The path to success... Become a workaholic or buy the business?
There are very few agents who have achieved the Champion level; most agents are stuck trying to access it though the wrong trail. When we evaluate most real estate agents' paths to success, we find the most preferred method to wealth and success in real estate sales is the workaholic path. The vast majority of people in the upper echelon of companies have given up free time, family, friends, and peace of mind to earn a large income. These six to seven day a week, on call all hours, 24/7 Realtors can earn large incomes, but the cost to their health, family, and spiritual life becomes overwhelming, and they eventually hit burn out, or they must correct their behavior due to a catastrophic event. The catastrophe could be divorce, massive health issues, or challenges with children. These issues usually hit fast and hard, like someone swinging a ball-peen hammer to your forehead.
The second most preferred method to success is to buy the business. Too many agents who are trying to grow their business to the highest level get sucked into the "marketing game". They think that by spending a larger and larger amount of money on advertising and marketing "to get their name out there", they will drastically increase their business. There is no question that, by sending thousands of postcards, newsletters, and promotional pieces a month, they can increase their business. The question is by how much, and how much will it cost them? What will the ROI (return on investment) be? What will they net for all this effort? There are viable marketing strategies agents need to implement, but most lack the monitoring and control systems to manage and track their ROI.
I know many agents who have built large practices through this marketing method. It does work for some people to increase their gross commission income. The downside is most of the money is used up in marketing with little profit left. Many agents have the philosophy of "I will invest it all for a few years to get my name out there and then cut back". The truth is that few cut back when they achieve a high income level. They fail to realign the marketing expenses for three reasons.
The first is that their goals have increased. Then, when they have increased their goals, they want to earn more money, so they actually increase their marketing, digging themselves an even deeper hole than before.
Additionally, they have been so busy working their business for a low return in net profit that they have been unable to develop new lead generation areas. They have been unable to invest capital or time into testing and perfecting new lead sources. Their business is so lop-sided and reliant on the marketing they are like a caged animal. They want out, but they are unable to open the door of the cage.
Finally, the agent is simply afraid to cut down on their marketing. They secretly know their revenue stream is unbalanced, but they can't objectively make the change or shift they know they must make. They often make a feeble attempt to cut back, but if revenues drop, even slightly, they are back to the marketing even stronger than before.
When coaching these people early in my coaching career, I did not realize what a security blanket and strangle-hold this marketing (buying the business) had on people. What I didn't realize is most people will panic if there is even a slight drop in leads or income. I would try to get them to quit cold turkey. The results were less favorable than I had hoped. The best approach is to transition away from buying the business is over time. Create a one year plan to continue the marketing while you open up other lead and income streams. This gives the other lead and income streams to gain momentum, results, and earnings. This enables you to feel confident about these new revenue creators, so you can slowly turn off the expensive and less profitable mega marketing driven sales techniques.
Another way I see agents buy business is through discounting their fees. This discounting and commission cutting has become more of an issue than ever. With the influx of new agents and consumers' perceived ease of home selling, the fee structure for agents has been getting attacked.
Many agents who use discount strategies to buy the business can make it when the market is hot. When the market cools, days on the market increase, and the advertising and marketing dollars increase because of the holding costs of listings, the small margins between their commission and the sales costs force them to change tactics, or they die.
I know of an agent team that is in the top five in terms of units nationally for a large franchise company. They heavily market their discount structure in their town. If we peek behind the velvet curtain of their business, it's not as glamorous. They sell about 350 homes a year. They have about seven buyer's agents plus the two of them. That's nine people to do about 350 units or about 36 units per person. That would be solid production on a per agent basis if they were getting a full fee. Since they are discounting, it's much easier to get listings and sales. 350 units is really not that impressive if you are willing to do it for free. There are an unlimited amount of prospects you can work for if you are willing for work for nothing!
Very few agents achieve success in real estate by establishing a well balanced business. In effect, a Champion Agent's business is to know how to produce the leads; where they are coming from; the conversion ratios of the contacts to leads, leads to appointments, appointments to clients created, clients created to contracts, and contracts to closings and income. A Champion Agent who has a balanced business knows the cost in each major category of his business including advertising, promotion, car expenses, phone expenses, client care, office supplies, and brokerage fees. They know the net profit of their business model and can project it in advance. They can track and monitor the cash flow of the business.
A well-balanced business enables that Champion Agent to have quality of life as well. They receive ample days off weekly, a number of vacation weeks a year, and few missed t-ball games or school activities of their children. Finally, the high net profit allows them to create a lifestyle of comfort while making investments for the future.
Less than 5% of the Realtor® population has achieved the well-balanced business model or the Champion agent's model. Most have defaulted to the workaholic or buying the business model because they couldn't see another way. To become a Champion agent, you will first have to make a commitment to yourself.
