Ready to start a team? Before you dive off into that new chapter, answer these three essential questions first.
First question when you think you’re ready to start a team:
What is your motivation for starting a team?
Of all the answers to this question we have heard over the years, there really is only one that is an indicator of future team success and profitability. The right answer is you have too much business for you to adequately give your clients the type of service they deserve. Any other answer is going to lead you down the road of frustration, turnover and financial disappointment.
When you find yourself consistently juggling more than you can handle, it’s time to bring on an administrative assistant. A good admin will allow you to do about 50% more business by taking the checklist driven tasks off your plate. An admin will help you organize the natural chaos of the real estate business that successful agents thrive in.
Second question when you think you’re ready to start a team:
Do you have enough in reserves to do it right?
Starting a team requires a mindset shift from being a business operator to a business owner. Successful business owners understand that managing cash flow is a critical factor that sinks many otherwise talented people. Having money in the bank or a line of credit that you can tap to level out cash flow is more than a suggestion.
Another factor to consider is profit margins. Most single operator real estate businesses operate with a substantial margin that hovers around 85%. As your team grows, that percentage will drop significantly. This will drop to 50% pretty quickly and go lower as you add more agents to your team.
A good administrative person is going to be your first hire when starting a profitable team. True admin people are driven by security and are best as salaried employees. Do not cut corners on this. You will get in trouble with the IRS and your state on a regulatory level. You will also be making a very costly hiring error by bringing on the wrong person. Plan on using a payroll company and good insurance broker to make sure you are complying with state and federal guidelines.
After your admin is up and running, you can start thinking about adding a buyer’s agent. To keep your team profitable, buyer’s agents only come into play when you have enough listings in consistent inventory to keep them busy with open houses three to five days a week. The open houses should supplement the additional leads you are handing off to them until they are closing 3-4 transactions a month.
Third question when you think you’re ready to start a team:
What systems do you already have in place?
Most productive agents have achieved their success based on little more than their personality and hard work. If your plan is to just add people to that business model, it will leave you broke and frustrated. Profitable teams are run on systems.
When starting a team, everything that is predictable and repeatable can be boiled down to a consistent system. If you can put it into a checklist, an administrative assistant can execute the checklist. With that said, it is important that you as the team leader retain full control of the design of your systems and processes.
Lastly, have your compensation programs laid out. Successful teams have administrative people on salary and salespeople on commission splits. Don’t try and confuse or combine the two, it only leads to disastrous results.
Remember, every person on your team is going to be a reflection on you. At the end of the day this is your business and your reputation are on the line.
Want more information on how to best structure your team for productivity and profitability? Contact us today.