Don’t you love it when every now and then you just happen to have the perfect answer to a question? That doesn’t often happen to me, but it did last November. I (along with about 25,000 other agents) was attending the National Association of REALTORS® annual conference in Las Vegas, and while I was there, my friend Michael Krisa caught up with me and we had lunch together. Little did I know he was going to ambush me with his video camera! (Hey, what are friends for, right?)

So here are the points I was t-t-trying t-t-to make in the video clip. (You’ve gotta love raw video!) By the way, the clip was originally posted by Michael on Real Blogging.

1. You must have a USP (Unique Selling Proposition). There are currently over 1.4 million REALTORS®, not to mention another million or so licensed real estate agents who are not members of the National Association of REALTORS®. Add that to all the unlicensed builder reps, property flippers, rent-to-own gurus, and FSBO experts, and you have a sea of people trying to practice real estate. What makes you different? Why should anyone do business with you? Well, if you are going to be successful in this business (or any other, for that matter), you must have a USP. If you haven’t developed your own reason why people should use you. Become the best at condos, retirement properties, golf properties, the best listing agent, the best at whatever! It’s just critical that you become the very best agent in some niche. That gives you a unique selling proposition.
2. You must have someone to sell to. You can have the best USP in the world, but with no customers, you are out of business. I’ve recently written extensively on that point. Click here to read more. You have to develop a strategy that will produce much more sales leads or customers than you can possibly handle. That gives you options and control. What if you want to fire a customer? (Ever had one of those?) If you don’t have enough business, you’ll end up spending time with customers you’d prefer not to. Or maybe you won’t be able to pick and choose the best customers and refer other less-desirable customers to other agents. So make lots of customers and get in control of your business. Being in control will give you freedom, and it will make your life much more enjoyable.
3. You must make up your mind to do the work. In the words of the Nike commercial, Just Do It! Many agents have a good USP. They might even have the tools in place to generate plenty of business. They just suffer from analysis paralysis. Some because of fear of rejection. Some due to laziness. Some are afraid of the hard work. Some fear the unknown. Whatever is holding you back, you owe it to yourself to Just Do It! Imagine your business with 50 transactions this year! Maybe 75 or 100! How big is your dream? It is achievable if you simply take these three steps. First, find your USP. Then, find people to sell to. Finally, just have the courage and the self-discipline to Just Do It!

In this installment, we’ll move on to the third thing you need to become a mega-producer in today’s real estate climate — the tools, strategies, and the discipline to manage all those low-cost leads for the time required to actually complete transactions with a large number of them.

I must confess that it’s very frustrating to see agents possess the very tools they need for their success and yet fail to take that last step — the step to making it all come together. I once was a struggling agent and nearly quit the business until I developed the lead capture gateway that quite literally turned my business around forever, so I’m very passionate about having the ability to generate as much business as you want or need to make your professional dreams come true.

And as the founder and CEO of a technology company that licenses state-of-the-art lead capture technology to agents all over the world, I am amazed at how many agents begin with the best intentions and then lack the follow-through to actually use that technology to make money. When I analyze why agents having the ultimate technology, then fail to succeed, I realize it comes down to just a few things: tools, strategy, and discipline.

Tools. Obviously, I believe that the primary tool you need is a lead capture gateway — whether ours or another. But having hundreds of leads every month won’t help you if you can’t stay organized. For that reason, I believe that contact management software is absolutely critical to high volume real estate. Here is why: In the previous blog articles of this series, I’ve described how because of the real estate buying cycle, today’s successful agent is going upstream and capture customers early in their search — as much as 6-8 weeks earlier than using traditional marketing. And during that time, to be effective, you must touch that customer twice a week.

Do the math on that: Eight weeks times twice a week (8X2=16) times 100 customers per month (100X2) or 200 customers. That adds up pretty quickly (16X200=3200) contacts or attempted contacts. How good is your memory? Can you keep up with every conversation, email, attempted conversation, search criteria, and bit of information in that quantity? Oh, and I forgot to mention the little details for the actual search, appointments, escrow activities, and so on. No wonder we are always dropping balls!!

That’s why you must use contact management software. It’s the only way to keep up with that much information effectively. In old-school real estate, you only worked with customers for a couple of weeks and never more that 2-3 at once. It was much easier to handle that with a “seat-of-the-pants” organizational system. There is no way to do that today — it’s just not possible, even for the best agents. Ok, so what should you use?

There are plenty of options out there for the agent wanting to get organized by using contact management software: Top Producer, Agent Office, Market Leader, Outlook, Sales Force, Act, Goldmine, and my personal favorite, Pipeline. Prices range from $100 per month on down. But, good contact management software doesn’t have to cost a lot of money. We developed Pipeline because we wanted it to be simple, and we give it away for free. To check it out, click here.

Another concern is ease of use. Now I’m a bit of a geek, but I have to say, if it takes me longer to learn and use a new software than I could spend using paper and pen, I think that software is a failure. That’s why we developed Pipeline to have a 5-minute learning curve. Again, it doesn’t matter which contact manager you use: just that you use one. You must be able to keep up with the thousands of little pieces of information in a simple and practical way if you are going to be successful today in real estate.

Strategies. The strategies I teach are pretty simple (probably because I am a simple-minded guy!) but very effective. Here they are: First, you must identify whether your customer is in phase one or phase two of the buying cycle. If you are using exclusively Internet leads as our agents are, you should assume they are in phase one. When you get a sign call or a referral, you are dealing with a phase two lead.

Next, phase one leads are not ready to talk to a salesman, so don’t be one. Approach them as you would a customer service call. Don’t be pushy. Don’t try to set an appointment. Don’t try to get them to come to your office. Don’t try to meet them at a property. Don’t try to get them to start looking at houses. And most importantly, DON’T WORRY. They will move to phase two soon enough. Your goal in phase one is simply to make them like you. Be their friend. Serve them. How easy is that?

Here’s how easy it is. You should be in touch with your phase one customers twice a week. I recommend once by phone, and once by email. Don’t spam them to death! Phone calls are much more personal. Again, your goal is simply to make them like you. Don’t forget that the odds are in your favor. They’ll work with the first agent they meet three out of four times, so just be first and make sure to become their friend. Duh!

Finally, understand that phase two customers are ready to look at houses. They realize that we hold the keys to the lockboxes, and so they are now ready to work with us. When communicating with phase two customers, it is best to be direct. Don’t be afraid to suggest looking at houses. And more important, stay in touch with them daily. Phase two is the last two weeks while they are actually searching for that dream home. Hopefully by now you are their friend. But don’t stay hands-off during phase two or they will work with the first aggressive agent they meet after they move into the search phase. Often it will be a sign call to the listing agent of a home they like.

So determine which phase your customer is in, and then use the appropriate follow-up action plan: phase one customers, hands off, customer service approach, twice a week. Phase two customers, be direct in your contact, and do it daily. Now how simple is that?! I promise you that if you use these simple strategies, you’ll be very successful and you’ll make lots of money. Better yet, is that you’ll be very relaxed and enjoy yourself in the process. This really is a cool business! The buyer wants to buy, the seller wants to sell, the lender wants to lend, the closing attorney wants to close — just stay out of the way, keep it simple, and get paid!

Discipline. We all hate the “D” word, but the truth is that discipline is 90% mindset. Make up your mind that you are going to do the things you need to do to be successful, and just do them. There are a few reasons that most agents fail in the area of discipline. Either they have no specific work plan so they never know how they are doing; they haven’t put the tools in place to make the job as easy as possible; or they have a strategy that’s just too complicated to execute consistently.

Most agents don’t lack the discipline they need. They just get discouraged because they’ve made it too hard for themselves. But what if you could make it simple? What if you could know exactly what you needed to do every single day in order to accomplish your goals? I believe you can. Assemble the few simple tools you need. It should be very inexpensive, if not free. Don’t be fooled into “investing” tons of money on tools and technology. Then put together a simple strategy, like the one I just outlined. Finally, in the words of Nike, just do it!

Today’s successful mega-producers are generating plenty of business, but unlike the customers of yesterday, today’s real estate customer is beginning online. According to the latest figures, in excess of 90% (94%) are beginning their search online. In my last installment, I explained how successful agents today are going way “upstream” to capture their business — before the customer has had the opportunity to be attracted by old-school marketing techniques. If you haven’t read it yet, you owe it to yourself to start there.

I’ll assume you read that installment. In this post, I’ll share with you how today’s agent can create plenty of low-cost leads. I’m not talking about buying leads or being dependent on your broker, your company, or some RELO company that wants a pound of flesh for every lead they send your way. I’m talking about creating your own leads! And I’m talking about making so many leads that you have so much business you can’t do it all!

I know that many of you reading this post will immediately dismiss the notion of making your own low-cost leads as “impossible”, but it is possible. And not only is it possible, it’s the very thing that differentiates today’s mega-producers from the average agents. I know of dozens of agents who make literally hundreds of their own low-cost leads every single month. I know agents that start off each day with 5 to 6 brand new leads in their contact manager. It’s not only possible — it’s the only way you’ll reach mega-producer status in today’s market.

Any discussion of lead generation has to start by discussing advertising. Lee Iacocca, when he was head of Chrysler Corporation, made an amazing statement. When asked about advertising, he said he was convinced that half of the millions of dollars that Chrysler spent each year on advertising was wasted. Half! But then he added that, if he could only figure out which half was being wasted, he could save the company a lot of money.

As REALTORS®, we typically spend 20% of our GCI, or gross commission income, on advertising. Magazines, newspapers, business cards, fliers, direct mail, websites, radio and television spots, billboards, and every promotional gimmick that comes down the pike: we sink money into all of these in a frantic attempt to generate enough customers to keep our businesses rolling. And the sad thing is that we know deep down in our hearts that much of what we spend our hard-earned commission dollars on is utterly wasted. Well the good news is that it doesn’t have to be wasted! Here’s what I mean.

If, as the NAR has told us, our customer chooses the first agent he talks to three out of four times, the key is to be first, right? And if the customer starts his search online 94% of the time, where do you think would be the best place to advertise if your goal was simply to be first? Online. Duh! See how easy that was? But I know what you’re thinking… “I have a website and I get almost no business from it.” Or, “I’ve done online advertising and it costs a lot of money and I’ve gotten very little if any results.” I completely understand. Those are legitimate concerns. Let me speak to them both.

Today nearly all home buyers begin their quests on the Internet. Many of them begin by going to a search engine like Google to search for homes or REALTORS®. Then they choose a link to a real estate website and visit the website of that REALTOR®, hoping to find help in their search. The overwhelming majority of these real estate customers are looking for home searches. If they don’t find a good, easy-to-use home search, they will generally move on to another website.

That seems pretty easy. Just get a website with an IDX home search. Heck, you probably have one already. But here’s where we come to the first problem. If that website is a “typical” real estate website, only a small number of visitors will fill out a guest registration form and identify themselves — generally only about 1%. What this means is that, out of every thousand visitors, you, the website owner, will actually capture only about ten leads. The capture is extremely inefficient because real estate websites are not designed for capturing, but rather giving out information.

So what’s the problem? Well, Internet traffic costs money. Either through pay-per-click (PPC) advertising or through search engine optimization (SEO), the website owner is able to list his website on the search engines so that it is displayed whenever a customer does a real estate search. Pay-per-click advertising often costs several dollars per visitor, while search engine optimization costs several thousand dollars up front and needs to be continually managed in order to keep the site ranking high.

Now, when you combine the high cost of traffic with the low capture rate (1%) of most real estate websites, your cost per online lead is extremely high, usually well over $100 per lead. This is why many agents, even those with websites, choose to purchase leads from vendors rather than make their own. Lead generation companies often charge $50 and up for leads, and many times they sell the same lead to multiple agents. Some vendors charge as much as 30% of the closed transaction, resulting in lead costs of thousands of dollars. To make matters even worse, not only are those leads expensive, but often the quality is poor as well.

This is the very problem that caused me to begin to look for a better way of capturing online customers. When I couldn’t find an effective solution, I had to develop my own technology, the LCM gateway. Instead of having the inefficiencies inherent in even the best real estate websites — websites designed around delivering information, the LCM gateway was designed to do only one thing: to capture Internet traffic. Rather than having a capture rate of 1% or less, as with typical websites, the LCM gateway captures as much as 30% of all visitors, thus bringing the cost per lead down to as little as $3. More importantly, the quality of lead is much higher than the quality of the leads supplied by lead vendors.

I can still remember buying leads from companies such as HouseValues, HomeGain, and Service Magic. I remember getting the same lead that had been sold to three other agents, and I remember getting some “leads” that had only a name and an email address. I remember a high number of bogus leads. It was very frustrating, but I was desperate. That’s why I decided to learn how to make my own leads. Now we generate all our own leads using LCM gateway technology — as many as two thousand good leads every single month.

So to summarize, being successful in online lead capture really comes down to the efficiency of your website. You should be able to make all the leads you want for $3-5 per lead. If your online leads are costing you more than that, you are spending too much. Let me give you an example. In Greensboro, North Carolina, we have an agent partner (an agent who licenses our LCM gateway technology) named Kay Hunkins. She’s a veteran agent who was one of the first in her market to begin to try to tap the Internet. Well, she was getting literally thousands of hits to her websites every month and had her sites listed in lots of online relocation directories. And she was getting between 10 and 15 leads from the Internet every month, much more than the average agent produces from his website.

Then she installed our lead capture gateway on her existing website — nothing else — and she was immediately so busy that she found herself ignoring most of her prospects and cherry picking only the best buyers. The turn-around in her business was so fast she put a deal in escrow the same week she started with us. Without upping her advertising a dime, she began to capture over 20 leads every day (over thirty times her previous capture rate!). All of her leads were people who had been coming to use her site anyway, but now she was able to identify them!

And there’s John Miller, an agent in Austin, Texas. When he began using lead capture technology on his website, John was struggling with only a handful of leads every month. Now, using the lead capture gateway technology, he is able to capture between 300 and 400 leads every month. His business will never be the same! Now he’s so busy that he’s having to recruit agents and build his own real estate team!

So did these agents suddenly get smarter? Did they begin working harder? Did they work longer hours? Did they just get lucky? No. No. No. No. They just got better fishing equipment. Now, instead of having to be dependent on “commercial fishing operations” to sell them leads, they make more leads than they can possibly use, and all for next to nothing.

If you don’t have good lead capture technology on your website, I encourage you to get it in place. Certainly, I would love you to consider our technology, but you very well may be able to build your own. Either way, having a low-cost source for copious amounts of leads is the single key to becoming a mega-producer in today’s changing marketplace. So get your technology in place. For less than the cost of a cup of Starbucks’ a day, you can make your own leads. Our typical agent partner spends under $300 per month and makes about 80-100 leads as compared to spending $500 on a magazine ad and getting maybe 8-10 leads! Efficient lead capture makes all the difference.

In my next installment, we’ll move on to the third thing you need to become a mega-producer in today’s real estate climate — the tools, strategies, and the discipline to manage all those low-cost leads for the time required to actually complete transactions with a large number of them. You won’t want to miss this installment. Until then…

In my last post I discussed the difference between yesterday’s pull marketing and today’s push marketing. I explained how pull marketing is reactive — “If you build it they will come.” Push marketing, on the other hand, is pro-active — “If you build it they won’t come so you have to go get them.” (Click to view previous blog post.) Many agents today have experienced that very phenomenon: doing lots of advertising and getting little if no results. Today’s successful agents are going upstream and capturing the lead early — generally during Phase One of the buying cycle.

Let’s face it, NAR tells us that 74% of all sellers and 76% of all buyers work with the first REALTOR® they talk to. So the key to success is simply being first and not chasing the customer away by using the wrong approach. Just be early and do it right and you’ll do business with them three-fourths of the time! But being early — getting there first — brings a unique set of challenges. First, there is understanding the nature of Phase One business, second is being able to create plenty of low-cost leads, and third, is managing all those leads for the time required to actually complete transactions with a large number of them.

Let’s start with the nature of Phase One leads. Traditional marketing attracts customers during Phase Two of the buying cycle. (For more, read this blog post.) Magazine and newspaper ads, yard signs, duty desk calls, open houses, referrals, and other traditional lead sources typically brought us a customer that was 2-3 weeks out from writing a contract. That customer had already moved into Phase Two of the buying cycle and was willing to talk to an agent. Most Phase One leads, however, come to us through the Internet. And because they are still in Phase One, they tend to be 6-8 weeks earlier in the process. In Phase One, they are still building their dream and gathering information, and they don’t want one of us pushing them. They simply want information where Phase Two leads are ready to search for a house. So the challenge becomes learning how to work this new style lead by providing customer service and not pushing or selling. Those agents who fail to learn how to do this are destined to fail working Internet customers. And that’s why many of our new agents do so much better than seasoned agents who have worked only Phase Two customers.

Let me share a simple yet powerful illustration that will change the way you look at Internet leads. I want you to think back to the last time you shopped in your favorite department store. Now, if you’re like me, you don’t have a lot of time to waste; when you go shopping, you go because you want to buy something. But remember how, as you walked into the clothing department, a sharp sales clerk came up to you and said, “Can I help you?” Now, I want you to be completely honest. What was your answer? You know what it was; it was the same as mine: “No, thanks. I’m just looking.” And I’m willing to bet that, within five minutes, you were looking around and finding that same clerk to help you locate something in your size.

Did you really mean that you weren’t interested, or were you implying that you wanted to gather information for a few minutes (Phase One) and that, later on, when you were ready to search (Phase Two), you might actually need his assistance? The procedure is no different for a real estate customer except that the buying cycle is much longer, given the price point of the purchase. The Internet customer is still gathering information when most agents call to say, “Can I help you?”

So there are generally only two reasons that an agent will fail in working Internet leads: 1) either he’ll take the “No, thanks. I’m just looking” literally, as though the customer wants nothing to do with him, or more often 2) he won’t take the hint and instead will insist on trying to set up an appointment to start showing houses immediately! This overbearing, hard-sell approach simply alienates the agent from the potential customer and removes any chance of his gaining the business. But make no mistake — that customer will go on to buy or sell, but with another agent! What a tragedy.

Okay, in the next installment I’ll discuss how to generate tons of Internet business using your website. I know what you’re thinking… but you really can generate more business than you can possibly handle using your existing website with a few simple tricks. There is plenty of business out there and getting your share is not that difficult. You’ll be amazed at how easy it is, just wait and see…

Before we launch into this segment, let’s recap the last installment. In it I was discussing how in the 1960s and 70s, our industry was in a Broker-centric Era. The brokers had all the power. Customers had very little access to listing inventory except through them. Agents had no business except through them. Modern real estate brokerage was in its infancy. By controlling the inventory, broker-owners were able to build real estate dynasties. It was common place to see multiple office operations with teams of agents, and it was during this climate that companies like Century 21, Coldwell Banker, ERA, and other similar broker-centric companies became huge empires.

Then came the Agent-centric Era in the 1980s and 90s and the resulting shift of power to the agents. One of the catalysts was the personal computer. First the brokers lost control of the listing book, then their exclusive main frame computer connection to the local MLS. Agents were suddenly able to be independent with their own MLS access. And since the agents were the ones doing all the transactions, many began demanding a bigger slice of the commission pie. That led to new agent-centric companies springing up: companies like Re/Max and Keller Williams. Agents got their bigger slice of the pie, but with it, came a bigger slice of the overhead.

Around the turn of the century, another remarkable thing began to happen, again powered by technology. Just as the PC empowered agents, the Internet empowered customers. Armed with information and choices (and let’s not forget the most important thing — the money), the customer became the one with all the power. It was inevitable, and it was proper. Information is power. Today’s customer has more information at his fingertips than brokers and agents had just a few short years ago. That shift of power has caused an erosion in overall brokerage fees of roughly 15% over the last decade. Nowadays, the agent must add value and not simply control access to the MLS and the lockbox.

Ok, so that’s where we are now and how we got here. But that still doesn’t help today’s agents, many of whom are still in broker-centric or agent-centric companies wondering where all the customers went. So where did all the customers go? Allow me to explain it by telling you a fishing story.

Once upon a time there was a huge river, stocked full of home-buyer and home-seller fish. All along the banks of the river were REALTORS® with their fishing poles. Everyone was catching all he wanted, and life was good. Then one day, way upstream, a big commercial fishing company set up operations, with its computerized fish finders, its power nets, and the latest in online fishing technology. The company began to pull many of the home-buyer and home-seller fish out of the river before they could ever make it downstream to be caught by agents still persistently hanging onto their same old fishing spots. Little did they know, the total number of fish making it downstream was getting smaller and smaller. It wasn’t long before the fishing began to get tough — so tough, in fact, that many REALTORS® just threw in the towel and quit fishing altogether. Others fished longer hours and did what they could to survive, while a third group simply gave up on fishing for themselves and began to buy fish from the big commercial fishing operations.

But what if an agent were able to get their hands on the same technology that those large commercial fishing operations were using? What if he were to go way, way upstream and begin to catch large quantities of home-buyer and home-seller fish? Not only would life be good again: it would be GREAT! What a huge advantage that agent would have! Well, believe it or not, this story is actually true. The big commercial fishing operations in this story are lead vendors, like HouseValues, HomeGain, and ServiceMagic, and every day the “fishing” gets tougher because a new lead vendor opens its doors. If you don’t believe me, just check your email inbox. Not a day goes by that I don’t receive some new version of the same old thing — another company using our listings to advertise on the Internet, catch our customers, and then attempt to sell them back to us.

But there’s another part of the story that’s also true. It’s actually possible for an agent to use the same kind of technology that the lead vendors use to capture leads — commercial lead capture technology only designed for single-agent use. And for those agents who have it, the technology produces amazing results. It’s called lead capture technology, and those agents who use it have more business than they can handle. Many go on to build teams, and some companies. Those agents who are proactive are having their best days ever, and here’s why they are:

Today, instead of locking down the information and the access, and waiting for the customers to come to us, the successful agent must go get the customer. Nearly all customer gathering methods used by agents in the broker-centric and agent-centric eras of real estate were what we call “pull marketing”. Today’s customer-centric agent must use “push marketing” to be successful at attracting business. Pull marketing includes strategies and ideas that are passive in nature. Think branding. Among pull strategies are geographic farming, sphere of influence marketing (also know as networking, circle of influence or circle of 50 marketing), open houses, model homes, yard signs, home magazines, etc. Think “If you build it they will come.” In all of these methods, the agent spends time, energy, and money building his or her name or brand and then waiting for the customer to call.

The problem with using pull strategies today is that customers will only call you after they’ve entered Phase Two of the buying cycle (For more about the real estate buying cycle, read my article: Working Internet Leads.), and most of the successful online strategies capture Phase One customers. By the time most of today’s customers get to Phase Two, it’s too late. They’re already working with an agent — an agent doing real estate the new way!

On the other hand, push marketing involves ideas that are active in nature. Think “pursuit” marketing. Pursuit marketing involves identifying a lead, and then the resulting proactive measures that will move it from a lead to a customer. Push marketing doesn’t wait for the customer to come to us. It goes right to the customer. And it typically goes way upstream, as much as 6-8 weeks before that customer ever responds to a pull campaign. And unless that first agent has done a poor job, one of the downstream old-school agents will never get the call. Instead of “build it and they will come”, today’s push marketing is more like, “build it and then go get them”. Sounds like more work, doesn’t it? It’s really not. It’s just a different way of doing real estate — a new way!

In the next segment, I will begin to describe the way today’s customer-centric agents practice real estate this “new way”. Many of you will be surprised at how different it is, and yet how easy. Until next time…

When CNN’s Pulse on America program featured us two years ago, they were investigating an interesting phenomenon in our industry. Click to view video. It seems that today there are two real estate worlds coexisting simultaneously. Like in the movie The Matrix, there was the “perceived” world and then there was the “real” world. In our industry there is much the same today. Those agents who are practicing real estate this new way, are doing quite well — many better than ever. But those who are hanging onto the old-school real estate model are finding themselves working harder and harder and making less and less money. In order to understand this “new way” of doing real estate, we must first look at the history of real estate practice and see how it has evolved.

The 1960s and 1970s: The Broker-centric Era
The 60s and 70s were quite literally the “golden age” of real estate (think Century 21’s gold blazers): a time when the real estate industry as we know it today was born. That original giant, Century 21, and other companies like Coldwell Banker, ERA, Prudential, Wychert, Long and Foster, etc., are responsible for pioneering many of the techniques that have become synonymous with real estate practice. The then novel ideas like geographic farming, sphere of influence marketing, floor duty, open houses, model homes, and so on, have now all become today’s mainstream methods of gathering customers.

I call this time in history the broker-centric era, because the broker was king. The broker owned the office, the listings, the signs, did the advertising, and generated the sales leads. He provided the agent with training, tools, and work space. It was also broker-centric in that broker kept most of the money. A 50/50 agent split was the norm, and that was after taking any franchise fees off the top. Real estate brokerage as we know it was in its infancy and many agents did quite well.

The 1980s and 1990s: The Agent-centric Era
Sometime in the early 1980s, top producing agents began to wake up to the fact that they were “doing all the work” and they were not getting what they felt to be their fair share of the money. Enter the agent-centric era. Companies like Realty Executives, Re/Max, Keller Williams, Exit Realty, and many others began to spring up, offering the top producing agent much more money. But like any other industry, there is no “free lunch”.

The additional agent compensation (today’s average agent split is now 62%) came with a price. Along with shifting brokerage commission dollars to the agents, brokers began shifting much of the associated overhead to them as well. Desk fees, office rent, telephone, fax, and copy fees, administrative fees, transaction coordination fees (to name only a few), became the norm in those agent-centric model companies. The agent was now king, but he had to finance his own kingdom. The agent did his own advertising and provided his own sales leads. The money for the agents became marginally better, but the overall customer experience (as measured by customer satisfaction levels) began to erode, as more and more agents were driven by independence and money.

2000 and beyond: The Customer-centric Era
Around the turn of the century, real estate began to change again, this time brought about by the Internet. Today’s information-empowered customer is now king. In both the broker-centric and the agent-centric models, the real estate professionals (either brokers or agents) were in control. Today, however, the customer is in control, and the customer demands excellent service. If he doesn’t find it with one agent, he will move on to another.

And now that the customer is king, the key to success in today’s fragmented real estate market is learning to gather customers, and then learning to serve them well. In an article I wrote for Broker Agent News, I describe at length the market dynamics of today’s customer. Essentially, today’s customer is different, and understanding and adapting to those differences, will make you wildly successful in our current market environment. Those agents who take the time to learn real estate this “new way” will dominate the real estate landscape over the next decade while those who don’t will be looking for new careers.

In my next post, I will begin to develop that foundation. How can an agent transition to the new age of real estate? How can you thrive while those around you are floundering? I believe you can! I believe you must! Stay tuned…

“Goosey Lucy said that Ducky Lucky said that Henny Penny said the sky is falling.” From reading and listening to the media you can’t help but think of Chicken Little. Okay, well I’ve finally heard enough! I’m so weary of hearing one person after another bemoan the sad state of real estate today that I’m about ready to scream!

Every time it’s told it gets worse! “The end of real estate is near.” “The mortgage industry is doomed.” “Give up and get out now while you still can.” “The lead aggregators have ruined our business.” “The banks are taking over our business.” On and on it goes. No doubt, you’ve heard it too. Well I say poppy-cock! The sky is not falling!

Certainly today is a tough time to be in real estate. If you are trying to do traditional real estate, you are no doubt struggling. But the funny thing is that for many agents — agents who have embraced the new model of real estate — this is one of the best times ever! It all depends on how you do real estate.

One of the agents that I supervise is named Kevin. Kevin has been in the business for less than two years. Before real estate he was a truck driver. Last month I paid him over $50,000 in commissions and he had his best month ever — well, that’s until this month. I have another agent named Dave who’s been licensed barely a year. Dave is part-time. He earned over $300,000 last year and he can’t even begin to keep up with his business. I could go on and on, listing agent after agent across the country that are having amazing times in this tough market. So what is this “new model” of real estate?

As opposed to the broker-centric model of the 1960s and 1970s, or the agent-centric model of the 1980s and 1990s, around the turn of the century this new model began to emerge. I call it the customer-centric model. In this new model, gathering customers is king. Those agents who’ve learned to do that — to gather customers well — are experiencing growth like never before in the history of the business. Gone are the days of “branding”, “image advertising”, and waiting on customers to come to us. Today we must go get the customers. Those who learn to do it well are making amazing money.

Over the next few weeks, I’ll write a series of commentaries on this new model and how you can participate in one of the best opportunities in the history of real estate. For now, I will settle for letting you ponder this question: Is real estate really that bad, or is it your approach?

As I’m sure you know, it is difficult to operate a business in today’s economic climate. It is more difficult to operate a start-up business, particularly a restaurant. That’s why I bought a going concern. During the course of my due diligence, I was given P&Ls for the previous six years of operation, all certified by a CPA. The most recent six months’ financials, however, were not available. I did, however, have numbers from the previous owner that showed consistent sales for those last two quarters, as well the owner’s certification of his full regulatory compliance at the time of the sale. Not being able to futher verify the information, I decided to purchase the restaurant anyway. I know what you’re thinking… and you’re right!

As it turned out, sales for the last six months were well below (less than half) the historical sales, and the latest information given me was fraudulent. Additionally, the restaurant (I later got detailed inspection reports from the county health department) was not in regulatory compliance, and was in danger of being closed. Clearly I could have done a better job in my due diligence. The good news is that we have courts to protect buyers from fraudulent representations of sellers, and there is now pending litigation that will hopefully compensate me for much of, if not all of my loss.

I also assumed a commercial lease that was 5 months in arrears when I bought the restaurant. I assumed that having a paying tenant would be enough to assure a great relationship with my landlord, who was responsible for all landscaping. When I took over, the restaurant was overgrown and looked like it was owned by the Adam’s Family. I requested several times that the landscaping be addressed in time for my grand re-opening to coincide with the face-lift we had given the building. When we got to the weekend of the opening and the landscaping wasn’t done, so I hired a landscape company to make the business look good, at my own expense, of course.

The new landscaping was a source of irritation to the landlord who eventually sued me wanting me to reimburse him for replacing 20 boxwood bushes which had been cut back a lot but were still healthy and growing fine, albeit much shorter and smaller. Our relationship deteriorated from there, and soon I was not afforded electricity to my road sign (on the shopping center’s circuit) even though I offered to pay for the power. We went for months during the summer when the sign didn’t illuminate until nearly 9PM (well after the dinner hour), and we had many guest stop in to see if we were open. The sign was on a timer and an electric eye system and wouldn’t illuminate until there was not a ray of light in the sky. The final straw was the landlord’s removal of our Muzak satellite dish from the roof (it had been there for 5 years) with no notice, and on Valentine’s Day (the biggest day of the year for a fine dining restaurant).

I made the decision that I would not continue to swim while carrying these lead weights. I felt I could certainly use the energy for my core businesses, and the ongoing financial drag on the corporate checkbook made the decision an easy one. I had been given the perfect opportunity to get out, by an unreasonable landlord who had breached our lease again and again. I took the opportunity, although I very much liked the business and was continuing to grow sales and manage expenses. I kept my general manager on the company payroll and now we’re using his skills at FavoriteAgent.com.

In making the tough decision to close, I had to detach myself from my emotional reasons for keeping the business and simply look at the numbers. It was a business. Was it the highest and best use of my time and resources, when I had been given the opportunity for a legal “do-over” by the actions of both the seller and the landlord? It took me about 15 seconds to realize that it was not. I didn’t like the prospect of facing friends and their feeling sorry for me. My pride was injured but I’m confident it will heal. Perhaps one day I will own another restaurant. It is nice to buy wine wholesale!

Ok. I closed the restaurant… well, it’s more like I am in the seemingly eternal process of closing the restaurant. I can tell you one lesson: It’s a lot easier to start something that it is to stop it. Buying a point of sale system takes a morning. Selling one takes weeks. Buying inventory is a quick and steady process involving a few minutes a day. Disposing of inventory takes forever. The same with everything, from leases, to advertising, to accounting, to tax returns. So what’s the lesson?

Take the time to plan your business. It is much easier than having to change directions after beginning in the wrong direction. The same is true in the real estate business. I’ve seen agents waste a year or two in a company they would never have chosen had they taken the time to look at different options and their own business plan. I’ve seen agents waste months and thousands on the latest advertising idea, simply because they saw an idea at a conference or seminar. Advertising (your single biggest expense in real estate) should be carefully thought out and planned. It is much easier to plan well going in than spending the remainder of a contract and a lot of hassle trying to extricate yourself from a bad marketing plan.

Planning is crucial to your success, regardless of the business you are in — whether restaurant or real estate. See my article on planning. And sometimes, even the best plans don’t work because circumstances change, as in my closing the restaurant. Don’t be discouraged if that happens. Hey, it’s only money, right?! If you know how to make money, you can always make more.

In the next installment, I’ll discuss the decision making process I went through in deciding to close The Vineyard. Maybe as we explore it together, we’ll take something away that we can use the next time we are in a similar situation. Please feel free to write and submit comments and questions. I’d love your input. Until next time…

In the last installment, I compared the restaurant manufacturing operation with real estate. In this installment, we’ll look at a restaurant as a sales organization. While the back of the house (the kitchen) is all about manufacturing, the front of the house (the dining room) is all about sales. Meeting customers, setting expectations and exceeding them, and attention to detail are crucial elements in any sales organization. A restaurant is no exception. Everything is important — from the elegant music, to the dress code of the staff, to the words in your script, to the carefully choreographed service. That’s why our company has carefully selected background music, decor, and office location to help create the right environment to facilitate transactions.

Harvey Mackay, best selling author of Swim With The Sharks Without Being Eaten Alive, once wrote that sales is really about creating the right setting so that the customer sells himself. In a restaurant, up-selling and suggestive selling, building the sale, and properly presenting options are important to your success. As real estate professionals, we have the opportunity to do all of that as well. Up-selling and suggestive selling is much like finding bargain properties for investors, 1031 exchanges for those who have recently sold and need to find a new place to invest their proceeds to save on taxes. Building the sale in a restaurant is much like our finding creative ways to help customers purchase more real estate, whether quantity (more properties), or quality (bigger and better single purchase). We build the sale by educating our customers, like properly explaining the leverage value of real estate investing, higher rates of returns on certain higher priced properties, finding our clients incredible opportunities, and so on.

At one time or another, we’ve all been to an empty or nearly empty restaurant. What did we think? Maybe other people know something we don’t. Maybe there’s a reason it’s empty. When the waiter spoke to us, he sounded desperate. So it is in real estate. One of the most pathetic sights is an agent without enough customers. He or she becomes desperate, and generally pushy. And somehow customers and clients can sense the desperation, and either leave or become more demanding. Before I discovered how to generate hundreds of new customers every month, I was a desperate agent too. Part of being a successful salesman is having enough customers that you can relax and focus on providing good service.

And of course, we all know how important it is to present our services in the best light. Whether that means properly staging a listing, cleaning up our offices, dressing properly, washing our cars, or a myriad of other seemingly small things we do to increase sales. The restaurant business is very similar. Appearance is critical — from the plating of the courses, to the presentation of the food at the table, to the proper method of opening a bottle of wine and presenting it to a guest, to the dress and hygiene of the staff, everything is important in making the sale.

In my next installment, I��ll discuss how it’s easier to start something that it is to stop it. More to come��