This spring, Inman is obsessing over helping you to tune-up your listings business, with actionable insights, the best advice from top agents and hundreds of helpful stories from all over the world. Interested in sharing your advice and insights with us? Reach out to me at matthew@inman.com.
Don’t forget that we’ll also be focusing on how agents and brokerages can all move Faster, Better, Together this July at Inman Connect San Francisco. Not got your ticket yet? Buy it here, and remember that Select members get a $100 discount. Thinking of bringing your team? There are special onsite perks and discounts when you buy those tickets together too. Just contact us to find out more.
As an active agent running my own team and a technology/marketing consultant now helping teams and brokers succeed, I’ve had the experience on both sides of the real estate business.
In the 16 or so years of that, I’ve noticed some fundamental things that separate successful real estate agents from the ones who don’t make it. In fact, these same fundamentals are what is driving success for technology companies that seem to be “eating our cheese.”
Below you’ll find five tips for being a successful real estate agent, peeled right from top agents and tech companies.
Writer’s note: This post is for agents who want to pursue real estate as a business and full-time career.
1. Treat your business like a business
Did you ever read the post about crafting a mission statement? My guess is that if you read it, then you probably have the right mindset, even if you don’t have all the business fundamentals down.
The most successful real estate agents treat the real estate business like a real business. They do the “whole 9” with business plans, mission statements and a clear vision. They know their business metrics.
Likewise, tech companies get launched and funded in large part due to their business plan. They understand what’s at stake, the know the numbers and have counted the cost.
When Redfin comes into a market, notice how strategic it is. Redfin picks an area with high enough turnover and price point to support a new brokerage before ever expanding into the suburbs. If real estate agents were half as strategic as this, the whole industry would be lifted.
2. Know your numbers
If you read that first point about treating the business like a business, then you must have known that one huge component of that was understanding the numbers.
Really good agents know how many homes they want to sell each month to hit their goals. Great real estate agents, know how many calls it takes to get the number of appointments needed to acquire the number of clients they need to hit their financial goals.
In addition, they know the conversion rates of each one of these things as well as what sources of business produce the right amount of opportunities (leads).
This is just basic business metrics.
LTV doesn’t mean, loan to value; it means, life time value of a customer. Starbucks knows that you’re worth $14,099 to it. Do you know what your clients are worth? Here’s a real simple calculation for you:
(Average value of a sale) X (Number of repeat transactions)
Writer’s note: This calculation is slightly different than the one that many businesses use because the turnover of clients is different in real estate.
Example average value of a sale: I’m in Atlanta, the median price is around $250,000. The average commission is 2.8 percent (before anyone gets all uptight, this is the same stat this present in many books, including the Millionaire Real Estate Agent by Gary Keller, certainly you are free to use whatever numbers you like and can charge whatever you want).
So the average value of a sale is $7,000. This number is a gross number, if you really want to do this, you should deduct the costs of the MLS fees, closing fees or whatever you have.
Example number of repeat transactions: In Atlanta, the average homeowner moves every seven to 10 years. To make the math easy, let’s go with 10 years. You can often get these stats from your local board, although sometimes it takes some digging.
Now for the fun part, how long are you going to work? Let’s say 30 years. Most agents I know start later in life, so I’m going to go with 30, but you might only want to work for 20 years, etc.
Something that’s awesome in real estate is that when people move, they often sell then buy, so we have to account for that. So if you’re really fast, you thought maybe that was three home sales, but really it’s more like five because you have to account for the listing and the purchase.
Typically, if you work with a first-time homebuyer, you’ll see this transition. If you really want to get something going, you could do something like this.
- First home: first-time home X commission rate (CR)
- Second home: move-up home X CR + sell of first home
- Third home: move-up or down-size home X CR + sell of second home
Add it all up
For our purposes, let’s just be simple and say the average sale is $7,000, the number of years I will work is 30 and the average move is 10 years, so three times.
We add in those two additional sales, and we have a simple $7,000 X 5 = $35,000 calculation. Because we’re doing really simple math, we know that this number is low.
Think about it
Before we move on, let’s pause real quick. Think about this: the number above is going to be really low for most of America. This number is more than double what Starbucks sees as LTV for a customer.
Is it any wonder why companies are desperate to disrupt real estate? It’s one of the (if not the) most profitable businesses to run. I recently did a podcast on the 5 business metrics that every business should know; if you want to go deeper, check it out.
3. Remember your database is your business
When I first joined Keller Williams over 10 years ago, I was told that over and over again. It seems like common sense, but the most successful real estate agents, who treat the business like a business, know that 2018 businesses run databases of customers.
They use CRMs (client relationship managers) to manage their database so they can stay in touch and track their customers. I won’t judge you if you are using Outlook to manage your business, but I can tell you that using a tool like that will bottleneck your growth.
Top agents and tech companies are using CRMs with automation, email and texting capabilities to stay top-of-mind with their customers and to fuel their growth. The right system allows you to generate a massive number of leads that can be processed. This is simply impossible with a notebook and the MLS.
4. Simplify your systems
Recently, Gary Keller told his company that Keller Williams was a tech company. When I heard that, I almost spit my coffee all over the place. Keller is a brilliant man, but this the first time I’ve ever heard him say something that was blatantly wrong.
Keller Williams is successful because it is a systems company. Everything they do is built around systems. When I consult with brokerages that aren’t gaining momentum, the biggest thing they are missing isn’t leads or culture or technology — it’s systems.
Tech companies understand this, and it’s in this area that they are whipping agents. I’m not talking about technology systems, although that’s part of it. Tech companies streamlined and simplified the systems. This is how they are able to scale so quickly.
Knock and Opendoor are able to go into multiple cities with their offering because they know their system (both tech and the process) can handle the load.
Ask yourself, what’s your business capacity? Most agents would do well to say more than 50 transactions a year. The top agents are thinking in the hundreds or even thousands.
5. Singularly focus on your goals
My last post on Inman was about SEO tips that agents could use. I got some reader email that asked questions. I won’t call anyone out by name, but they were suffering from the SOS (shiny object syndrome).
Many agents suffer from this, and the only prescription is to stay focused on your business plan (see the first point). It’s common for all people, not just agents, the hope of a quick fix; buy some leads from a provider, and it fixes everything.
Unfortunately, as we’ve discussed, if you don’t have a business plan, understand the metrics and have killer systems, your business can’t handle a ton of new volume.
There is such a thing as a business failing because it drowned in too many opportunities. However, before you think “not me,” most businesses don’t fail this way; most fail because they overextend themselves across too many directives instead of focusing on something narrow.
Tech companies and top agents agree on this. If you analyze the top companies (both tech and real estate), you will find that they are narrowly focused on niches. It could be more than one, but rarely more than three distinct niches. This should provide some hope for some agents.
Opendoor and Knock won’t replace agents; they are going after a market of homeowners who have enough equity to exchange for the convenience of not having to deal with the selling process.
In fact, these two companies are going after business that traditionally went to investors. Redfin isn’t competing with you on your clients; it is taking the business of people whose agents did not stay in touch (that’s not you, right?), and frankly, don’t see the value that a full-service agent brings.
The point is that the best companies are laser focused on their goals and don’t let a new competitor or a new shiny object detract them from what they are wanting to achieve.
This is not a definitive list. Ultimately, I could have just wrote about the first point, and that one strategy alone could help you. The best advice I can give you from watching non-real estate companies, tech companies and top agents is that running your business like a business is the only way to achieve at a high level.
It took me about five years before someone taught me this. When I shifted my mindset, I went from selling 30 homes a year and being worn out from working weekends to having a balanced life selling close to 70-plus homes every year moving forward.
Joshua Jarvis is a digital marketer with 4rd Marketing in Atlanta, Georgia. Connect with him on LinkedIn or Facebook.