Connect with us

Business Marketing

Running a Successful Real Estate Business Part Un: Kill Overhead

Published

on

The Series

In reading the title, you are probably thinking that I am about to go all Deepak Chopra on you and unleash some infomercial guru wisdom. But I am no guru, nor am I trying to be.  I am just an avid student of good business. While in the presence of a successful enterprise, be it a small restaurant, a Mom and Pop print shop or a multi national corporation, I often find myself wondering about what makes them tick. In between CNBC specials on Walmart, Coke or Home Depot, I ponder whether there is a  set of principles that they all follow to one degree or another. What I am about to share with you are lessons being learned as we speak in running our own real estate business. And since AgentGenius hosts some of the brightest minds in the real estate landscape, my hope is that in our discussion, my own education in the art of running a business on all cylinders can be furthered as well.

RASREB Series Part 1: It’s what you keep

Most keys to success in any business are very simple, bordering on obvious. So much so that they are often followed with the obligatory “duh”. But as simple as they are, you’d be surprised how many pros do not (can not, will not) follow them. Instead they will do everything in their power to complicate things just so they don’t ever have to cross that ever dreaded line to actually do something. The first key to running a successful real estate business goes a little something like this:

In the real estate business, it’s not what you make, it’s what you keep. Kill all the overhead that’s not necessary to run your business and you will see it flourish and last.

Overhead is the ultimate double edged sword in any business. If kept slim and under control, it gives your revenues room to breathe and grow but if not, it can become cancerous and lead to the eventual demise of the business. When business is good, revenue wise, overhead operates under the radar and goes mostly unnoticed as the business owner is concentrated on counting all the cash coming in. So all the excessive rent space, useless money pits that are some marketing campaigns, and admin employees that are working full time for Facebook are rationalized by the money windfall into the company’s coffers. But when the times get tough and business slows, the business owner gets in a cost cutting mood but it’s often too late as the business bleeds money on a monthly basis.

Get it together

Enough with the generalities – What can you specifically do in 2010 to get your overhead under control?

Rent

I know I’m going to raise some eyebrows with this one, but since that’s never stopped me before, here I go. In my opinion, 80-90% of actively practicing real estate agents pay way too much for rent to the tune of 40-50%. They say it has to do with “what their clients” expect of them but that’s pure BS. Most of the clients agents do business with don’t even see the office of the agent. You typically meet Buyers at the property you are going to show them and Sellers at their home. It’s not about the clients’ expectation – it’s about their expectation of themselves. That’s how overhead typically gets rationalized through entitlement mentality: I deserve to have a ______ or I’ve earned the right to drive a ______. The quickest way to put 5-10 grand in your pocket in 2010 is to take a long hard look at your office needs – step outside of yourself for a second and view the situation as a businessperson. Do you really need 2000 SF or could 1200 SF do the job just right? Are you really getting any walk-in traffic in that high rent area or could you move out a little farther and cut your monthly rent significantly? On the flip side, I am not a believer in swapping for a home office. The economics of it make a lot of sense but the logistics doesn’t. As you become more and more successful, you work with more and more people and your probability of running into a weirdo grows. So, keep business and home separate if you can help it.

Marketing

This is a tough one, since we are constantly bombarded with new and improved ways to market ourselves and our companies. The urge to try the latest and greatest all the time is real and quite frankly, we wouldn’t have found some of the greatest products we leverage today if we hadn’t taken a chance on them first. But that does not mean that you string nonperforming tools and services along every month just because some work and some don’t. Cutting your overhead is about eliminating waste. Give products just enough time to prove themselves but remember that you don’t owe them any loyalty if they don’t respond with performance.  One disturbing phenomenon I have noticed in real estate is what I call “defensive spending”.  When posed with the question “what do you do to earn your commission”, agents get into a defensive mode that leads to hourly employee thinking. They start offering “marketing services” to Sellers that they know damn well don’t do anything to sell a home but justify it by stating that “although it doesn’t work, Sellers like it”. Newsflash: Wide majority of Sellers, pay for results, not effort. If you spend every waking hour of your day at the Seller’s home trying to sell it but couldn’t, you’re as useless in their eyes as the agent who did nothing and didn’t sell it. Those people that don’t think you are worth the money you earn, will not change their opinion regardless of how much you do. So focus on marketing that produces tangible results and cut what does not work. Depending on what your monthly marketing budget, this could save you from $1200-$5000/year or more.

Staff

Have you ever heard a business owner very proudly state they have X number of people working for him/her? I call that headcount ego and I learned to disregard it from The Millionaire Real Estate Agent. Most of the agents featured in that book didn’t have a huge staff – they just had a very efficient one that new their role and executed it perfectly. During boom times it’s easy to get carried away and overhire. Soon, you have positions overlapping and double the amount of people doing half the work. If you are a soloprenuer and thinking about adding an assistant, do so when it’s absolutely necessary. And don’t add to your staff until both you and your assistant are up to here with work. If you already have staff in place, take a look at the structure of your business and look for ways you can have the same people do more or less people do the same amount of work.

Debt

Last but not least, whatever you do, don’t become an “If only” agent. This is the pro that constantly states: “If only, I could have enough money to do that huge Adwords or Radio or TV campaign”. What eventually follows is debt and behind the corner from there failure resides. Here’s a simple rule of thumb: If your business has not generated enough money to purchase a marketing campaign that would send it to that next level, it’s not ready to handle that next level. The only thing worse than not having any clients, is having lots of them that think  you ‘re an incompetent douche. Take my word for it – Never take on debt to further your business because it will cause the opposite effect more often than not. If you do have business debt, think about a strategy to take care of it and step off the rat wheel.

Thoughts?


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...

Continue Reading
Advertisement
18 Comments

18 Comments

  1. BawldGuy

    December 4, 2009 at 11:10 am

    Any thoughts? Are ya kiddin’ me? You’ve essentially chronicled my professional learning curve. Though some of what you say doesn’t apply totally to the investment side of the biz, conceptually you’ve hit ground zero.

    Almost all local clients visit my office, as it should be. My office, therefore, must meet a minimum standard of what clients expect. We do that, and with a budget.

    Marketing? OMG have I ever screwed the pooch on there. Mea culpa. But gimme a pass on that one, as I was an Old Schooler doin’ his best to make the transition from 1969 to the 21st century — not to mention while trying to operate in the new virtual world. No kiddin’, I’ve sent over a quarter million over the falls for bupkis results. I speak broken internet-speak now, so I’ve learned where to spend for what results. Still sittin’ in the front of the class though, as I’m barely passin’ with a C- I think. 🙂

    Good stuff, Erion.

  2. Janie Coffey

    December 4, 2009 at 11:15 am

    Great great blog post!
    Last year we chopped our office rent by 2/3! This accomplished 1) less stress, 2) more flexibility, 2) more money for the things that really count (ie marketing and debt reduction). It was the best thing we ever did. I tell everyone I see struggling, that you need to just cut what isn’t necessary for the end result. Kill the fluff. I am glad you pointed it out so clearly! Just in time for 2010 business planning.

    Oh, and Bawldguy, you made a stunning transition!

  3. BawldGuy

    December 4, 2009 at 11:28 am

    Thanks Janie, but you only see the shiny paint and gleaming chrome. 🙂 It’s the power train I’m workin’ on now.

  4. Rob McGuirt

    December 4, 2009 at 1:02 pm

    Good points. I opened my own office, via a virtual “pay as you use” office space. Fully staffed with reception, conference rooms, break area, color copier, etc…. Cut out my former brokerage fees for office space. Went from $1000/mo to $65/mo.

  5. Josh Ferris

    December 5, 2009 at 1:34 am

    Having gone from a traditional office brokerage to a virtual one back to a traditional office again I can say that offices are a huge waste of space. I meet my clients at our office occasionally but more often than not I meet them at the sales office of my builder clients. Great article Erion!

  6. Ken Brand

    December 5, 2009 at 2:03 pm

    WISE counsel, especially the part about, analyze and act as an offense not after fit-as-hit-the-shan, gangrene has set in and it becomes a defensive amputation.

    Great stuff!

  7. JR of Sun City Real Estate

    December 6, 2009 at 10:10 pm

    “don’t become an “If only” agent” This is what greatly struck me in your post. Thanks for all the insights!

Leave a Reply

Your email address will not be published. Required fields are marked *

Business Marketing

Snapchat’s study reveals our growing reliance on video

(BUSINESS MARKETING) Snapchat released a report that shows some useful insights for future video content creation.

Published

on

Snapchat's video

Snapchat is taking a break from restoring people’s streaks to publish a report on mobile video access; according to Social Media Today, the report holds potentially vital information about how customers use their mobile devices to view content.

And–surprise, surprise–it turns out we’re using our phones to consume a lot more media than we did six years ago.

The obvious takeaways from this study are listed all over the place, and not even necessarily courtesy of Snapchat. People are using their phones substantially more often than they have in the past five years, and with everyone staying home, it’s reasonable to expect more engagement and more overall screen time.

However, there are a couple of insights that stand out from Snapchat’s study.

Firstly, the “Stories” feature that you see just about everywhere now is considered one of the most popular–and, thus, most lucrative–forms of video content. 82 percent of Snapchat users in the study said that they watched at least one Snapchat Story every day, with the majority of stories being under ten minutes.

This is a stark contrast to the 52 percent of those polled who said they watched a TV show each day and the 49 percent who said they consumed some “premium” style of short-form video (e.g., YouTube). You’ll notice that this flies in the face of some schools of thought regarding content creation on larger platforms like YouTube or Instagram.

Equally as important is Snapchat’s “personal” factor, which is the intimate, one-on-one-ish atmosphere cultivated by Snapchat features. Per Snapchat’s report, this is the prime component in helping an engaging video achieve the other two pillars of success: making it relatable and worthy of sharing.

Those three pillars–being personal, relatable, and share-worthy–are the components of any successful “short-form” video, Snapchat says.

Snapchat also reported that of the users polled, the majority claimed Snapchat made them feel more connected to their fellow users than comparable social media sites (e.g., Instagram or Facebook). Perhaps unsurprisingly, the next-closest social media platform vis-a-vis interpersonal connection was TikTok–something for which you can probably see the nexus to Snapchat.

We know phone use is increasing, and we know that distanced forms of social expression were popular even before a pandemic floored the world; however, this report demonstrates a paradigm shift in content creation that you’d have to be nuts not to check out for yourself.

Continue Reading

Business Marketing

Technology is helping small businesses adapt and stay afloat

(BUSINESS MARKETING) Small businesses need to utilize digital platforms to adapt their businesses during COVID-19, or else they may be left behind.

Published

on

small businesses new tech

While many may not have imagined our present day back in March, and to what extreme we would be doing things “remotely” and via “hands-free contact”, we have to give some credit to small business owners who remain flexible and have pivoted to stay afloat. They deserve major credit on adaptations they have made (and possibly investments) in new technology (ordering online, online payments) especially at a time when their in-person revenues have taken a hit.

There are various marketing buzz words being used lately to say “let’s keep our distance”, including: curbside, to-go, hands-free, no contact, delivery only, order via app, social distancing and #wearamask.

The thing is, if you really think about it, small businesses are always in evolution mode – they have to pay attention to consumer consumption and behaviors that can shift quickly in order to stay relevant and utilize their marketing and advertising budgets wisely. They heavily rely on positive customer reviews and word of mouth recommendations because they may not have the budget for large scale efforts.

For example, we use Lyft or Uber vs calling an individual cab owner; we order on Amazon vs shopping at a local mom-and-pop shop; we download and make playlists of music vs going to a record or music store. Small business owners are constantly fighting to keep up with the big guys and have to take into account how their product/service has relevance, and if it’s easy for people to attain. In current times, they’ve had to place major efforts into contactless experiences that often require utilizing a digital platform.

If stores or restaurants didn’t already have an online ordering platform, they had to implement one. Many may have already had a way to order online but once they were forced to close their dining areas, they had to figure out how to collect payments safely upon pickup; this may have required them to implement a new system. Many restaurants also had to restructure pick up and to-go orders, whether it was adding additional signage or reconfiguring their pick up space to make sure people were able to easily practice social distancing.

According to this article from the U.S. Chamber of Commerce, “Studies have shown that 73% of small businesses are not aware of digital resources, such as online payment processing tools, online productivity tools, e-commerce websites, online marketing and other tools, that can help them reach customers around the world. If small businesses had better access to global markets, it could increase the GDP of the United States by $81 billion and add 900,000 new jobs. During the pandemic, this could also mean the difference between thriving and closing for good.”

There are some larger corporate technology companies offering ways to support small businesses whether it’s through small business grants from Google, resources and grants from Facebook or Verizon giving them a break on their telecom bill. The challenge with this may be whether or not small business owners are able to find time from their intense focus on surviving to applying for these grants and managing all that admin time. Many business owners may be focusing on what technology they have and can upgrade, or what they need to implement – most likely while seeing a loss in revenue. So, it can be a tough decision to make new technology investments.

It does seem like many have made incredible strides, and quickly (which is impressive), to still offer their products and services to customers – whether it’s a contactless pay method, free delivery, or even reservations to ensure limited capacity and socially distanced visits. There are still some that just haven’t able to do that yet, and may be looking at other ways to take their business to a wider audience online.

We would encourage, if you can, to support small businesses in your community as often as you can. Understandably there are times that it’s easier to order on Amazon, but if there is a way you can pick up something from a local brewery or family-owned business, this may be the lifeline they need to survive and/or to invest in new technology to help them adapt.

Continue Reading

Business Marketing

There’s a shortage of skilled workers, so get learning

(BUSINESS MARKETING) COVID-19 may end up justifying training funds for lower-class workers to learn new skills. Skilled workers are desperately needed right now.

Published

on

skilled worker

The COVID-19 pandemic (yes, that one) has ushered in a lot of unexpected changes, one of the which is most surprising: An increased call for skilled workers — a call that, unfortunately, requires a massive retraining of the existing workforce.

According to the New York Times, nearly 50 percent of Americans were working from home by May; this was, reportedly, a 15 percent increase in remote work. The problems with this model are expansive, but one of the greatest issues stems from the lack of training: As employees of lower-class employment transitioned to working online, it became increasingly evident that there was a shortage of skilled workers in this country.

The Times traces this phenomenon back to the Great Recession; Harvard University’s Lawrence Katz points to some parallels and insinuates that this is an opportunity to elevate the lower class rather than regressing, and it seems fair to put the onus of such elevation on lawmakers and senators.

Indeed, Congress has even addressed the issue of skill equality via “bipartisan support” of a $4000 credit for non-skilled workers to use toward skill training. For Congress to come together on something like this is relatively noteworthy, and it’s hard to disagree with the premise that, given the invariable automation wave, many of our “non-skilled” workers will face unemployment without substantial aid.

COVID-19 has accelerated many trends and processes that should have taken years to propagate, and this is clearly one of them.

Supporting laborers in developing skills that help them work within the technology bubble isn’t just a good idea–it’s imperative, both morally and economically speaking. Even middle-class “skilled” workers have had trouble keeping up with the sheer amount of automation and technology-based skillsets required to stay competent; when one considers how lower-class employees will be impacted by this wave, the outcome is too dark to entertain.

It should be noted that non-skilled workers don’t necessarily have to scale up their training in their current fields; the Times references a truck driver who pivoted hard into software development, and while it may be easier for some to focus on their existing areas of expertise, the option to make a career change does exist.

If we take nothing else away from the time we’ve spent in quarantine, we should remember that skilled labor is integral to our success as a society, and we have a moral obligation to help those who missed the opportunity to develop such skills fulfill that need.

Continue Reading
Advertisement

Our Great Partners

The
American Genius
news neatly in your inbox

Subscribe to our mailing list for news sent straight to your email inbox.

Emerging Stories

Get The American Genius
neatly in your inbox

Subscribe to get business and tech updates, breaking stories, and more!