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Being a solo agent today is more complex than ever. If you’re stressed out because you’re so busy you can’t keep up with it all, you need help. The challenge is what to do. Should you start a team? If so, where should you begin, and what should you do?
Speaker and CEO of Spark Tank Media, Jeff Lobb, recently joined me to walk through the requirements for starting a successful real estate team.
Why do you actually want a team?
Lobb recalled when he once had 40 listings in his personal inventory. While it was great to be that busy, the downside was he could no longer manage that much business by himself.
“When you start thinking about building a team, the first question you must answer is, ‘Why do you actually want a team,’ Lobb said.
Lobb explained that some agents start teams out of necessity — they have too many leads, too many listings and not enough hours in the day. Other agents see building a team as the next logical step in their growth.
“A lot of people don’t realize what’s involved in getting involved in a team. They just jump first because they think they must be bigger. While I believe teams are the future of real estate, my first takeaway is that many agents start teams for the wrong reasons,” Lobb said.
Avoid the biggest mistake agents make when they start a team
The biggest mistake agents make when starting a team is hiring a buyer’s agent before securing administrative support. In fact, the smart move is to make your first two hires administrative, specifically, a transaction coordinator and a marketing/administrative assistant.
The reason? If you make the mistake of hiring a buyer’s agent without having an additional administrative report, then you’ll be stuck doing more administrative work, resulting in even more chaos.
Admins are critical, even if you’re not starting a team
Before you even consider building a team, hiring at least one administrative assistant can really help your business grow. Administrative assistants keep your business running. Without them, you are the bottleneck.
“Buyer’s agents usually only get paid when they close a transaction. When you hire an administrative assistant, a transaction coordinator or a marketing person, that’s consistent money out of your pocket. That’s the first bullet you must bite.”
If you’re struggling with the financial commitment, reset your mindset.
“When you hire admins, you’re not giving up money, but buying back your time and avoiding burnout,” Lobb said.
Creating a job description
Lobb said another major issue many agents struggle with is giving up control.
“I thought I could do it all. I didn’t trust anybody, Lobb said. “I realized that I was terrible with detail work. A huge realization was what I was good at as well as what I needed to give up,” Lobb said.
You can use this information to write a job description for your first hire. Make a list of “What I like to do and I’m good at,” and a second list, “What I hate to do or do poorly.” The second list is the job description for your first administrative hire.
Small or large team?
Every team starts small. Small teams can be highly profitable if they’re run properly.
“What’s intimidating for a lot of newer team leaders is they see these mega teams, but they have to realize even the biggest teams started with one or two people,” Lobb said. “Regardless of the size of your team, you must determine what the process is for submitting listings, guidelines for working with buyers, and who handles all the other parts of the process.”
Agents often start teams with expectations that are very different from reality. Here’s what one disillusioned team leader told Lobb:
“I’m not sure I actually want to manage people. I thought having a team was just going to help me do more transactions and handle my stuff. Instead, running a large team gets into the business of attracting, managing, recruiting and retaining people. I don’t know why the hell I got into this — it’s not producing for me what I expected with the amount of time I’m putting into it.”
“When you run a large team, you’re not in production anymore — you’re running a company inside of a company,” Lobb said.
An additional harsh reality is that the behavioral profile of a top producer is very different from that of a manager.
Overhead can be the death of your team
A primary reason teams fail is not from a lack of sales, but from cash flow management. Lead generation costs and meeting payroll for your support staff are the two primary sources of overhead for large teams.
“If you’re paying for big lead sources along with salaries for the support team, this can be the death of you. Overhead will choke you very quickly if you don’t manage the process,” Lobb said.
“Before you make plans to expand your business, wait until you have a steady cash flow and a reserve. Your lead gen and admin costs show up monthly; commission checks do not. You will need a reserve to keep your business operating.
Start cutting expenses now
Most team leaders are hyper-focused on growing their revenue. What many fail to address, however, is where they can cut expenses. The two primary places for team leaders to look are their lead generation costs and staffing. Here are Lobb’s top recommendations about what to do.
- Lobb’s first tip is to always put sales first, because “Creating more sales always cures more problems.”
- Next, look at your lead sources. Lobb recommends that if a lead source is not generating the results you need, drop it. Instead, focus on developing leads from the contacts and the people that you already know, i.e., your sphere and past clients.
“This has been a pretty constant statistic — The NAR Profile of Buyers and Sellers has consistently shown that 65 percent of all business is generated either from past clients, your sphere of influence or referrals from people you already know,” Lobb said.
“There are probably hundreds, if not millions of dollars sitting in their current systems and databases that could be converted. If they enhance their sales systems within the next 6-12 months, they can convert more sales from these sources than what they’re doing currently.”
- In addition, if you have already paid for leads from any of the portals, these often convert 12-18 months after you receive them. Stay in contact with them.
Not getting the results you want? Change your messaging
If you’re regularly prospecting your database, but you’re not getting the results you want, shift your messaging. Lobb has listened in to a lot of prospecting calls and he cringes at much of what he hears agents saying. Here are some important tips.
- Rather than talking at them, ask questions.
- Avoid Realtor jargon such as “CMA.”
- Offer a service to reengage with them. For example, most agents offer to do a CMA for past clients or current listing leads. A better approach for someone who owns a home is to offer an “Equity Checkup.” It’s exclusively about their home and their equity, making it more personal and valuable. You can quickly create an Equity Checkup by going to NARRPR and pulling a beautiful 15-25 page report on their property. Couple it with your personal CMA, and you have something almost everyone will keep and value.
“The magic word that gets their attention is ‘equity,'” Lobb said. “When you ask if they know that their equity has changed significantly, that gets their attention.”
Here’s an example of a simple question that can often get you the appointment.
“Did you know that the amount of your home equity has changed? If you’d like to know by how much, I’d be happy to drop off a copy of your personalized Home Equity Checkup for your property.”
If they say “yes,” schedule the appointment.
The toughest issue for team leaders and their agents: Compensation
When it comes to team compensation, Lobb said confusion is common. Rather than looking at the split as a percentage, what matters most isn’t the percentage you’re offered, but what’s left in your pocket.
Stop obsessing over the split
A 50/50 team split might sound awful compared to the 80/20 split you had at your last brokerage, where you only closed two deals. If you join a team where you have full administrative, marketing and lead generation support and you close 12 deals, you will come out ahead — way ahead.
Know what you’re really getting
A strong team may include a full suite of services: transaction coordination, marketing support, paid advertising, videography, social media content and CRM management. Ask yourself what it would cost you to handle all those things by yourself, as well as how much time it would take.
Use a $10K commission as a test case
When you’re interviewing at a brokerage or for a team, Lobb advises that you have the person you’re interviewing with to walk through a hypothetical deal. Here’s what to ask:
“Show me how a $10,000 commission would be split between the brokerage, the team and me.”
This one exercise can eliminate false assumptions and set expectations clearly.
The costliest mistake team leaders make
The mistake? Paying agent splits based upon the gross commission rather than the net commission after brokerage and team expenses.
For agents, ask about both the team and brokerage payment structures
Be sure to clarify whether your commission split is based upon gross revenue or revenue after expenses are deducted. It’s equally important to discover the brokerage’s model — Is there a cap? Is there a franchise fee? Does the broker charge a transaction fee?
Again, it’s not about the split but about how much ultimately ends up in your bank account and how many more deals you can do.
The 2 biggest challenges team leaders face
While starting a team can be exciting, the hardest part isn’t generating leads and closing transactions — it’s managing the people and the cash flow. Other issues Lobb outlined include:
Hiring, training and retaining
Hiring agents for your team can be difficult and time-consuming, especially since “Every day someone’s trying to recruit your people,” Lobb said.
Even if an agent agrees to join your company or team, ou still have to train them. If you’re like most team leaders, you probably don’t have the bandwidth to do training since you’re already stretched too thin yourself. One option is to outsource your training, which many teams do.
Cash flow can kill your momentum
Monthly expenses — lead gen subscriptions, staff salaries, marketing costs — keep hitting even when commission checks don’t. “You’re not getting paid for time out,” Lobb warned. “You need a cash buffer to carry you through slow cycles. Without it, overhead will eat your business.”
Lobb’s final takeaways about starting a team
“I think teams are the future. I think teams allow a lot of flexibility under a brand without carrying all the overhead of the brand. Be sure you understand why you’re starting a team, identify what you’re good at and what you’re not good at, and find those key people that can fill those voids for you.”
Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, and the founder of RealEstateWealthForWomen.com is a national speaker, author and trainer with over 1,500 published articles.
