(This is the 6th post in a 9 part guide, please read them in order)
Why is a real estate business model important?
I deliberately used the word ‘model’ because your business needs to have a foundation and structure beyond just praying for deals. How you build this model will depend on how you package up your value to the world.
A common issue I see is most real estate agents struggle to identify what makes them a better choice over their competition.
Think of this scenario:
You’re sitting in your brokerage computer room having a coffee with some agents and your office manager comes to the back and makes an announcement.
A homeowner from across the street popped by the reception to say that they want to list their home for sale, and since your brokerage is the closest real estate office, they want to talk to an agent.
Your manager wants to be fair to everyone, so all 10 agents in the office each get 5 minutes with the seller to prove they’re worthy of being hired.
Now, without any preparation, what would you say to convince that seller to hire you as their listing agent?
The reality is that the public sees us as a commodity, not unlike buying a can of beans from your grocery store. If you’re grocery shopping and one brand of beans is sold out, you just pick a different brand because, well… beans are beans.
And in the absence of any perceived value, the consumer will aways choose the cheapest option.
What do we do with this information, and how do we build a business model around it?
1. Become good at one thing in real estate and make it your flag
There are so many things in real estate that you could develop expertise in. Here are some examples:
- pre-construction condos
- estate sales
- gas stations
- waterfront properties
- franchises
- relocation
- foreclosures
- specific geographic areas
- first time home buyers
- office leases
- luxury homes
- (the list goes on)
Becoming a specialist does a number of really good things for your business.
- It gives you confidence in your service when you’re working with clients.
- It gives your clients confidence in you because they are benefiting from your experience during a transaction.
- It allows you to understand important metrics in your business like average commission amounts and timelines for deals.
- Using these metrics, you can reasonably predict future performance based on how you adjust your business.
- It gives you perceived value when you’re marketing yourself to the public.
This doesn’t mean that you should be turning down clients that don’t fit into this box. If you’re a struggling real estate agent, I would never refuse business if I could provide them great service and earn some commission at the same time.
Rather, it’s crucial to carve out an identity for yourself in a vast sea of agents who all have access to the same MLS systems, access to the same properties on the market, and templated documents required to complete a deal.
Most importantly, becoming an expert in something means that you can serve your clients better. And that’s really the bottom line.
2. Put numbers into action and scale
One of the reasons most real estate agents don’t regularly create business plans is because they can’t conceptualize their numbers well enough.
This comes down to lack of systems that can provide predictability and structure to a business, and the consequence of this is many real estate agents will charge commissions based on what they think they deserve as opposed to what value they’re trading for money.
Imagine starting a new band and seeking gigs.
The important thing to start off with is deciding who your audience is. Are you playing weddings, bars, or corporate events? Based on who your target audience is, you would tailor your performances accordingly to meet their needs.
In real estate it’s no different, and understanding your target market will enable you to figure out how to deliver value to your clients. By identifying your niche and focusing on effective marketing, you will ensure you’re not just charging an arbitrary commission. Instead, you know the tangible outcomes you can deliver and you’re able to charge justifiable fees.
Once you understand the unique value you bring to your marketplace, you have a foundation to build a business model around it. This will allow you to approach real estate as a business with expanded parts instead of seeing it as a linear activity of just closing deals.
It’s important to have this structure if you want to scale and grow. If you’re chasing sales like a squirrel chasing acorns, it’s nearly impossible to apply any type of multiplying factor to your business.
In other words, you can double or triple the output of a system in your business if your model makes sense. However, I bet you won’t be able to double your buyer appointments over an extended period of time without burning out.
Remember, winging it in sales can only get you so far. You can make money chasing deals, but you’ll have very little leverage over your future. Always think about your real estate business as a multi-system entity that serves a purpose or a target group – something that has other moving parts that exist independently of your sweat equity.
Now that you’ve set up a solid foundation for your real estate business, it’s time to proceed to the next topic.
Lets move onto Level 7: Avoiding Common Mistakes As A Real Estate Agent