This July, Inman’s editorial theme is Teams — what it takes to build and join one, how to optimize your team for summer 2020, and even when to consider leaving one. And if you’re not already a subscriber to our Teams Beat email newsletter, sent every Thursday, sign up now.
Are you thinking about starting a team or do you already have one? If your team is making any of the mistakes listed below, take immediate steps to correct them. Failure to do so can result in disputes within your team, cash flow problems or even the disbanding of your team.
Team or partnership?
An agent team is different from an agent partnership. In a true team, all the business flows through the team with no one doing any outside deals. In an agent partnership, agents may share part of their business with the “team” but still do separate deals as well. The issues listed below apply to teams and, in many cases, to agent partnerships as well.
Mistake No. 1: Making your first hire a buyer’s agent
Hiring a buyer’s agent as your first team member is a recipe for disaster. If you don’t have the administrative support to handle the business that’s already coming in, adding another agent to the mix will only increase the number of issues you’re facing.
Instead, your first two hires should be administrative. A great place to start is with a transaction coordinator. Since transaction coordinators are typically compensated on a per-transaction basis, you only pay for the time you use.
If you’re hiring your first in-office or virtual assistant, make a list of what you love to do and what you hate to do. Your “hate-to-do” list is the job description for your first administrative hire.
Only hire a buyer’s agent once you have the necessary administrative systems in place to handle the extra business. In many cases, a virtual assistant, who has his or her own equipment and only charges you for the hours you use, might be a better choice, especially if you’re working from home.
Mistake No. 2: Failure to systematize your business
Creating systems is critical to your team’s success. To begin this process, jot down each step you take from start to finish in your transactions. This creates a basic job description. As you expand, repeat the process for each new position on your team.
You should also document your lead generation processes, the systems you’re using for tracking transaction data, as well as how you’re using your CRM. Look for ways to automate as many processes as possible. This frees up time for your team to do more lead generation and close more transactions.
Next, organize these documents into a “team systems and procedures” manual. This documentation allows you to cross-train team members to handle different roles on your team and also makes it possible for you and your team members to take time off.
Mistake No. 3: Failure to address what happens if a team member exits
In your “team systems and procedures” manual, clearly document exactly what happens if a team member becomes ill, dies or decides to leave the team. Make sure these policies are in writing, and have each team member sign off on them.
If you’re operating as an equal partnership, you will also need a “buy/sell” agreement that documents how the partners may buy each other out or terminate the team or partnership. Have this agreement drawn by an attorney, and do it when you first start your team or partnership.
If you’re considering entering into a 50-50 partnership, a key challenge here is that there’s no way to resolve disputes when 50-50 partners disagree. If you don’t feel comfortable giving your partner a 51 percent interest, that person is not the right partner for you.
Mistake No. 4: Not having written goals tied to your higher purpose
Having written goals dramatically increases the probability you will achieve those goals. A common trap for many agents is setting goals based on the number of transactions or how much money they will make.
The most effective approach is to tie your goals to your “big why,” such as putting your children through college, having adequate funds to retire or supporting a charitable cause you’re passionate about.
Mistake No. 5: Not knowing your numbers
Are you tracking the following numbers in your business?
- Cost per lead
- Lead conversion rate
- Marketing costs per listing and buyer
- Net income
- Administrative costs including overhead
- Vehicle costs
- Which areas of your business are generating the highest return
- Which areas are failing to provide an adequate return
Failure to track where your business is inefficient or is losing money is a sure way to go out of business.
Mistake No. 6: Failure to work ‘on’ your business, not just ‘in’ your business
Michael Gerber’s book, The E-Myth Revisited, is mandatory reading, especially if you’re just starting a team. Gerber explains that when you launch your team, you must identify who will handle three primary roles on your team: the technician (the person who delivers the service), the entrepreneur (the team lead or rainmaker), and the manager who supervises operations and is also responsible for handling payroll and taxes.
How these different roles are handled requires you to “work on” your business, not just “work in” your business. “Working in” your business includes generating leads, converting leads and closing transactions.
“Working on” your business means stepping away from the business to evaluate your numbers, monitor cash flow, market trends and how to adjust your activities to maximize the effectiveness of your business.
Mistake No. 7: Compensating based on revenue before deducting expenses
One of the most common mistakes team leaders make is basing team member compensation on gross revenue rather than net revenue (income less expenses). As a rule of thumb, if you’re compensating an agent at 50-50, the actual percentages after expenses are about 42.5-42.5.
Mistake No. 8: Treating independent contractor (IC) agents as employees
Do you require team members to attend meetings at specific times, use your tools and systems, lead generate in a certain way and/or time, or follow specific instructions about how they conduct their business? If so, you are treating them as an employee and may be subject to substantial fines under independent contractor law.
Unless you are the supervising broker for your company, as an individual team leader, you cannot engage in these activities unless you have hired the person as an employee.
There is zero protection for you in the IC laws. This is a complicated issue, and it varies from state to state, so check first with your supervising broker about what is required and then with a labor attorney about what your state requires.
Mistake No. 9: Failure to hire to a behavioral profile
Many agents hire someone whose behavioral profile is the same as theirs. This is a huge mistake because this person will often leave your team and may even try to steal some of your clients. Instead, you should hire based on the role on the team and their behavioral profile.
Many people are familiar with the DISC assessment. The “D” is for dominance and drive. The “I” is for influencing (“people people”), the “S” is for steadiness and systems, and the “C” is for compliance (high-detail people).
- Top producers generally score high on the “D” and “I” factors, and on the “utilitarian” factor from the TTI Personal Interests, Attitudes, and Values Profile (PIAV). According to TTI’s research, the utilitarian factor alone predicts sales success at the 72 percent level. This is the profile to look for if you need a rainmaker or for any position on your team where you need a practical problem-solver.
- If you need an assistant, you want the reliability of someone who has a high “S” score, which means they are extremely dependable and loyal.
- If the person will be interacting with clients, you also want a high score on the “I” factor.
- If the person will be handling compliance, handling technology, or your books, you want someone who scores high on the “C” or “detail” factor.
Another great resource to give to every person on your team is Tom Rath’s StrengthsFinder 2.0.
Mistake No. 10: Being fast to hire and slow to fire
Before bringing any one on your team, conduct at least three interviews with the person — one by phone to see how well they handle phone conversations and the other two in person. Someone can always bring their “A” game once. Doing it three consecutive times is much more difficult.
When you realize you have hired someone who is not a fit for your team, fire quickly. The longer you draw out the process, the harder it will be.
If you find yourself making any of the mistakes outlined above, pivot now to ensure your team will be as productive and profitable as possible in the future.
Bernice Ross, President and CEO of BrokerageUP and RealEstateC