Did you know that there are additional profit centers you can add to your business from the inside? In this day two video of the Broker Owner Challenge, we’re going to find out how to increase production right from inside your brokerage. We’ll chat with Mike Bernier to get some insight into their experiences so you can apply them in your own business.
The Lifeline Of A Brokerage
Increasing per person production pushes all of a brokerage’s other financial agendas. A lot of people go from being in production and being an agent to becoming a broker because they don’t want to have to grind it out anymore to sell real estate. The rude awakening is that you still have to grind it out to recruit.
When you’re making good money in production, you might think you’re going to step out of that and make money in brokerage. However, nobody tells you that for the next couple years of your life, it’s going to be miserable. You’re probably not going to make the money you did—and you’re still in production.
Recruiting is the lifeline of a brokerage. It’s the most predictable way to actually earn more money. When you know your per-agent revenue per year, you can scale your business knowing and counting on those numbers. This allows you to swing the bat a little bit harder in different areas because you know what you can expect. It also helps you make the right decision for growing your company.
Knowing Your Numbers
We’ve has coached people that have 100 to 200 agents—and they still don’t know their actual revenue per agent. This is like trying to build a deck without a blueprint. You don’t know what your schematics look like when you don’t know your numbers.
When you know your numbers correctly, you can make plans. For example, you might discern that when you hire 10 more people and retain them, you will make X amount of dollars. You’ll then be able to plan where to spend that money in your budget. Without those numbers, it’s hard to do that. Knowing these numbers should be one of your primary focuses.
Focus On Recruiting
While it’s important to know your numbers, it’s vital to make sure that you’re always focusing on recruiting. Recruiting is a team full-court approach. That means it’s not just about doing one thing really well. The focus should be placed on how you can do more recruiting.
Maybe you can hire in-house callers to make pitches for you. A really strong outbound approach could get you an additional 5-6 appointments per day. Mailers, online targeting, socials, and training are other great options to stack on top of each other to create positive growth.
Creating decoy brands is another strategy that can allow you to get in front of your target audience. Mike has a few decoyed brands inside his business, including LOUD Media. When creating the San Diego Real Estate Agent Mastermind, they started to email agents from LOUD Media urging them to come to the event. It was sponsored by Big Block and a few other real estate vendors, and they were able to get between 20 to 60 people in the room.
This gave Mike and his team the ability to give them training—arguably better than they were getting from their current broker. At the end, a short presentation about Big Block began to have positive compound effects on their recruiting.
Putting The Systems In Place
Recruiting is truly a business within a business. It’s not just about posting a job ad. Rather, having systems in place is a key component. For example, when our team was doing outbound dialing, they would send people several reminders through text and video. They would even send them a map of the complex where their office is located, showing them how to find it.
For those they were heavily trying to recruit, they would even send a driver to go pick them up and bring them to the office if they wanted. There are so many different systems that can be put in place, from outreach and recruiting to follow-up and onboarding.
Of course, remember that if you’re trying to recruit three agents a month, your strategy will be different than if you’re recruiting 30. If you’re trying to recruit on a large volume, you need deep systems, layered marketing, and extensive follow-up. If you want to go big, you have to build a big system—but that’s where your best investment is.
Tracking Per Person Profitability
When it comes to tracking growth and revenue, there are a few formulas that can give you the numbers you want. You can take your current production and agent count from one quarter ago to figure out per-person profitability. Some programs can calculate, track, and report on what each agent brings in revenue-wise.
These programs allow you to also average your numbers. If you have 100 agents with different revenues all over the map, you can average their revenues. Mike employes a hybrid approach. He tracks revenue per agent, how long they stay with the company, and how many agents have been recruited in the last year or month.
Mike and his team are constantly adjusting different formulas to figure out how much revenue they’re going to make per year—which is crucial in budgeting and projections. They land within 3-5% every single year, but each brokerage has to determine what works for them. Software that tracks agent revenue is helpful—and Sweet Assist can also help with these backend logistics.
Finding Agents To Recruit
One of the questions that often comes up in recruiting is where to get a list of agents—besides a local MLS board. Using a combination of broker metrics through ShowingTime and MarketView Broker, you can build custom lists. If you’re going to try to scrape a list off of Facebook, you need to have people opt-in. You have to give them something so they voluntarily provide their email address to obtain what you’re offering.
The beauty of recruiting and getting lists that have full data is that you have names, home addresses, email addresses, and phone numbers. This allows you to build powerful custom lists to target a specific group. You can also use a skip tracing program to get home mailing addresses. While it might be state-specific, ShowingTime also provides home addresses so you know you’re not just sending mail to the office or a random admin.
Nobody Is Broker Than The Broker
Mike Bernier’s brokerage has 600 real estate professionals averaging 9.5 units sold per agent. This number is important because they need to know what the true revenue per agent is. The old saying nobody is broker than the broker. Broker profitability is down between 4- 5%, and team profitability is down around 15% to 35%.
Based on the way teams are structured, there’s downward pressure on agent commissions and commission splits. Mike got licensed back in 1998 when it was normal for agents to pay 50% splits to a broker and get almost nothing except for some marketing material. This percentage went down to 25, and then 20, and then 10—which was great.
Flat fee models, though, are now more common. This means there’s more pressure to have brokers make less money and for agents to keep more. This makes it harder for brokers to make money.
Four Key Ways To Create Revenue
To combat this, brokers need to be more creative in the way they create revenue. Regardless of the model, there are four basic areas of revenue generation. One is recruiting. If you know the deals per agent that you have, you can figure out how much you’re bringing in on average for each transaction. For example, if you’re bringing in $10,000 per agent in your organization and want to make $100,000 additional revenue for the year, you’ll need to recruit 10 more agents and retain them.
Agent optimization is another place to look at for revenue generation. Agents can be optimized in terms of splits. If you’re looking at doing a split model and are getting 20% splits, you’re optimizing the ahem to do more transactions than the previous year.
You can also use vendors partners and broker products to create revenue and make money on internal products. Lastly, ancillary income such as respite and non-respite businesses like mortgage title, home inspection, radon mitigation, and construction can make additional revenue.
Making Money Outside Of Commissions
When you go to the airport, they have all kinds of services in the same small area—including restaurants, coffee shops, electronic stores, and more. The reason this works is that they have a captive audience. Similarly, how many different businesses touch what brokers do in real estate?
Look at the economic impact per real estate transaction. There are commissions, mortgages, title insurance, moving companies, construction companies, transaction management, marketing services, landscaping, home inspection, home warranty, construction repair, and the list goes on. There are so many different people involved in transactions and appraisals.
Mike realized that in brokerage models, the focus is on the bottom 10%. Being focused so much on commissions, it’s easy to forget all the different places that money can be made outside of that. What about the economic impact on the agents’ business themselves?
How many things are they buying and paying for from different sources other than the brokerage, like marketing services, lead generation technology, coaching and training, admin assistants, commission advances, swag, showing agent support, and more? Agents are spending money outside of the organization and buying it somewhere else. This is when Mike decided to create a national ecosystem.
Building A National Ecosystem
Mike and his partner had an in-depth conversation about creating a place that nobody wants to leave, just like the airport. What if they were to create a national ecosystem? What would the ecosystem do? T would create more revenue for the brokerage.
If agents adopt a brokerage’s systems, products, and partners, the broker makes more money. Outside of monetary value, this credibility adds to the revenue, helps recruiting and retention, and builds influence. Introducing this ecosystem can also helo you gauge the current importance and influence you have with your agents.
If you introduce a product or piece of technology and tell your agents they should invest in it, do they believe you? Will they do it? Your adoption rate is based on your influence and reach, and this is also vital in recruiting and retention.
If they really like the products you have, outside of your organization they’d have to rebuild that same system elsewhere. The thing about agents is they don’t want to sit and do business build-up. They want to go sell property.
Potential Vendors And Partners
When it comes to potential vendors and partners, things can get complicated. Whether it comes to tech vendors, home inspectors, and home warranty companies, everybody wants your agents. However, why are you allowing them to build their business on the backs of yours? If you’re already paying so much money to run a labor-intensive brokerage, why throw more money to vendors? And if you do, how to you choose who you’re going to work with?
The first thing you want to do is look for solid referrals. If you’re already working with vendors in different sectors of the market—like a great stager, construction person, and handyman—then leverage who you know. If you get referrals from your agents, make sure they’re well vetted.
Your vetting process should be important, as anything less than top-notch is going to affect your ecosystem. Because you need to focus on your influence with your agents, don’t bring in people that can’t deliver or aren’t up to the task. If they fail miserably in front of you and your agents, how many times will your agents use the vendors and the products that you recommend?
Even if you have vendors promising to add value to your business, make sure they have the capacity to scale. Once you open up floodgates and get agents to adopt a service, can the vendor keep up? If they don’t have a scale plan for their business, you probably don’t want to work with them.
Another important part of the vetting process is quality control. Ask a vendor how they keep quality control as a top priority as they grow. Do they have systems in place to track and measure it?
For example, let’s say there’s a mover that’s super excited to work with you. They might assure you that they’ll give you some sort of percentage of what they’re bringing in revenue-wise, but they don’t have a solid way to track it. You’d have to be able to know and trust what they’re telling you.
Today, there’s software and systems to track anything. You don’t want to work with people that expect to have you grow their business for them while they do nothing but show up and get paid. There have to be clear expectations. What do they bring to the table? How will you grow together? If that’s not clear, it needs to be before you partner with them.
You also need to find out what they’re willing to pay. Some companies say they’ll give you 15%, 20%, or 50% of their company. Some say they’ll pay you a flat fee per month. Some might offer to pay you a percentage per revenue that you make from your agents. While you can strike different deals in different categories, make sure to have that conversation upfront.
Another part of partnering with a vendor is asking questions. Some of the things you need to know from those you partner with are:
- How do you handle a problem?
- What’s your escalation process when you’re getting complaints or something’s not going right? Do you have a system and process in place?
- Are you consistent and reliable so that everybody wants your business?
- Once we have your business, are you going to show up every time?
There are also questions related to your value proposition to the vendor. This includes:
- Are you going to be marketing their services for them?
- Are you going to be in front of your agents on different communication channels about these vendors?
- Are you going to bring vendors into your sales meeting and training?
- Are you going to help connect them with your other vendors so they can grow each other’s business?
- Are you going to do feature spotlights or force integrations on your team forced so they use your providers?
When you have a large business, coaching is key. Helping smaller businesses figure out how to grow is a huge value prop of why they want to work with you. Providing a system where vendors and partners can connect with and interact with each other helps everyone to grow so everyone is successful
A Disaster Recovery Plan
Part of proper vetting includes a contingency plan if the vendor doesn’t deliver. If somebody really bites the dust, what do you do? Do you have somebody else on deck? Sometimes brokers have an instinct to defend their relationship with a vendor or brush problems under the rug. It’s best to take full responsibility, identify the problem, and fix it.
If a problem can’t be fixed and the vendor isn’t the right fit, what’s your disaster recovery plan? Do you have to pay money to an agent, buyer, or seller for something that happened? Having a backup is key for every single industry or product that you partner with. If they fail miserably, have options in place for recovery. Your profit centers should be run like a separate business that’s controlling profits from different places.
Marketing Your Vendors
If you don’t have a great marketing plan to get your vendors more business, you can’t justify what you want to charge them or the percentage of their company you want to own. Additionally, the more agent adoption you get, the better. The more agents that trust your products, advice, and your ability to grow their business, the more adoption is going to grow. In turn, the more adoption, the more money you’re going to make and the bigger better vendors you will attract. down down the road layered approach.
Just like you need a layered approach to recruiting, the same applies to marketing your vendors, profit centers, and internal products. You need to keep pointing eyeballs back to them because it’s hard to keep people’s attention. If you’ve ever opened your email and have seen how many people are trying to sell you on different things every day, agents are getting the same.
Just like large companies, your focus should be on getting customers to return, not just acquiring new ones. Although a lot of brokers treat their agents like a pain in the ass, you need to treat them like your customer. They’re bringing in revenue, and you wouldn’t treat your buyer or seller half as bad as you might treat your agent. Keeping agents happy will make them want to spend more money on your products.
Another key is to have a forced point of entry for your vendors. This is crucial. For example, using Sweet Assist allows brokers to build a transaction management system for their team. This puts every transaction, listing, 1099, agent tool, CRM, and anything else all in one place.
This is a forced point of entry because they can’t upload a listing unless they go into Sweet Assist. Once they’re in the system, you can start hitting agents with marketing messages to stay in front of them. Regardless of the software or system you use, forcing an entry into one point is crucial.
Leveraging and building internal products can also help build revenue. For example, using a sophisticated platform for lead generation provides internal resources to the team. You can also use products like Ylopo that can be split off for specific agents. If somebody wanted to retarget their entire SOI with Ylopo Facebook ads, they can do so without paying the $1,000 minimum. Rather, they can pay the brokerage to run it for a $100 tech fee.
Mike’s team also uses an internal call center, where their agents can dump all of their leads into it from signs, calls, open houses, Facebook ads, realtor.com, or whatever they’re using. They then do all the incubation and lead nurturing, giving it back to them for a split. Lead generation is great for internal profits because again, it can be broken into pieces and offered individually to agents.
This same strategy works with CallAction and ProQuest. Instead of paying $700 to $800 per agent, they can pay the brokerage $100 and have full capability of using the service. The brokerage can be connected to the back end, which is what agents don’t want to do that. If you do that for them and charge a fee, most of the time they’ll say yes.
Another vendor strategy is to partner with commission advance companies. You can negotiate and get better rates—and this is super important. If you can’t negotiate a better rate on something, then the agent can go directly to get that. You need to negotiate better rates and run it for them so that it’s easier to use and less expensive when they get it from you. This is how you get adoption.
For example, virtual assistants from the Philippines provide inexpensive services for a team. At $6.00 per hour cost for you, these services can be farmed out for $25 per hour. You can also farm out other work, like marketing flyers, open house items, and Facebook ad runs. Transaction coordinator work can be on an as-needed basis per hour, rather than an assistant full-time at $15 to $20 an hour.
These strategies allow you to leverage internal systems externally to your agents. If you’re recruiting for them and all they need to do is pay X amount of dollars towards the VA, it’s a value for both parties—and they don’t have to run it.
More Outsourcing Opportunities
If an agent wants lead capture for sign calls on a listing, you can keep a field team to make trips and charge the agent $100. Mike has a field team of old retirees that just want something to do, so they can drive around and make money themselves while providing value for the brokerage and agent.
Transaction coordinators can also be outsourced where the brokerage gets money or a piece of their business. Mike’s team also partners with a company that has an operator. This is perfect if you feel you can’t run the business yourself or with just an extra person or VA. A true operator is skilled and has deep knowledge of what they’re doing. They can build the systems out for you, and you just collect a piece of it. When you’re scaling transaction coordination for a large group of agents, an operator is ideal.
A business utility connection is another great value add. Mike’s team has built a system with a utility connection company where all utilities, mail forwarding, Direct TV service, and cable service can all be transferred independently of any work from the buyer or seller. They just need to click a couple of boxes and it’s done for them. It’s free for the client, free for the agent, and is paid by the service providers themselves to do the transfer.
Creating A Market Center
Let’s say your revenue per agent, based on GCI alone, is $6,000. You can start adding other things, like renting out building space to agents and lenders. Then, factor in your outsourcing and revenue-building opportunities. After that, what you’re bringing in for revenue is quite a bit over GCI.
If the GCI of each agent is $6,000 but you’re bringing in $7,200 per agent, that’s an extra $1,200 per agent. If you scale that over each agent, that’s a huge additional source of income every single year. This allows you to choose how you want to apply these funds to increase growth.
When you treat your business like a market center, you’ll have your agents’ attention and influence. You’re giving them deals better than they can get on their own and you’re helping them run their business. You’ll become more of an operator in their business, like an operations partner, which adds value that other brokers can’t compete with—independent of the commission split that you’re charging them. This will also increase retention.
How To Find Loyal Vendors
Many vendors are working with other real estate brokerages already. For example, a virtual tour photographer might be working with competing brokerages. Try not to be afraid of competition; if you’re a successful brokerage, you’ll probably be able to blow the competition out of the water and provide the vendor with more business.
Finding loyal vendors comes down to synergy. Do they like what you are doing? Do they believe in your mission statement? Do they love you? Do you give them so much business that they don’t have time for anybody else?
Good vendors are going to be working with your competition; that’s just the reality. What you don’t want, though, is for them to recruit away from you. Mike’s team had one vendor that recruited their vendor manager, a full-time person who just works on getting and managing vendors. In that situation, they stopped working with that company.
Most vendors won’t want to bite the hand that feeds them. If a vendor works at a company really focused on recruiting, you can have a separate agreement so they don’t solicit your agents. While you don’t usually need to worry about competition, you can always put extra agreements in place.
Offering Tech Products To Agents
As mentioned earlier, Ylobo is a great platform to offer services for agents. This includes listings and targeted ads, paid for with the $100 tech fee. Free options for agents, like no-cost CRM, increase adoption while providing opportunities for upsells later on. This also encourages agents to trust your products, making them willing to pay for other services in the future.
One example is RealScout, which normally costs agents $100 per month. By buying it for the entire company and offering it to agents for free, you can increase your recruiting and retention by providing a helpful tech product.
Revaluate is another amazing tool that uses predictive analytics. Every single contact you have in the platform gives you scary, Big Brother data licensed from some pretty big providers. Based on actual life events and not mortgage information, it can tell you the likelihood that someone’s going to move in six months.
Providing trusted products like these make agent start to rely on them. They’ll love it and won’t want to leave your brokerage.
Choosing The Right VA
When choosing to outsource VAs, it’s important to the right person. By going through a series of interviews and asking key questions, you’ll know who is right for you. For example, if a VA can tell you all about circle prospecting, how they’ve handled objections, how they got appointments, and what systems they use them, that’s a keeper. If you need them to make conversational calls, you can send them scripts and ask them to record a conversation to see how it flows.
Notable VA companies include Virtual Latinos, 123 Employee, and MyOutDesk. You can find people that are specifically trained in certain areas. So if you need a marketer or an IFA, these are all great solutions. Of course, you want to make sure to sprinkle your solutions out, not using one single route.
Remember that just because someone isn’t local, doesn’t mean they can’t have conversations. Mike has an appointment setter named Flo that sets recruiting appointments—anywhere from 5 to 10 every day. Most customers want to meet Flo when they come in, not even realizing she’s currently in the Philippines. It doesn’t matter if someone has an accent; if they’re competent, there shouldn’t be any problems.
Maxa Design is a program integrated into Sweet Assist. Similar to Canva, it allows agents to easily put together marketing materials. Even if it’s easy to do, most agents don’t want to sit down and figure out how to make a postcard, create a mailing list, and print out 100 to send.
When things are done for them, agents will be willing to pay. Whether that’s 20% of their commission or commission splits, these types of integrations give them options. Maxa Design can be custom built for your brand and brokerage. Agents can make open house signs, open house flyers, real estate signs, business cards, lists, social posts, and more.
Higher Compensation VS Profit Sharing
A question brokers often have is when to offer higher compensation versus profit sharing to agents. If you’re going to offer higher compensation, remember how this affects a team. In many traditional brokerage models, you could have 100 agents with 100 different plans. It’s impossible to keep up with, and often one will get jealous because somebody has something the other doesn’t. Everything’s hush-hush and secret.
If you’re going to work with a tiered system, make sure it’s transparent. Everybody should know about it, and there needs to be no discrimination. Of course, there’s no right answer to this. Your choice should be based on your model and what works for you—just make sure to make it into a system.
With all that information under your belt, it’s time to get to the challenge. You’re going to need to do two things. The first, if you’re not already, is to find a rescue attorney.
A rescue attorney can help you structure everything legally. Every state and area has different legal requirements and agreement language. It’s important to find someone in your area that knows local real estate laws and can get you set up. This is vital for terms and conditions
The second challenge is to add three additional revenue centers—either internally or externally—to your business in the next month. Make it a focus and a priority. If you don’t, you’re going to be focusing on that bottom percent of the commission.
Doing It Right
Another thing that’s important to remember is to do everything right. If somebody asks for our agreements, that’s a liability for us. For each state and local area, the laws are different. For everything we’ve talked about so far, if any of it is tied to any sort of RESPA or regulations, you should be talking to attorneys. There are great real estate attorneys that can support you in getting these things together to make sure you’re doing it the right way.
Outside of RESPA, you still have general corporate real estate attorneys. That means you may still have terms and conditions you need to abide by. Again, go through your attorneys with everything you do. Don’t try to play TV lawyer; get it done right. They will challenge you, question you, and push you not to do something. You don’t have to not do it, you just need to make sure you do it right. Make it legal and start making money on it.
Offering Higher Compensation vs Profit Sharing To Agents
Lastly, when should you offer higher compensation versus profit sharing to agents? If you’re going to do higher compensations, one thing about a lot of the traditional models that drive us crazy is that you have to have 100 agents and 100 different plans. It’s impossible to keep up with.
One agent may get jealous because somebody’s got something the other doesn’t. Everything’s hush-hush and secret. If you’re going to do something like that and it’s a tiered system, make sure it’s transparent. Everybody should know about it, and there’s no discrimination. You don’t ever want someone to point back at you and say someone’s got a better deal than them and they deserve something better. If you’re going to do it, make it systematic and make it visible.
As far as when it’s appropriate for profit sharing versus higher compensation, there’s no real right answer. You really have to look at your own model and see what works for you. Whatever you’re going to do, make it into a system.Read More ➔