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Running a Successful Real Estate Business Part Deux: Multiple Profit Centers

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A Tale of Two Niches

As the real estate market took a turn for the worse in 2007,  foreclosure filings across the country spiked heavily and like mushrooms after the rain, REO brokerages appeared on the scene almost overnight. The new contingent of hastily put together firms joined the handful of brokers that had been selling bank owned foreclosures for decades. It reminded me of out of state roofing contractors flocking to the shore just hit by a hurricane. But as it turned out, experience did not make much of a difference – Even the noobs were pushing out the door anywhere from 20-60 properties a month, every month. What had been a relatively dormant niche, was now the place to be.

During the same time, seasoned real estate agents that had made a great living by listing and selling in a particular neighborhood or part of town, found themselves trapped in the quicksand of immobile inventories and no alternatives. They could still list with the best of them but for a while there it seemed like all buyers had evaporated in the shadow of a bursting bubble. Working what pipelines they could manage to put together, they either squeaked by waiting for the returning tide, got second jobs to supplement their income or simply fled the business.

Story behind the stories

The two tales above share a common reason for being: Both businesses were based on a single profit center model. Do one thing and do it well. Specialize in an area and become the expert – is the mantra we often hear. But this lack of diversification, makes your business very susceptible to market movements. It is akin to having all your money invested into the stock of a single company: If they flourish you are set for awhile but if they faulter, they’ll take you down with them. But this is your business we are talking about here, not Las Vegas. That REO broker can count on continuous business for another year on the optimistic side. Afterwards, that gravy train ain’t showing up to the station. By the same token, what happened in the past few years is bound to happen again in the future and neighborhood agents can’t let themselves be caught by the same trap yet again.

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RASREB 2: Think Multiple Profit Centers

In order to have a successful real estate business long term, it must generate revenues from multiple profit centers.

Think about this for a second: Coca-Cola arguably makes the most successful soft drink in the history of the product. Why do you suppose they have Sprite, Fanta, Dasani in addition to their flagship product? In addition to supplying market demand for alternative flavors, they are effectively hedging against the possibility that their main product might become obsolete or undesirable as some point. The sales of alternative drinks pale in comparison to Coke. However, the Coca-Cola company is much stronger because of them. I often hear agents mumble statements that start with: I don’t do ______ or Working with _______ is not worth the effort or even Dealing with ________ is beneath me. Ninety nine percent of the time, those statements come from a place of ignorance. Case and point: About four years ago my wife kept trying to suggest that we should start working with HUD owned foreclosures only to be turned down by me. I told her HUDs were too complicated, not worth the effort etc etc. Thank God she finally succeeded. They were not complicated and in these past four years that profit center alone has accounted for over 30% of our total revenues. So before you dismiss a niche that could make you thousands, do your homework.

Implementation

In the first part of the Running a Successful Real Estate Business series, I showed you how to trim the fat and kill overhead to succeed in real estate. Ideas without implementation are a waste of cranium RAM. So here’s some specific actions you can take to add profit centers to your business to enable it to survive and thrive the ebbs and flows of moody markets.

Adding a foreclosure component

I can already see your eyes rolling in the back of your head and hear your sighs. Foreclosures can be a pain – if you don’t know what you are doing. If you do take the time to educate yourself about bank REOs, HUDs or short sales you might find that once the right expectations are set in there can be some structure to this niche. And there’s definitely money to be made. Remember, the goal here is not to become an agent that exclusively does foreclosures – you are just adding this component to the mix of what you are doing already. If not, you can join the ranks of those agents to supply me and others with clients because “their agent didn’t handle foreclosures”. Your choice.

Don’t take the poison pill of strict specialization

If you are an Exclusive Buyer’s Agent or Exclusive Lister, it might benefit you to dip your toe on the other side as well. Buyers Only Agents: Keep handling your buyers but start taking some listings from time to time. And i’m not talking about handling any listings that fall on your lap either. Seek out listings, market for them and earn the business. Or add a partner agent that handles that for you. You will find that not only will you see added revenues from the newly added profit center, but you will also add steam to whatever you are currently doing. Same thing for listers.

Diversification of marketing methods

Some of us take pride in never using any “old methods” of marketing – We don’t doorknock, cold call, direct mail, print marketing etc. We constantly boast that this medium is dead or that medium is obsolete. On the other side, old schoolers hide behind statements that social media is a “waste of time”, blogging is not for me and internet prospects don’t work. No matter which side you are on, my advice is: Try something different and you might be surprised. Those cheesy letters you despise so much might just turn into listings and that blog post you reluctantly wrote might start bringing you real clients.

Houston Real Estate Rainmaker and Uberproud Father/Husband (not necessarily in that order). When I'm not skinning cats or changing diapers you can find me on Twitter or Facebook. I blog about marketing, social media and real estate. I might not always be in agreement, but you can rest assured I'll be honest. Oh, and I can cook a mean breakfast...

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17 Comments

17 Comments

  1. Portland Condo Auctions

    December 17, 2009 at 6:42 pm

    The ones who fear the internet are going to lose out on a lot of money. As soon as the baby boomers are gone their direct mailing business is going to be gone too.

    -Tyler

  2. BawldGuy

    December 18, 2009 at 10:13 am

    Hey Erion — Your points are well taken. Allow a Boomer/RE dinosaur to make a distinction as it relates to ‘specialization’.

    I don’t mean to offend anyone, especially house agents, as some of my best friends do that. 🙂

    In teaching agents various parts of the biz, I’ve often pointed out the difference between specializing in neighborhoods and the like, and specializing in a relatively complex niche. You mentioned REO’s for example. To do that well requires marginally more knowledge/expertise than farming & becoming the ‘specialist/expert’ in a particular neighborhood — something you and I could train a high school freshman to do well.

    We can discern the actual level of know how & expertise required for expert/specialist status in any particular niche by how many ‘flock’ to it — and succeed at it almost immediately. So let’s not be too quick to label REO agents ‘expert’ or ‘specialist’. That’s not in any way to damn the whole group, as I personally know a couple local agents here in San Diego who easily merit expert status.

    I guess my point is that much like the description ‘great’ has been relegated to meaningless in sports, so has specialist and expert in much of real estate.

    Multiple sources of income? You never cease to amaze me. Your ability to adapt on the run is more than impressive. Combined with your obvious skill & aptitude with the 2.0 world, and your continued success is no surprise. Bet you’re glad your wife is persistent. 🙂

    • Erion Shehaj

      December 18, 2009 at 4:39 pm

      “Specialization” in this post refers to an agent that focuses exclusively on one aspect of the business not so much their level of expertise. God knows many who flocked to the REO pasture made money while having zero clue. If you need proof, take a look at REO listings on the MLS – that’ll be a lesson in how not to market a property.

      I’m certainly happy about her persistence. Our bank account, even more so 🙂

  3. Pete Skoglund

    December 18, 2009 at 10:30 am

    It’s unbelievable that most seasoned agents refuse to break the mold yet are shocked at their financial stauts (or lack of any financial status).

  4. Mark Eckenrode

    December 18, 2009 at 12:14 pm

    erion, nice article to help stretch the mind of many. and i agree with what Jeff says above, especially about the varying degrees of specialization. there’s also a lesson in specialization to be had from Coca-Cola…

    a number of years ago they thought their business was “drinks” and so came out with wine. yes, it flopped miserably. they then realized their business was “refreshments” and, well, they do a damn fine job of that. so, diversification for diversification’s sake ain’t the way to go. you point to that in your article. the point is, if you’re going to diversify or add profit channels, make sure they complement what it is that you already provide.

    • Erion Shehaj

      December 18, 2009 at 4:42 pm

      Mark

      As fate would have it, CNBC ran a special on Coca-Cola last night. A line caught my attention: “Coke realized that now it’s not as much about the drink as it is about selection”.

      Diversification for the sake of diversification is uncontrolled chaos. But, it’s hard to know whether a profit channel would complement your existing business if you don’t know anything about it.

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Business Marketing

10 must-listen-to podcasts for business owners

(MARKETING) If you’re a business owner and want to learn something…anything…give one (or all) these podcasts a listen.

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As podcasts grow more and more popular, it has become increasingly difficult to sort through the sea of excellent options out there.

From interviews with business leaders to industry-specific advice from experts, podcasts are an incredible free and convenient way to get a small dose of inspiration and knowledge.

This short list offers just a taste of the myriad of business podcasts available. Whether you’re an aspiring entrepreneur looking for some tips on breaking into a new industry or a seasoned vet hoping to get some new inspiration, we hope you’ll find something here worth listening to.

How I Built This, hosted by Guy Raz.

Podcast fans will recognize Guy Raz’s name (and voice) from TED Radio Hour. While that show can be a great source of inspiration for businesses, one of the most consistently inspiring shows is his new project that shares stories and insight from some of the biggest business leaders in the world. In just four months, Guy has talked to everyone from Richard Branson and Mark Cuban to L.A. Reid and Suroosh Alvi. While there are plenty of excellent interview-driven shows with entrepreneurs, if you want to hear about the world’s best known companies, this is your best bet.

The Art of Charm, hosted by Jordan and AJ Harbinger.

The Art of Charm is a business podcast by definition, but the advice it provides will definitely help you in other parts of your day-to-day life as well. With over three million listens a month, the incredibly popular show provides advice, strategies and insight into how to network effectively and advance your career and personal life.

StartUp, hosted by Alex Blumberg and Lisa Chow.

If you’re an entrepreneur, there is no excuse not to be listening to StartUp, the award-winning business podcast from Gimlet Media. The show’s talented hosts come from incredible radio shows like Planet Money and This American Life and bring a top-notch level of storytelling to the show, which provides behind the scenes looks at what it is actually like to start a company. Now on the fourth season, StartUp is one of those business podcasts that even people not interested in business will get a kick out of.

The Whole Whale Podcast, hosted by George Weiner.

One of the best things about podcasts is the wide variety of niche shows available that go in-depth into fascinating topics. One of those shows is the Whole Whale Podcast, which shares stories about data and technology in the non-profit sector. You’ll get detailed analysis, expert knowledge and can hear from a long list of social impact leaders from Greenpeace, Change.org, Kiva, Teach For America, and more.

Social Pros Podcast, hosted by Jay Baer and Adam Brown.

Navigating the surplus of social media guides online can be a nightmare, so look no further than Social Pros. Recent episodes talk about reaching college students on social media, the rise of messaging apps, and making better video content for Facebook. Plus, there are great case-studies with companies doing social right, like Kellogg’s, Coca Cola and Lenscrafters.

Entrepreneur on Fire, hosted by John Lee Dumas.

One of the original entrepreneurship shows, Entrepreneur on Fire has logged over 1,500 episodes with successful business leaders sharing tips, lessons and advice learned from their worst entrepreneurial moments. Sometimes humorous, sometimes heartbreaking, always inspiring, this show is sure to have at least one interview with someone you can learn from.

The $100 MBA, hosted by Omar Zenhom.

Think of The $100 MBA as a full-fledged business program in snack-sized portions. The daily ten minute business lessons are based on real-world applications and cover everything from marketing to technology and more. Cue this show up on your commute to or from work and watch your knowledge grow.

This Week in Startups, hosted by Jason Calacanis.

This is your audio version of TechCrunch, Gizmodo, or dare we say The American Genius. Each week, a guest entrepreneur joins the show to talk about what is happening in tech right now. You’ll get news about companies with buzz, updates on big tech news and even some insider gossip.

The Side Hustle Show, hosted by Nick Loper.

This is the show if you want answers for the big question so many entrepreneurs face. How do I turn my part-time hustle into a real job? Featuring topics such as passive income ideas, niche sites, and self-publishing, host Nick Loper is upfront and honest about the tough world of side hustles. The show features actionable tips and an engaging energy, and may just be that final push you need to grow your gig.

Back To Work, hosted by Merlin Mann and Dan Benjamin.
Focused on the basics that you don’t think about, Back To Work looks deep into our working lives by analyzing things like workflow, email habits and personal motivation. Somewhere between self-help, and business advice, Back To Work takes on a new topic relating to productivity each week.

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Business Marketing

Why your coworkers are not your ‘family’ [unpopular opinion]

(MARKETING) “I just want you to think of us as family,” they say. If this were true, I could fire my uncle for always bringing up “that” topic on Thanksgiving…

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family coworkers

The well-known season 10 opener of “Undercover Boss” featured Walk-On’s Bistreaux & Bar. Brandon Landry, owner, went to the Lafayette location where he worked undercover with Jessica Comeaux, an assistant manager. Comeaux came across as a dedicated employee of the company, and she was given a well-deserved reward for her work. But I rolled my eyes as the show described the team as a “family.” I take offense at combining business and family, unless you’re really family. Why shouldn’t this work dynamic be used?

Employers don’t have loyalty to employees.

One of the biggest reasons work isn’t family is that loyalty doesn’t go both ways. Employers who act as though employees are family wouldn’t hesitate to fire someone if it came down to it. In most families, you support each other during tough times, but that wouldn’t be the case in a business. If you’ve ever thought that you can’t ask for a raise or vacation, you’ve probably bought into the theory that “work is a family.” No, work is a contract.

Would the roles be okay if the genders were reversed?

At Walks-Ons, Comeaux is referred to as “Mama Jess,” by “some of the girls.” I have to wonder how that would come across if Comeaux were a man being called “Daddy Jess” by younger team members? See any problem with that? What happens when the boss is a 30-year-old and the employee is senior? Using family terminology to describe work relationships is just wrong.

Families’ roles are complex.

You’ll spend over 2,000 hours with your co-workers every year. It’s human nature to want to belong. But when you think of your job like a family, you may bring dysfunction into the workplace.

What if you never had a mom, or if your dad was abusive? Professional relationships don’t need the added complexity of “family” norms. Seeing your boss as “mom” or “dad” completely skews the roles of boss/employee. When your mom asks you to do more, it’s hard to say no. If your “work mom or dad” wants you to stay late, it’s going to be hard to set boundaries when you buy into the bogus theory that work is family. Stop thinking of work this way.

Check your business culture to make sure that your team has healthy boundaries and teamwork. Having a great work culture doesn’t have to mean you think of your team as family. It means that you appreciate your team, let them have good work-life balance and understand professionalism.

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Business Marketing

Market your side hustle with these 6 tips

(BUSINESS MARKETING) It can be hard to stand out from the crowd when you’re starting a new side hustle. Here are some easy ways to make your marketing efforts more effective.

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Side hustles have become the name of the game, and especially during these turbulent times, we have to get extra creative when it comes to making money. With so many of us making moves and so much noise, it can be hard to get the word out and stand out when sharing your side hustle.

Reuben Jackson of Big Think shared five ways that you can market your side hustle (we added a sixth tip for good measure), and comment with your thoughts and ideas on the subject:

  1. Referrals: Don’t Be Afraid to Ask!
    If you’re going to make a splash, you have to be willing to ask for favors. Reach out to your network and ask them to help spread the word on your new venture. This can be as simple as asking your friends to share a Facebook post with information that refers them to your page or website. Word of mouth is still important and incredibly effective.
  2. Start Where You Are
    Immediately running an expensive ad right out of the gate may not be the most effective use of your (likely) limited funds. Use the resources you do have to your advantage – especially if you’re just testing things out to see how the side hustle goes in the real world. You can do this by creating a simple, informational landing page for a small fee. Or, if you’re not looking to put any money into it right away, create an enticing email signature that explains what you do in a concise and eye-catching way. Check out these tools to create a kickin’ email signature.
  3. Gather Positive Reviews
    If you’ve performed a service or sold a product, ask your customers to write a review on the experience. Never underestimate how many potential customers read reviews before choosing where to spend their money, so this is an incredibly important asset. Once a service is completed or a product is sold, send a thank you note to your customer and kindly ask them to write a review. Be sure to provide them with links to easily drop a line on Yelp or your company’s Facebook page.
  4. Be Strategic With Social
    It’s common to think that you have to have a presence on all channels right away. Start smaller. Think about your demographic and do some research on which platforms reach that demographic most effectively. From there, put your time and energy into building a presence on one or two channels. Post consistently and engage with followers. After you’ve developed a solid following, you can then expand to other platforms.
  5. Give Paid Marketing A Shot
    Once you’ve made a dollar or two, try experimenting with some Facebook or Twitter ads. They’re relatively cheap to run and can attract people you may not have otherwise had a chance to reach out to. Again, the key is to start small and don’t get discouraged if these don’t have people knocking your door down; it may take trial and error to create the perfect ad for your hustle.
  6. Go Local
    Local newspapers and magazines are always looking for news on what local residents are doing. Send an email to your town/city’s journal or local Patch affiliate. Let them know what you’re up to, offer yourself for an interview, and give enticing information. The key is doing this in a way that your hustle is seen as beneficial to the public, and is not just an ad.

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