On this 202nd episode of my Monday Morning Pep Talk, I'll make a final attempt during this segment of Take Flight V4.0 to challenge you to take a hard look at your business and ask yourself: "Is my business predictable and enjoyable?"
I've been in this business for 25 years and have studied it, lived it from every angle and I've concluded that it comes down to one question: Do you want to build a business that focuses on relationships (your lists) primarily or will you be transactional in your mindset and primarily focused on moving properties? Over the course of this episode, I will cover the things I considered when I made the decision to go all in on the relationship game after the transactional model failed me in a big way. This episode could easily have been included at the beginning of the segment ("The Cabin") of Take Flight V4.0 but I think it's important at this stage to help you sift through the factors that you need to consider before you go all in on a business model type.
Here's what I used to validate my decision and what has led to coaching around a relationship-based model:
- What is the definition of a predictable and enjoyable business? First off, this business is tough. It will take you to the highest peaks emotionally and the lowest valleys. That's why a broker/advisor gets paid what they get paid. Most couldn't do what you do each day knowing that the commissions don't get paid until the property trades. It takes a certain type of person to enter that arena every day. Still, the biggest stressors I've witnessed from brokers/advisors is when the hotlist of active buyers and sellers (pipeline) gets low. If those "batteries" are not charged (revisit episode MMPT #201), the relationships are not there to power your business. If you want "predictable,” you need to put in the consistent effort to properly maintain your CRM and the lists it contains. If the business is "predictable,” it becomes "enjoyable" because you'll get to the point where you get to decide who you want to work with in your business. A predictable business has a constant flow of new business, eliminating the massive peaks and valleys and the emotional roller coaster that goes with an unpredictable business. Because of this, a predictable business is much more enjoyable. "Enjoyable" does not mean it will be "easy.”
- A relationship model works in every market. It has worked over generations, and it will continue to work for successful entrepreneurs and companies for generations to come.
- People hire who they know, like and trust. The trust has to be earned and maintained.
- Don't ever forget the Law of Compensation: Your income is determined by how many people you serve and how well you serve them. The Law of Influence: Your influence is determined by how abundantly you place other people's interests first. The Law of Authenticity: The most valuable gift you have to offer is yourself. Thank you, Bob Burg, for writing The Go Giver.
- A relationship-based business, if executed property, converts at 20% (return on database = 20 referrals out of a 100 relationships). Most other lead generation strategies convert at 1-5%. The ROI and on your time is 3 to 10 times better than most lead generation solutions.
- Relationship-based businesses can be much more profitable because the expense ratio is much lower. The investment is primarily your time.
- A well-run relationship-based business will be 90%+ referral based with new opportunities coming from your 5 lists.
- If you are switching from a transactional or hybrid model to a relationship-based model, the process can be humbling in the beginning when you categorize your Top 100 and you have way less contacts that qualify than you thought you would. The reality sets in that you've got some work to do. You have to understand and believe that "less is more.” It's hard to conceptualize for most brokers who are new to this process that 50 contacts in your Top 100 can out produce 2,000 contacts on an email list. The only way you'll "believe it" is when you see the results and, again, that could take some time. It takes commitment and patience to plant in the spring and harvest in the fall.
- The only thing that can fully be counted on long term is your CRM full of relationships. Most other lead generation strategies could go away or be restricted. If you don't own it, there is some risk. When I started out, I put all of my eggs in the basket of one developer and was taught this lesson the hard way. Lead generation sites and social media platforms could go away or be restricted.
- If you are new to the business, start building a relationship-based business your first year. One relationship turns into 2, 2 turns into 4, 4 to 10 and it will go from there and grow quickly once you hit about year 2 or 3, if you start the right way. By year 5, you will have a really nice predictable and enjoyable business.
- Trust the Process (Long Game) - it takes time. You are literally building your business brick by brick, client by client. The end result is that you will have a business that attracts clientele instead of having to consistently hunt for new properties to sell as your only business development strategy. You have to commit to daily action to make it work. Find a group of like-minded people to create accountability and develop a WAM (weekly accountability meeting).
- If you have decided that you want to go all in on the relationship-based model but are finding a lack of energy to put in the effort to build it, go back to MMPT #184 (Create Your Destination) and listen to that episode. Most likely, your vision is not big enough or you are not reviewing it on a daily basis.
I feel like I am selling past the close on "The Cabin" section of Take Flight V4.0 and I don't want to push too much and have you tune me out. I feel like I have to sell it hard because the industry as a whole is transactional. (More than 90% of brokers don't stay in touch with their clients post-closing.) You've got the information you need to make the decision on whether or not a relationship-based business model is a fit for you. I’ll leave you with a metaphor that I think will put some perspective around this episode.
Imagine you are a talented chef that has worked in other owners' restaurants for the early years of your career and you've made a decision to open your first restaurant. You'll decide your concept (your niche) around your talents, your tastes and the size/location of the restaurant that you want to open (how many tables and seats). You know what every chef or restauranteur knows, and that is that you've got to execute flawlessly for the first 3-6 months for any hope of long-term success. The success of a restaurant depends on whether you can get people to come back over and over again and to also recommend it to their friends. If a chef/restauranteur can't create that with their food and hospitality, the longevity of the business is doomed. A restaurant has to create great food and a great environment for people to come back over and over to fill the seats and tables. If the tables/chairs are reserved out in advance, that creates predictability and profitability. Running a restaurant is tough but running one that is predictably profitable is much more enjoyable.
My question for you would be, why would the strategy driving a real estate brokerage business be any different? That's a decision for you to make.