The real estate journey is almost always an organic one. It starts with getting your license and cutting your teeth with a deal to deal hustle. Experience says if an agent doesn’t have something under contract within the first 45 days, there is a 30% chance of them flushing out. Sometimes this is physically, mentally or both. Either way, they don’t come back.
The next hurdle is closing something within 90 days. In a full commission business, cash flow is paramount. If you don’t have something to put into your bank account within that first 90 days, another 30% will flush out. It may take a year for their bodies to leave, but they are gone. Another 20% will be gone at the one year mark. For the 20% that survive, there is a very predictable growth pattern along the real estate journey. Here are the markers and milestones along the way.
The Solo Season
The bulk of the industry is made up of the “solo-preneur”. Those who do it all. It is the least expensive way to operate and has the the highest profit margin. You will see agents in this stage lean on vendors or their brokerage as ad hoc support staff. What should you expect from this stage? At this stage at the real estate journey, your EBITA profit potential is about $300k. Agents here can expect to be putting in 40-60 hours a week and be taking your cell phone on vacations. You won’t work 9-5, but will have a flexible and demanding schedule.
The Small Team
The next stop along the real estate journey is the small team. At this point you will have an admin staff and a buyer’s agent. You will have some systems in place. These agents still are working 40-60 hours a week, with an EBITA profit potential of approximately $500k a year.
The Big Team
The big team has become what the brokerage was 20 years ago. It provides a great nurturing structure and lots of handholding for the agents on the team. The team leader has built some proprietary systems and a brand. There is typically an admin staff and between 8-20 agents. The team leader has the ability, through leverage, to cut back to 30-40 hours a week. Profit potential? Approximately $1 million.
The brokerage is a badge of honor. A great, single office brokerage will have between 40-250 agents. They will have a full admin staff. This is the point where you can start tapping into the multiple streams of income. While still working between 30-40 hours a week, at this stage the target profit potential is around $2.5 million.
The last stop in the real estate journey is building an empire. These are the rare breed who venture into opening multiple offices and have mastered the art of leverage. Everything becomes systems based. The profit potential becomes unlimited and mastery over time becomes an art form.