are removing roadblocks and making sure that we can help them, support them, and facilitate that.

When do you know when a problem is something that you need to, like, jump on right away and prioritize? And when you know that something is a problem that, like, you know, what, you know, we're. We're over halfway through the quarter. We're. Let's just stay focused on the core things we're focused on here. Let's really take that thing on later. Like, when you. Like. Like, how do you. How do you know, like, in the moment? Um, we need to. We need. I need to point two people's minds at this right away. Figure it out, and then we'll roll it out versus this, because. And I asked that from my own experience as well, which is like, let's deal with that in six weeks, because let's just stay focused. Let's finish this quarter strong. Let's, you know, we. We still have progress to go on the things we already committed to. Let's. Let's kind of hold off on that. Like, it's a constant tension.

I think some of it is, you know, being in tune with the business, right, and understanding what the. What the. The goal is, like, what's the intention? And I, you know, that. That problem, that issue, whatever it is, does it really. Is it affecting us accomplishing the goals and the things that we're trying to accomplish? Is it in line with, you know, our ultimate, you know, end goal? So that's one thing we try to evaluate is like, hey, we understand it's an issue, but is it affecting the things that we're trying to accomplish today? And then the other part of that is capacity and resources, right? Like, hey, we're finishing this up. You know, I'll give an example. You know, we. We had the fallout boss conversion last year. We had another transaction management, you know, CC conversion this year. It's like, there are other things that we want to accomplish, but, man, we got to get those things done so then we can get the resources over here. And then if it is something that is directly affecting our business and we evaluate resources, and maybe it is like, okay, well, we're just gonna have to bite the bullet here, add additional resources, and we'll get it solved. But usually it's those two things, you know, our. Is it Getting in the way of the progress and the goals and the things we're trying to accomplish. And do we have the resource and capacity at the moment to do that? Because we don't want to do it at the detriment of the things that we're trying to accomplish and finish and complete move on.

Yeah, there's. There's hardly ever a challenge that derails us from the focus of our. Of our goals. Right. Like, and that's what we have to remember is. And so you kind of go back to that, as Billy pointed out, right? Like, if it is something that's going to be detrimental to that and it's going to have a big impact on what we're trying to accomplish, then we've got to allocate the resources to that. And that's how, you know, you're like, hey, can I pull my best off operator off of this? Do I have to pull them off of this and put them here? And if you go, no, I. I wouldn't pull my best, then it is not a priority, right. Like, I'm like, billy, you got to focus on this. Then. Then I know it's a priority, right? Like, hey, we feel it's going to have a big impact on the current business or the future business.

Yeah. Like, kind of tucked in there was a little bit of like, on the fly scoping as well. Like, well, if we were to take this on, what would that look like? So you at least entertain that conversation, make the right decision for. For the business and for. From there. So you all were kind enough to host me this week.

Yeah.

Thank you.

Kickoff all agent meeting, first of the year thing. And, you know, we met in advance and kind of settled on consumer experience and video messaging, with which I had a background in both of those topics. And kind of what emerged as I was putting it together was this kind of natural underlying theme of, you know, what's the right role of people? And generally speaking of the agent, but of people in general versus, you know, what's the right role of the machines in creating and delivering consumer experience? And then, of course, I see video messaging as a bridge between those things at some level. But I'd love to hear like, any. I'm not asking for backpacking, but like, anything, you know, a couple days removed from it, anything that stands out to you as, like, as a, as a good message of the day or of the time for your team or. Or for the industry in general.

Yeah, I. And I've gotten feedback. I actually had a, like our top producer Mastermind the next day. And they were all talking about, you know, takeaways from the content, the integration of video and the ways, you know, some of it they've been told before, right? Like, hey, you know, the, the five ways that they could integrate video today into creating a more human element and a human touch and creating a better experience for their, for their clients. All of them had ways that they wanted to start integrating it in. So one of the ones that was super impactful was the thank you. Right. Like we try to think of these ways to, to follow up with our past clients and stay in front of our database and repeat referral business. A genuine video that says thank. It's funny how you don't, you don't think of that, right? Like we think we've got to send them, yeah, we've got to send them with a call to action and this and that. And it was like. But it's also like, you know, it's a, it's a great way to reach out. It actually is quite fulfilling too, right. Like, you know, and so thank you Thursdays was something that resonated with them, creating it where they're the, you know, the Thursday and the follow up for their database and past clients and sending just little thank you videos. I thought that that was a super impactful one. And then we went into the CMA video. You know, a lot of them use it right now one of the challenges that we have and one of the problems that we're trying to solve is longer days on market, right? We've got a boatload of listings and we're taking on new ones every week and they're not coming off the market as quick as we're taking them. Great problem to have to be getting all those listings. But at the end of the day, if you don't have a great communication and you don't have trust, your cancellation rate is going to go up, right? If, if the client doesn't believe that you're working hard on their behalf and you haven't communicated well on what you're doing for them. And I firmly believe and said for years, but it is great when you come in and you reaffirm that is that like video is a great way to do that, guys. And so every Tuesday you need to be giving a breakdown on what the weekend traffic look like, what's happened in the marketing, what the current market is doing, what the competition is doing, and then what's next. What. So what. And now what, what was it? What were the three.

So what and now what? And it applies to everything, by the way. It applies to every call, every email, every text.

Yeah, presentations, I think of that too. But they all took that away from. It was like, okay, I've got to re engage with my Tuesday videos with my current active listings and also those ones that I'm trying to pursue, you know, the sellers that are in the pipe and then keeping that in mind, like a lot of people don't know what to say, what to do. And it really is a simple framework if you go with that solution. So yeah, it was good, healthy dialogue that took up all of the time in the Mastermind, which I love. When I don't even get to my content, they're just talking about that. So it definitely had the impact. So we appreciate you coming in, Sharon.

Yeah, I'll just add to that. I think you gave some really practical, actionable things to do, but you spoke at it from a way that, you know, the personality of an agent in video as you know. Right. Is a challenge. Some agents get it, some agents don't. But like George said, the thank you Thursdays, the CMAs, the, the, the practical things that you gave really spoke to each individual personality. People that could do that, that, that are more, you know, numbers. We call it that high SC that could grab that, shoot that cma, send it out or the one that is that more high. I like relational. That's going to do that. Thank you Thursday. It wasn't, wasn't that high. It's going oh thank you Thursday. That stresses me out. But man, I could do the, you know, those type of things. Right. So that's what I took out of it as well is like great, practical, easy, understandable things for anybody in that spectrum of personalities to do.

Cool. For folks watching and listening, that is a subscriber only episode. We recorded that session. So what George and Billy have been talking about is a portion where I walk through five different ways that you can use video messages among hundreds and all you need to do is go to realestateteamos.com subscribe. When you sign up there, you get access not only to that but to 7 other subscriber only episodes at this point. So there's a bunch of stuff in there just to reward you for subscribing and then you get weekly email exclusive insights sent to you as well. So that's all@realestateteamos.com subscribe. I welcome anyone's feedback on that stuff. So back to the real conversation. Thank you for enduring that promotional message. Two pieces of language that you both offered and you offered it in. I assume these are like deeply held principles. I don't assume it, I just know is a little bit of an assumption on my part. But you both mentioned them when I spent that time with you for the Inside the Lawton Team series from you, George. It was having a goal of making your agents as consistent and efficient as possible or to make the most consistent and efficient agents on the planet. And we use kind of systems and training and technology to do that. And then with you, Billy, in our conversation, what I remember from it from last year was a filter of is it to the delight of the consumer and or is it to the delight of the agent? And I think, I think those two things together were what kind of motivated me to figure out what to bring to speak to to your agent population. Because that, that consistent inefficient piece is like what is the right role of the person? What is the right role of the machine? And then like, you know, what are we actually doing here from a goal setting perspective, from a consumer experience perspective, is it to the light delight of the consumer? So I'd love for either of you to speak to each of those and like how foundational are those ideas? Are these ideas that you talk about within the organization or are they just things that you personally feel and you happen to communicate them to me that way?

Yeah, you know, that's at the core of our mission here. One it is, you know, obviously keeping it saying consumer centric and seeing the agents as our partners. And so how can we add to the agent success while keeping the consumer experience in mind, creating the way that we think we can provide value as a team leader through lead generation. Tech stack things along those lines is creating these really efficient, consistent agents. What is our value proposition? How do we create that mission is through that integrating in different things tech stack that's actually usable, right? Like that the agents are going to use. And it's not just, you know, an add on that, you know, nobody's actually going to take advantage of. And so obviously like AI components of a lot of people are thinking right now like on sales AI and you know, it reminds me of that meme that I saw. It's like yeah, I want, I want AI to do my laundry and dishes not right, you know, music and, and write for me. I like, I want it, I, I want it for. And so that's why I think about it for our agents too is like what is the stuff that they hate doing? Right? And some might say the prospecting side, but that's where the human element is so stinking important. Right. And so as we look through the tech stack and what technologies can we add and how can we create efficiencies, it is through like transactional management, keeping the consumer informed, helping our agents like keep great database hygiene things along those lines and essentially like giving them an assistant that is the things and can do the things that they don't want to do. Right. And that's how we, like, I think that's where our big value is and where we're trying to drive more and more change and consistency and value.

If you just break it down to its core principles of the fact that we are a consumer service business at the end of the day, if we don't serve the consumer in a way that there's so many options that they have today and they're getting inundated by these opportunities, and if we're not differentiating ourselves by creating a great experience for them, that's going to be detrimental not just to the consumer, but to the business in general. So it's got to be to their, you know, to their delight, as I said, to their liking. And then, you know, as a team lead, as team leaders, Right. Our job is to provide the opportunities and the resources and the value for the agent to be able to do that. Right. So it truly is at the core of everything that we think about because at the end of the day, that's where, that's where the rubber meets the road. And being successful is being able to. And we, we, we really kind of at our core have that servant leadership thought and mindset and that translates to the consumer.

You mentioned Follow Boss, which I talked about probably the most at length with Julia O. Buckley in that Inside the Lawton Team series. You also mentioned a tc, I think change. You mentioned sisu, like in this conversation. I'd love to kind of like walk through those in light of that setup. So like, you're almost a couple years into Follow Up Boss at this point. I think, yeah, I don't need to go like step by step through like, you know, you know, how it was implemented and all these things. But like at a high level, what do you, when you think about, like before and after, is there anything that stands out with regard to consistency and efficiency of agents or delight of consumer or delight of agent with regard to that change? Then we'll move through a couple of those other technologies.

Yeah, I'll just, I'll start with kind of the, you know, the CRM is where, you know, at the end of what we tried to do, what we're continually trying to do is create an environment where the agent does have a million places to go. Right. Part of being efficient is I don't have to log into 15 different websites. I have one place where I can operate my business. You know, at the team meeting you were referencing that you were here a couple days ago. We always have that founders lunch that you graciously came on and it's all the new agents that have joined the team. And I had an agent ask me, hey, you know, what you guys are providing is amazing, but if I was going to spend my time in one location to do business, where would that be? And, you know, my answer was fault boss, right in the CRM. So, you know, from a high level, what that's allowed us to do over the last couple years is to add value that plugs into that system that I'm not having to take them away from that system. Right. They can still, they can get any AI component that we've integrated. They can get that information right in the CRM, right. That, that, that AI component, if they engage in that assistant will update the CRM, update, follow. So from a high level, it's really just what we hoped it would be at that point, which was just open integration, the ability to work well with others and play with others well. And so it's done that and it's lived up to that to this point. We're still learning, we're still growing. It's still somewhat of a culture change a little bit. You know, you've got your systems and operational change, but then you've got the culture change and that's coming and that's, you know, through just consistency and continuing to do that. So that's been really good and we've been really happy with that side of it. Transaction management, we just recently finished that. We went, you know, started with dashboarding and it was again simplifying. We had a couple different systems we were using and how can we simplify this? And we're just now getting that dialed in at the end of December. So not a lot of experience as far as, you know, feedback as to what it's done for us, but the experience of getting a transition, the team getting it in and those things have been good and we've been able to get some integrations even in that, that sync to follow up boss. And some different things that again lead to that creating an efficiency, consistency and opportunities for agents to do what we want them to do, which is serve the consumer.

Yeah. Really quickly without asking. I'm not asking for history walkthrough, but, you know, I think you've been on the team, Billy, for 6ish years.

Seven next month. Awesome.

Okay, awesome. Got a nice anniversary coming up here. George goes to take that out. So what was TC like, you know, six, seven years ago? Kind of like what were the steps leading? And I'm asking again on behalf of the folks that watch and listen or that are, you know, they might still be in that early kind of spreadsheet checklist phase. Like, what are some of the phases that it went through and kind of like what forced any of those major changes and. Or what forced or what brought on, you know, what enlightened you to the opportunity that got you to do this latest project or this latest upgrade?

When, when I came on, it was one Excel spreadsheet on one individual's computer with two transaction managers trying to make sure this thing was synced up. So that's, that was the extent of it. So the iteration went to, hey, let's not get too crazy. Let's just, let's get this thing online to where it's syncing and everyone has the same visibility.

This latest project or this latest upgrade.

When, when I came on, it was one Excel spreadsheet on one individual's computer with two transaction managers trying to make sure this thing was synced up. So that was the extent of it. So the iteration went to, hey, let's not get too crazy. Let's get this thing online to where it's sinking and everyone has the same visibility. And then, honestly, the iterations came from George's desire to see the data. Right. Instead of having to constantly filter all these columns to get to what do we have pend, what are our numbers? It started with me just creating a tab and building essentially graphs and charts out of the Excel spreadsheet to show those things. But then we went through a pretty heavy, extensive growth with agents. When I came on, I want to say we had 20, 25 agents, and then within a couple years, we were at 100, 150, close to 100. And at that scale, you're no longer managing that from an Excel spreadsheet and you're not getting the data that you want from those things. Then we started looking at the systems that did that, that functioned well in those things. As your business scales and iterates, you're looking for different things. You're looking for things that provide different values for you. I would say the iterations really come from the ability to integrate with systems so that we can simplify that. I don't have 50 different programs doing the same thing. And so that's how we've ended up where we're at. We started simply with that sheet we were through broke. Remember we threw a few others and then we ended up here just with the idea to simplify and get down to the point where we can be ready for the next version of scale.

Cool. And what was going on for you, George? When you're like, I want to see this, I want to see this data or I want to see this differently. Like where were you? Like what distance had you had? I mean whether it was by design or not, like what distance did you arrive at from kind of some aspects of the business that you wanted to draw yourself closer to? Like what pulled you apart and what, what made you say I want to see that, I want to be closer to that. And what were some of those elements?

At that time I was spending most of my day, you know, in the trenches with the agents, coaching, you know, mentoring, also some, some production and other channel accounts that we had. And so when you're head down and you're, you're in the trenches, you, you can have this, you know, belief that the business is doing well or you know, things are going good or things are going really bad. Right Too. You could, you can have this idea that that's, that exists as well. The data tells the real story. Right. Like, and you. I've wanted it at our fingertips and you know, while there's some, there's some out there like in transaction management systems that have good, good dashboarding software and things along those lines. Like we, we wanted any. I want to see everything but like I want to be able to see financials. Like I want to go one place to see that integrates transaction management, financials, whatever else the heck we have jotforms, right. Like all these other things that can go into one spot. Billy migrated us into a BI software that did all of that grow. And now I can go and I can look at. We probably have 50 different dashboards, but there's like five that I go to. And now I get the data that I want. I can see and assess the business. You know, at any point in time, it's in real time on what's going on. We know how many pendings, what our cancellation rates are, who's performing, how many are company generated lead sources, how many are agent generated lead sources. I mean how many files each TC is Carrying. So there are those, the EKG of the business that I want to know at any given time. And you can drill down to even the micro if you want to. So I'm looking at a macro mostly, but if there's a problem, we can drill down very micro and see where it's actually coming from.

I'll add and circle back to the question you asked about how do we. How do I identify when there's an issue, whether it's something we jump on today or we, you know, push out. That's a key component for us, right? Is one. It helps us get to the ground. Truth of we hear this is that really what's happening and then we can get in there and see, okay, yeah, that is. Or it's not as bad as it seems and we can make those decisions appropriately.

One of the main things that I'm trying to bring up more often because it's a challenge for a lot of different people because they don't necessarily have this type of visualization or understanding or handle on the business or they just came out of a massive growth phase or they just came out of a massive firefight over a couple of months or several months or whatever is profitability. And you know, profitability I feel like at some level is something that is managed day to day, but it isn't really either, you know, like in that, you know, it's, it's the, it's the end result of a lot of small decisions that are made and a lot of things that are permitted to continue existing that maybe should have been killed a while ago. And you know, all these different elements, they do add up to the final thing, but it's not something you can like really actively manage per se on a day to day basis. Just not that relevant. How. How have either of you thought about profitability and how has that changed over the past seven years? You know, you've been through a lot of different stuff, market conditions, of course, but even agent count. I'd love like a few minutes on how you think about profitability, what kind of eye you keep to it. What are some of the core elements where you're like, well, we learned that the hard way, you know, we're not going to make that mistake again. Like anything you have to share on profitability and either of you can, can jump right on that, you know, profitability.

We always have a target in mind, right. And then with that there's, you know, my mind generally goes to how do we generate more revenue? And Billy's mind goes to how do we reduce expenses? And so it's good to have that yin and yang of your business. And that's where, that's where we realize each one of our seats is at, right? And so Billy goes on the mission of breaking down the P L and going, you know, it can be death by a thousand cuts, you know, within a P and L. And so we're looking for everything that we can cut back on. And I and Billy probably know he'll know the exact numbers, what we've actually been able to remove from the P L without removing humans, right? A lot of times you go to your payroll, right? Payroll is our rent and our biggest expenses. And. But we, you know, we've got a really good group of people. And here's the challenge. Like, you know, the market is, is soft right now. And we believe, you know, rates and demand all coming back here in the next year or so. And all this amazing, talented people, if I were to let them go, I'm gonna have to go ask them to come back at some point, right? And so that's where we're at. It's like, hey, Billy and I have to make a Choice, you know, 2003 or 2023, 2024 was like, do we hold the line or do we. Or are we slaves to the numbers? Right? We are such a. This is the margin, like, and you need to have a margin in mind. But we don't chase, like, without a doubt, we have to hit this margin. Like, it's about, there's, there's real humans on the other side of this and never forget that. People with, with families, things along those lines. And so, so we adjust, right? We, we, we adjust and go like, yeah, I would love to hit a 20% margin, right? When you're in production, you got a smaller team. That's very achievable when you're like us, like you. I don't know, I don't know anybody doing it. It probably is out there. Somebody way more efficient, maybe a little more shrewd than we are to be able to hit that. We don't, right? And so we like to see in that double digit noi, but in, in hard times, that gets down to single digits, man. It gets, you know, 5, 6, 7, 8%. But that's a choice we make, right? And that's what we know at the beginning of this year, we go, all right, this is our target. Let's do, let's do everything we can to stay there. And so we're analyzing not just based on what our desires are and what George's, you know, net income and Billy's net income, you know, want. They, we want it to be. We're, we're looking at the market and making really sound decisions based on that and then also based on the durability of our business. Right. Like we, first and foremost, we're not in this for the short. This is, you know, the infinite game for us. And in that is a very durable business. And we want to make sure that our team feels protected in that every whim of the, the market, we don't shift with the winds of the market. Right. Like, we are durable, we're predictable, and we're your shield. Right? And so that's, that's where it comes from. And I don't know where, where those values were created. But, you know, I think, you know, both Billy and I's families have come from corporate America and have seen, you know, my, my father got laid off after 32 years of working with the same company my grand. That my grandfather worked for and everybody else in my family worked for too. And, and retirement, you know, promises not, not fulfilled things along those lines. And so we have a duty to do something better.

George mentioned the infinite game, right. We're not in this to look at it at the end of each year and look at what that profit margin is. Right. We're looking to. Growth is always the vision and growth sometimes in general, it eats capital. Right. And sometimes when you're still trying to grow, have market constraints at the end, how we do that is with people. And so we've got to balance that as much as. Yeah, that's my job to dive in and reduce the expenses, which we did. But that came from systems and, and things that we just weren't using effectively or didn't need anymore because the market or our internal, you know, people, it just wasn't of value anymore. Right. So we call, we can, you know, he called it death by a thousand cuts. I call it the. It's only right. It's only this, it's only that. Well, you add. You had enough of those. It's only up. It gets pretty significant, right? So it's making sure we keep those things in check that we're not, you know, we're not spending a little bit on things that really don't matter. Let's get rid of those things and then focusing, going back, focusing on the agents and the people and making sure that we're strong. When the market does shift in those things, we're not having to you know, as George mentioned, I think earlier, as we try to do everything we can to not jerk the wheel and if we were chasing a profit line, that's all we'd be doing is we'd be jerking the wheel every time the numbers change. And we just don't want to do that.

Yeah, I really appreciate that sensitivity. So many really good things in there. Even going back to the idea of I'm focused on top line growth and he's focused on creating efficiency inside the business so that they're both happening all the time and someone is like just focused on those things. I also appreciate the sensitivity to this person came up and like, was developed within our culture and in our organization. They've been a star in each of their seats and they're in this particular seat now. And if, if we happen to feel compelled and we have trust, as you know, to go back to the beginning of this conversation, the idea of letting them go over, you know, some fraction of some percent. You know, you mentioned he threw a lot of percentages out there. Like, you know, the difference between, you know, 6 and 7, 8 and 7 and 1, 16% in a tough market is like, it's not worth her or him necessarily. And all the investments that we've made together going forward. So I really appreciate so much of that. I would love just a quick go. I want to hit a couple more topics before I've, I've also modified my closing questions for you guys because you've already answered them. I think you'll enjoy it. Lead sources, like, when you think about like partnerships, lead sources and other like just as a group of investments, how does that fit into this philosophy? Like, you know, how have you vetted them over the years? You know, if you've moved away from one, how much time did you give it? What were you looking for? Like, any thoughts? I assume this is you, George, but it's probably also Justin. But I don't know how the, exactly how these decisions are made. But like just over the years, for a high level, for someone thinking about like, okay, if I was to double my, my, the size of my organization from 18 to 36 agents, because I, you know, I've got a good plan, we've proven this out pretty well. You know, I'm looking to maybe add a couple more or I'm not sure if I have the right ones. Like, any tips on lead sources in this zone of, you know, we're looking for good partners to build a durable business. At the same time, we're not going to Live in something, we're not going to add another. It's only because someone made the right call on the right day and I happened to pick up the phone and they were, you know, like whatever.

Yeah, yeah, yeah. That lead source is, you know, depending on, obviously you go a number of different routes. But ROI is, is the key for picking the right lead sources. Which ones do we believe are going to provide us with the best ROI and accelerate? They're like, what you also have to bake in is like how quickly can I accelerate building a book of business? Right. And so some are actually lower, a little bit lower margin on the front end, but they're so down funnel that it doesn't take all the nurturing, it doesn't take all the time. Right. And so you can accelerate building a great book of business for an agent that's been in, you know, two years in the business, three years, right. And, and get them to something that is more repeat referral and a better BL of business. Right. Like what we're trying to do is take what, what would take a normal agent 10 years to build and see if we can get it down to two and say, okay, and now here's what you do with that database. And so when you come on with us, you know, 90% of your business might be coming from a company generated lead source in which our company generated lead sources reverse. But you know, there's one clear, you know, standalone that stands out. Zillow. Zillow is, you know, sent us over 10,000 opportunities in the last. My agents, even though, you know, maybe a little bit lower margin than some, some sources, they see the value in continuing to build up their database and build up, you know, their client, past client, repeat referral business. And so while you 90% of your business may come from Zillow the first year you're with us, you know, by year three, year four, you know, we're hoping it's, you know, it's probably 30%. Right. And so you're so agent net, preserving that agent that are increasing that agent net over, over time is a focus. If I'm evaluating, if I'm a team leader and I'm evaluating lead sources, I'm asking the hard questions. If it's one of the aggregates, like you know, RDC, homes.com, anything along those lines, give me real data to support, like you have to show me the data that supports that there's an ROI on my investment. Right. And how long do I stick with that? I don't like year long. Deals, but I'll do a year long deal if there's some, maybe some clawbacks on that. I can get into more detail on all that sometime. But I, I'm, I can commit to like a, I think as a company you have to commit to six months. Now if you're doing social media marketing, if you're doing things that take a little bit longer for ppc, right. You're, you're doing your, you're really kind of marketing your IDX site things along those lines. You're farming. You better at least have a year or two year commitment on that because you're not going to see the ROI right away. But you need to be tracking those numbers and watching that effectively making sure that people are moving through the funnel. Right. Because they're, they're just a little bit further upstream than what you know, the Zillows have. And so you need to be tracking, make sure that the lead indicators are still moving it down funnel and that all the things are in the, are going the right way and that's going the right direction. If, if, but if you're not focused on it, you're just going to be throwing money down the drain.

Did I hear you right on like in terms of ROI and saying this is good or this is not good, Are you factoring in the idea that on average this lead source, you know, most, most people would say this converts at X percent therefore it's good or this, this converts it at X minus, therefore it's bad given that they're of equal cost or whatever. So like pretty simple math there. But like one thing I always wondered is do you factor in the idea that, but why percent of the time, you know, our database is built on repeat and referral from this source?

Yeah, I don't have it in a dashboard but we do have like originating source, like how many of our, you know, 2000 or 1800 transactions, even the repeat referral was an originating source from one of what was a company generated. Right. Like that, that's important. And if, if you know, if we were to look at that, I mean you're probably somewhere in the 90% range of our business comes from in, you know, in this last year originates with company generated lead sources, high level, 2.

Minutes or less NAR settlement. How has it gone? Net positive, net negative, still too early to know. You know, how is that going overall?

I think there was a lot more, at least for us, a lot more anxiety and emotion leading up to it and within 30 days, very few conversations. It was more around Process of the rules of, you know, the MLS and different things of that nature. And you know, within 60 days. Not, you know, I don't, I don't think we've had a discussion about it in the last probably four months. Honestly, our association just actually updated a form yesterday to even remove some of the confusion that was there initially because they were concerned about, you know, just certain things. So yeah, I think, I think the lead up was far more concerning than the actual play out. We haven't yet seen a huge impact to, you know, commissions agents have figured out how to have those conversations. And in general, I think the market understood, consumers know that these are the things that have to be done to get out, to see a home and those type of things. So we haven't seen a huge impact actually. If anything, it's caused our agents to step up their game to understand to, you know, be able to explain their value and show their value and get those, you know, those agreements under signature. So outside of that, it's only been from what we can tell, a positive.

That's very consistent with what I've been hearing from team leaders who are put together and have a put together team that are thoughtful and are providing training. Their single biggest challenges. Most often the more ignorant or underprepared or confused agents on the other side of a deal slowing things down. With regard to this and the type of agents that you're building and investing in are typically out there doing a lot of that like second and third layer education for people that don't have it available to make sure that the whole deal goes properly. Okay. I really appreciate you guys. You're awesome. I love the business that you've built. I'm so privileged to have spent so much time with you all in person. Thank you again for having me reach recently. Just one question for each of you to wrap this up. It is an either or like the other ones. You can answer one or the other. And I'll start with you, George. And this gives you an advantage, Billy, because you'll have a minute to think about it.

Thank you.

But you know, you guys have been working together for almost seven years now. You've known each other for several years prior to that. So George, what is something that Billy is into that you can't relate to? Or what's something that you learned about him recently that surprised you?

I don't know if there's anything I've learned recently. Okay, wait, wait, let me see. What is something Billy's into that you're.

Just, you just can't relate to.

I cannot relate to. Let's go there. So, I mean, it is the depth at which he understands some technologies and like, he's my go to on any kind of Apple update or, you know, anything along those lines. And I'm like, I know how busy we keep him and I don't know where the heck he has time to understand all the other stuff. He's like, oh, yeah, it's the new update. And it does this, this, and this. And I'm like, where do you figure this stuff out, man? I just like, do you do. What do you do? Is this what you do at night? And. Or like formulas and spreadsheets, things along those lines? I'm like, I don't know. This is where I want to. The number to tell me how to just. Can we. Where do we. How do we get it there? And so I have no desire of learning that. I just love that he does the.

Cheat code now is AI for those things.

100%. Yeah. Yeah, 100%. It didn't used to be, but yeah.

What was the second part of that again?

What's something George is into that you can't relate to? Or what is something that you learned about him recently that surprised you? Like, I've known this dude for a decade and I just learned this.

Yeah. I. I don't know if it's something that I just learned. I'll just say I, I want to go there just because I think I'm shocked at times of how much of a. We joke. We're both the same in this is how much of a consumer George is like. George is usually very disciplined. Like, thinks like, there's nothing that he doesn't do that hasn't been thought through that isn't like, tied to some sort of goal. Like, we're only doing this. The one thing he doesn't do that with. Not the end. He doesn't have a ton of cars. But, like, cars are, like, purposeful. Right. Like, I need one. Let's go get it. We're not thinking where I'm going to do all the research. I'm going to tell you, like, you know, everything that's going on with it so that I can make an informed decision. But I think it's that we joke about. Oh, man, we're such consumers. We jump on it all the time. But I think that's the one thing I was like, huh? I did not. That was one thing I was not expecting.

Yeah. Yeah.

And it's usually little stupid stuff. Like, it's not, you know, it's not major stuff. It's, you know, just little stupid stuff. Like, gosh, yeah, that Instagram feed got us.

It's always like a. Some sort of biohack thing, like the grounding bed sheet or the hydrogen water bottle thing or then I'm like, I'm like. I don't know if I feel exceptionally better, Billy. I've been grounded for the last three months now, and I don't think anything's actually changed. I think we got taken on this.

Instagram is so good at putting those things in front of people. And it's persistent as heck. Like, even if you just dwell on it for like a half a second too long, you're not gonna escape that ad or its second or third iteration. That's really funny. That's really good. Thank you both so much for making time today and for. For everything that you shared with us and continued success to you in the year ahead.

You said, man, we appreciate you a ton. Yeah. Thank you for everything you're doing.

Yeah, yeah. Always enjoy hanging out with Ethan. Appreciate your sacrifice of time. Like, we know you traveled here from Colorado Springs and served our agents really well. So greatly appreciative of you and your time.

Cool, thank you. Lots of stuff right down below. Links to both of these guys. Online links to the Inside the Lawton Team series that we did. It's an eight episode series. Michelle was mentioned. Justin was mentioned. Julia was mentioned. They're all in that series with standalone interviews and episodes. Diving into their specialty and their contribution to this awesome organization. Thank you both guys and we'll talk again soon.

Thanks.