When you own most NORMAL types of businesses, after you get through the first year or two of working super hard to figure it out and get your customer base established… it gets a lot easier. After that, you don’t need to work NEARLY as much, you have an automatic marketing system working for you, the money keeps coming in (and maybe even INCREASES), and you can take REAL vacations, during which you don’t even have to THINK about work.
BUT… it doesn’t seem to work that way for real estate agents. You work SO hard (like I did when I got into real estate) to get to 8M, 10M, 12M in volume, and being a real estate agent JUST DOESN’T GET MUCH MORE EFFICIENT. It just keeps requiring MORE of your time. At some point you’re thinking, “I like the money, I like real estate, but this just isn’t sustainable.”
The traditional answer is to build a team. But, first of all, most real estate agents would rather stick a fork in their eye than to be a manager and be required to hire and train and supervise people. And even if you love managing people, the most popular book about building a real estate team, Gary Keller’s The Millionaire Real Estate Agent, says you only get to keep 62% or 50% or 39% of your commission (the percentage goes down as your volume goes up). And that’s only IF you do it perfectly, so… that doesn’t sound like that great of a profit margin, especially considering all the managing you need to do to keep it going.
So, CAN real estate be like a NORMAL business, where after you work hard in the beginning to get it going, you can work fewer hours, AND make the same (or more?) money, AND take REAL vacations where you don’t have to worry about work the whole time?
Hi, I’m Mike Regan. I’m the CEO of Relevate Real Estate, and I’ll say up front that one of the approaches to being a successful real estate agent that I’ll be talking about in this article is the way we work here at Relevate. However, MY ONLY GOAL is to help you figure out what’s best for YOU, so I’ll try to be very unbiased as I explain everything, and I hope you’ll feel like I did a good job of that here.
Previously I pointed out that with most businesses, once you work hard to get them going, they get more efficient and the money keeps coming in and you get the freedom to spend a lot less time working. I actually EXPERIENCED this TWICE with two different businesses, before I got into real estate, first running a manufacturing operation, and then again, after that, with an operations research consulting firm I owned. Maybe that spoiled me because I was expecting the same thing when I got into real estate.
I only got into real estate because I got bored with consulting. For the consulting firm, I had written two books…
… and developed a really efficient process to acquire clients and deliver our value.
Process improvement was the kind of consulting we did for our clients, so of course we did it to ourselves too. Our system was really successful, I made great money, and I was working about 20 hours a week… BUT it was the same thing over and over again… aaaaand I was ready for something different. So I sold the consulting firm AND the rights to the books I had written, and jumped into real estate.
However, after I was in real estate for about 18 months, closing about 35 transactions annually, I found out that the real estate agent business definitely needed some operations research consulting itself. I was just WAY too busy to have an actual LIFE. I said to myself… “This is NOT COOL. There HAS to be a better way, JUST LIKE when I ran those other businesses, where I could make this process more efficient, and make the same or more money, but NOT have to work so hard, and be able hang out with my family, AND have real vacations.”
So I applied my consulting experience to the real estate agent business, and made a lot of changes, for my own personal benefit, to the way I did business. And thank goodness, I did find a better way to do it. My life got MUCH better as I grew my business, without having to manage a team, to over $20 million in volume and my working hours decreased to less than 20 hours per week. In this video I’m going to share the results of that improvement effort with YOU. So today, I’m not the CEO of Relevate, and instead I’m going to put my consulting hat on…
… oh wait, that one’s from last weekend, I don’t know where my consulting hat is? But whatever, the point is I’m going to walk you through the exact analysis I did, as an OPERATIONS RESEARCH CONSULTANT, on my own real estate business.
I started by analyzing the two traditional normal ways of doing real estate, which are (1) Doing It All Yourself, and (2) Building A Team.
Doing It All Yourself
The advantages of doing it all yourself are:
1. Everything’s totally in your control, so you know things will be done right because YOU are the one doing them.
2. You keep almost all the money because you aren’t paying anyone.
The disadvantages of this approach all stem from the fact that you DO have to do everything yourself:
1. Either you’re too busy SERVING clients to do any marketing, or you’re doing nothing BUT marketing to GET more clients because all your current clients closed and there isn’t anyone in the pipeline. And that roller coaster gets old quick.
2. There’s no leverage, meaning there isn’t any opportunity for you to profit by delegating activities that can be done for a lower hourly rate (like delivering checks, stuffing envelopes, and even some showings) to enable you do to more of the activities that bring in clients and make you lots of money (like calling warm prospects, or stopping by to visit a recently closed buyer),
3. You can’t grow your business much beyond about 9 million in volume or 30 transactions (if you’re really efficient) so your take-home (“taxable”) income can’t grow beyond $175-250,000. If you’re SUPER efficient or work a ridiculous amount of hours, you might squeeze out more than that, but the bottom line is, there’s definitely a limit.
What all this adds up to, for most agents, is that they sacrifice their life balance, theoretically temporarily, to work VERY HARD to establish a very nice income level, but then when they get there, they find they have to keep working just as hard, just to maintain it. And THAT is not sustainable. And if that’s where you are, I get it. I was there too.
So I read Gary Keller’s book, The Millionaire Real Estate Agent, to learn how to build a team to fix my business and my life.
Building Your Own Team
The advantage of a building a team is SUPPOSED to be LEVERAGE. This would mean:
1. Being able to delegate lower-hourly-rate tasks so you can focus on the revenue-generating tasks that bring in clients
2. Unlimited volume and income growth, and
3. A better life balance.
The disadvantages of building your own team are:
1. Building a team requires doing management. And that, in tur,n has several disadvantages:
- Management means hiring, training, and supervising. That sounds awful to most agents.
- Even if you LIKE management, it takes a lot of time. For many agents who start a team, the amount of time they spend managing is equal to or greater than the amount of time they save by delegating. So their life-balance gets worse, not better.
- You get paid ZERO when you do management, because it doesn’t bring in any business or revenue.
2. As I mentioned earlier, the profit margin of a team is pretty low. Gary’s book says 62%, at 10M in volume, 50% for 17M, and 39% at 26M, if you do everything perfectly. But almost no one does, so the actual profit percentages are much lower. From the data we’ve collected, the averages or closer to 50% for 10M, 38% for 17M, and 21% for 26M (the best we’ve ever seen at 26M is 32.5%).
Now, you may hear some team owners claim to be taking home a higher percentage of total commission, but that is ONLY if they take care of a lot of clients themselves, which means they are giving up a lot of their time, which defeats the purpose of having the team. Then they’ve got the disadvantages of BOTH doing it on their own AND having a team.
As a result, for most agents, when they start a team, their working hours increase and their take-home income decreases, and they usually end the building-a-team experiment pretty quickly and go back to doing business pretty much by themselves. Which might cause you to ask the question…
So, Why Would ANY Agent Have Their Own Team?
Well, when we ask that question, we assume everyone WANTS maximum take-home income and ALSO maximum time to spend with family and on their personal interests. If that IS what they want, then sure, having a team doesn’t make much sense. However, some agents have different priorities and we certainly respect that. For example, some agents…
- … LIKE doing management and leading and mentoring others, and they’re willing to give up a good amount of take-home income and life balance in order to enjoy that opportunity.
- … don’t want to sell. So they spend money to bring in leads, either by advertising or purchasing from Zillow or realtor.com, and they coach buyers agents to convert those leads into clients and closings. This is an extremely difficult way to make a living, because not only are they giving up half the commission to buyers agents, they’re also paying an average of 40% of the commission for the leads in the first place. And for those of you who are into MATH, that only leaves 10% for the owner of the team. It’s a tough tough way to do real estate.
- … believe the theory in Gary Keller’s book that if they just keep at it, they’ll build a team they can walk away from, and that will give them continuing passive income while they do other things with their lives. This would have to be a situation where the clients come from some other source than from the agent who owns the team, since that agent is leaving. Mark Spain Real Estate, and all his highway signs about guaranteed offers, is an example of this.
- … enjoy the admiration of other agents who feel having a team is the ultimate sign of real estate agent success, even if it costs them significant income and life balance. I don’t really get this one, but it’s a real thing.
Is there a Way for Real Estate Agents to Maximize Take-Home Income AND Have Maximum Life Balance?
That’s the question I needed to answer for myself toward the end of my second year in real estate. I was experiencing all the challenges of doing everything myself, and from what I had learned about the Keller Williams team model, I wanted NO part of it.
The answer is YES, there is a better way. Thank God. No really, I mean it, THANK YOU LORD. Because I wouldn’t have stayed in real estate otherwise. NO WAY. Here is what made sense to my operations research process improvement brain:
First, my main issue back then was being so busy and so tired I couldn’t even think, and me hiring and training and supervising people to help me was definitely not the answer. I had some money saved from my time as a successful consultant, so I hired a really good manager, and made her the COO (Chief Operating Officer) for my business, and tasked her with hiring fully licensed agents and a marketing expert and training them to be my support team.
I know what you’re doing now, you’re reaching for the eject button on your browser and saying “Mike, that’s crazy, and you must have been a horrible consultant because obviously hiring a COO dedicated to managing YOUR TEAM would cost WAY too much”. Here is what I say to that… YES, I totally agree. That’s why the next step of my plan was to FIND OTHER AGENTS WHO HAD THE SAME PROBLEM AS ME, and get them to share the cost of the COO, and as a benefit of doing that, they’d be able to also share in the use of the support team that our COO hired and trained for us.
Soon, I had ten agents working in partnership with me. Each of us paid one-tenth of the cost of the COO, so that cost became very manageable for each of us.
^ This is the wonderful Trinity French, our first COO, and we would have been lost without her. She’s still with us, but she’s now a top producing agent.
^ This is the equally wonderful Christine Nguyen, who was one of the first agents to join our partnership. She’s still with us, and by now she’s sold over $500M in real estate. She and Jimmy take a LOT of vacations. I love that for her.
^ And THIS is the super wonderful Jan Carmody, who was our first support team member. She’s now one of our brokers-in-charge and still with us, loved by literally everyone.
So, back to our story, we’ve got ten agents, all sharing the cost of the COO who hired and trained the support team. Now, sharing the support team members turned out to be a huge win for all of us, in three ways:
- Since we ALL utilized them, we were able to hire more support team members, which gave us ALL more flexibility.
- If any of us needed multiple support team members at once, for example to staff a big marketing event or to show homes to several buyers during one weekend day, we had the support capacity to handle it. And,
- we each only had to pay for the support hours we actually needed, because when one of us wasn’t utilized (and paying) for support, several of the other agents were, so our support team members were always being utilized (and paid) by someone, so that gave our support team members job security and enabled us to retain them for the long-term.
So, that’s the basic idea. Pretty simple, right?
A really key point of working with the licensed support team members is that we’d assign only one of them to be the primary support person for each client, and we introduced them to the client at the very first meeting with that client as a big advantage to them. Which it WAS very true because we emphasized that we’re NOT handing the client off in any way, rather the support team member’s role was to help us to help them, like a doctor and a nurse taking care of a patient, two for the price of one. The clients LOVED it.
What happened next is, all of us started selling a LOT more houses. And that’s because we had a shared marketing plan organized FOR us, with our input, and campaigns got sent out every month consistently. In addition, we all had more time and energy to keep up with our past clients and our spheres of influence, and ask for referrals… because we weren’t doing all the client service ourselves anymore.
In addition to that, we all got the flexibility to spend more time with family and actually have… REAL VACATIONS where you could actually turn your phone off… because our clients back home… were covered.
In the end, even though we each did have the added expense of sharing the cost of the COO, and paying for however many support team hours we used, we all increased our take-home income a lot, to an average of over 65% of total commission revenue, because all the additional clients and closings way more than made up for the expenses. AND more importantly, we got all that time back for our families and our personal lives.
Since then we’ve grown a lot and made other process improvements. We expanded our marketing team to plan, produce and implement marketing campaigns or events every month that agents can participate in without having to plan or think about marketing themselves.
We also invested $600,000 (so far) into an amazing software system to track all the client relationships and marketing, and it includes detailed checklists for the support team members to follow so that everything is done right and consistently every time:
Of course we’ve hired and trained a lot more client service support team members and they’re just amazing people. Finally, we added a listing analysis and preparation team, and of course, a lot more agents have joined our partnership.
A portion of our always-growing support team:
Our listing analysis and preparation team:
You CAN be Very Successful In Real Estate and Have Amazing Life Balance
Listen, real estate should (and can be) just like any other business, where you can have plenty of time off and increasing income after the first few hard working years to get it going. You just need to have an efficient system, and the traditional advice of “building your own team” is not it.
I hope how I’ve explained all this makes sense, and if you’re at all intrigued then I’m SURE you have lot more questions, and I’m guessing the first one is “What exactly does it cost to do business using the Relevate Business System? So we’ve answered that in a very straightforward way.
If you’d like to learn more about Relevate, just give us a call at 919-740-7000 or set up a time for a confidential zoom or in-person meeting.