This is an overview of the book The
Millionaire Real Estate Agent by Gary Keller
Mr
Keller's bio: Gary
established Keller Williams Realty, with partner Joe Williams, in
1983. Keller is a native of Houston, Texas and a graduate of Baylor
University.
Key
point: Run your occupation like a real business. And the goal of
a real business is to have others successfully run it for you. In
particular this book is about how to net a million dollars in income
through a business that others run for you.
Mr.
Keller speaks to the importance of keeping it simple. He quotes jazz
legend Charles Mingus as saying, “Making the simple complicated is
commonplace; making the complicated simple, that's creativity.” He
goes on to talk about creativity. He says we should build our
creativity on top of solid, proven models. To do it the other way
around would be too hard and take too long.
Speaking
about models, Keller talks about making it to the top of the real
estate mountain when he says, “Once the path was identified, the
journey became more accessible to others.” It is mentioned that
doubts can truly undermine our efforts. Knowing that others have
achieved the exact success we strive for allows us to model the
behavior. In turn we increase our chances of achieving the results we strive for. Gary gives the
example of Roger Bannister and the four minute mile.
It had
long be thought that no human being could run a mile in less than
four minutes. Australian miler John Landy had made numerous
high-profile attempts but had come up short each time. Then along
came British medical student Roger Bannister. Bannister broke the
goal down into manageable pieces, a quarter of a mile is less than a
minute. On May 6, 1954 Roger ran the “miracle mile” in 3 minutes
and 59.4 seconds. What's equally interesting is that Landy came back
to break Bannister's record in less than two months. Once the
psychological barrier was torn down, and the sub-four mile was proven
possible, Landy and many others were able eo accomplish the feat as well.
“The
truth about ability is that it is neither set nor predetermined,”
says Keller. This may seem obvious to some, but many people don't
believe it. The Stanford psychologist, Carol Dweck, wrote an excellent
book on the subject titled Mindset. If you believe Keller's quote, you're said to have a "Growth Mindset." If you disagree, you are said
to have a "Fixed Mindset." While this may appear to be an inconsequential idea, it turns out to make all the difference in the world. I can't get
into it here but I will be posting an overview of Dweck's book
soon.
Anyways.
Keller talks about The Three L's of his real estate agent model.
They are: leads, listings and leverage. Gary says that every
professional – regardless of whether they're a doctor, lawyer or
whatever – has two jobs: their chosen profession and lead
generation. It could be argued that many people choose to work in
big companies so as to keep from being responsible for the generation
of leads. Meaning, the unspoken code is, “You find the work and
I'll do it.” Hopefully they come to understand the price
they're paying for such abdication. Often the real value is in the
finding of the work.
Keller
suggests that you think of yourself as being in the lead-generation
business. “If you count on the market to deliver leads when times
are good, you better count on it to take them away when times are
bad.” Indeed, one of the main ways to prepare for the inevitable
shifts in the market is to create and maintain a habit of prospecting
(lead generation). Gary says, “The ones who look like marketing
and prospecting geniuses do it consistently over time and
meticulously track and source their leads...For all its creativity
and art, the part of marketing and prospecting that is science always
rules.”
So
Keller is saying that leads generation comes first, last and always.
And the leads that you should be most focused on are seller-listing
leads. Listings just flat produce more income than buyers. In the
book Gary lists what he calls, “The Many Virtues of Seller
Listings.” They are:
1.
Seller listings mean marketing opportunities:
a) You
get to put your sign in the front yard (and maybe directional
signage, as well).
b) You
get to market the listing through direct mail and email, etc.
c) You
get to advertise the listing through newspapers, magazines, the MLS,
your website, etc.
2. You
have more control of your time. There is usually not the sense of
do-it-right-now urgency with sellers
that buyers often have. As such, you should be able to control your
schedule a little better.
3.
Seller listings maximize your per-hour compensation. It usually
takes a lot less time to obtain and market
a listing prior to its selling. More time consuming is showing and selling property to
a buyer.
4.
Volume, volume, volume. In Keller's experience a highly focused, highly
leveraged real estate agent can work
fifteen to twenty-five seller listings per month. And keep it up.
The same agent would be hard pressed
to work seven or eight buyers per month, while continuing to do so over a
long period of time.
5. With
seller listings you are on the front end of pricing, which translates into an intimate knowledge of the
market.
6.
Properly marketed seller listings bring you more business. Because
of the multiple marketing
opportunities
that are part of the listings process, Gary has found that on average,
one well-marketed listing
will generate one serious buyer who buys. So, if you focus on
obtaining and marketing seller listings,
you should be able to get all the buyers you need. It's the real
estate industry's version of the “twofer.”
The last
of The Three L's is leverage. Leverage is about three keys areas:
people, systems and tools. Keller counsels, “Until you have maxed
out on what you can accomplish through focus on leads and listings,
you should not be hiring another person.” But, once you've got more
on your plate than you can handle, you will want to hire help. The
first hire will be the first piece of leverage and it should be
administrative help. Obviously, such assistance will help with the
load of administrative work. But also, this person will eventually help
create and implement your systems, the second aspect of leverage.
Keller clarifies, “Systems documentation is an ongoing process. It
is never complete.”
Your
documented systems are one of the tools of leverage which will allow
you the freedom that comes with the passive income generated by your
business. Two key pieces of advice are given and they are; one, know your
numbers, and two, practice what Keller calls “Red Light, Green
Light.” RLGL is where you take one step at a time and make sure
that every expenditure pays for itself. Whenever adding an expense,
hold it accountable and make sure it improves profitability. Whether
it be an advertising expense or a new hire each expense needs to
prove itself profitable before additional funds can be spent.
As you
progress and grow your business make sure you are operating based on
proven models. Gary quotes Warren Buffett as saying, “One learns
through experience, and if not from experience, from those with
experience.” You need to maintain a grasp of how the various
aspects of your business interact to produce financial results.
Obviously, this will help you practice Red Light, Green Light.
Keller
references the legendary marketing book Positioning
by Al Ries and Jack Trout. I won't explain this book too much. As you might have guessed, I
have an overview written about Positioning as well. I plan to post it in the not-too-distant future. Suffice it to say, the
marketplace is very congested with advertising messages. You need a
strategy to get through all that clutter.
So, how do we fill up our sales funnel/pipeline with all the necessary
leads. Keller says, “A strong marketing-based,
prospecting-enhanced lead-generation plan backed by script and
dialogue mastery is the best formula for creating the greatest number
of leads for your business.”
As
you probably know, your database IS your business. When marketing to
your database you want to divide it into two groups: the people you've
met and, the people you haven't. All the people you have met should
go through the 8x8 and 33 Touch program. This means you will
contact these people, once a week. for eight straight weeks. An additional
33 touches will come throughout the year.
From
these efforts you should be receiving 2 closed deals for every 12
people you put through this program. Keller phrases it as 2 for 12 instead
of 1 out of 6 because it should be one repeat sale and one referral
sale. Remember to put the referred client back through the 8x8 + 33
Touch system.
For
the group of people you have targeted but haven't met (including your
farm) you will do the 12 Direct program. It stands for twelve direct
mail pieces mailed out annually. From these efforts you should
receive one closed deal for every 50 people you put through the 12
Direct program. And, of course, you want to take and put all new
clients through the 8x8 + 33 Touch system. This may seem like an
expensive endeavor. Gary encourages you to go ahead and do the math, based on expected
commissions, and you'll see this system more than pays for itself.
Keller
says the key to growing your business is to follow the four models and to
focus on The Three L's. The four models are the following:
- Your Economic Model – where you'll invest your money and time
- Your Lead-Generation Model – 8x8 + 33 Touches and 12 Direct
- Your Budget Model – accounting and Red Light, Green Light accountability
- You Organizational Model – hire administrative help first, hire talent
As part
of your organizational model, seller specialists are responsible
for five key activities:
- Converting seller leads into appointments
- Making listing presentations
- Securing seller listings
- Handling communications during the marketing period
- Negotiating purchase offers
Similarly,
your buyer specialist is responsible for six key activities:
- Convert buyer leads to in-office presentation appointments
- Make the presentations
- Secure the buyer listings
- Show houses
- Negotiate purchase offers
- Handle communications from contract to closing
Keller
figures you need $2.4 million in Gross Commission Income (CGI) to net
a million in income. That because you will need $700K for Cost of
Sale (COS) and another $700K for Operating Expenses. The break down
is as follows, CGI – COS – Operating Expenses = $1M. To achieve
$2.4M you're going to need lots and lots of leads. Hence the reason
Keller spends so much time on the subject.
The book
finishes with advice on a personal level. Keller reiterates, “Your
growth will actually come before the growth of your business.” He
takes a minute and discusses the idea of a balanced life saying that
it's basically an illusion. Especially if you wish to be a high
achiever. Life will often see-saw between balance and imbalance.
The key, Gary says, is to, “allow imbalance when key goals are at
stake, but not to dwell in that state too long.” Keller calls this
“counterbalancing” and says it's much more realistic than a so
called “balanced life.”
Keller
references a book by Michael Gerber called the e-Myth. In it Gerber
talks about the difference between working “IN” your business and
working “ON” your business. Working in your business means doing
the tasks that are necessary to close deals such as showing property,
negotiating, prospecting, etc. Working on your business entails the
bigger picture that you allow you to walk away with ownership of a
successfully operating business. Examples would be defining the
mission, detailing your values, orchestrating the direction of the
enterprise, leadership, etc. When it comes to leadership Keller
finds it useful to remember the acronym MVVBP. Meaning that you want
to bring five key things to your venture: Mission, Vision, Values,
Belief and, Perspective.
Keller
says, if you stay focused and utilize the energy that comes with
continuous learning, you too can net a million.
How
can you use this information right now?
Focus on The Three L's of
real estate: leads, listings, and leverage. Stick to the basics
because fundamentals win championships. As obvious as it may seem,
treat your job like a real business. Some people may not like this
idea but, the language of business is numbers. To the extent that
you can understand and master your numbers, you will improve the
results you're getting and, your life will get easier. This includes
things like you conversation ratios. It also means holding all, non-fixed,
expenses accountable for improving profitability.
