More and more we see the words “Team” or “Group” on for sale signs. This is a growing trend across North America, with large teams even popping up in small towns where you might not expect it.
So why is this happening? Is it an ego contest or is it a solid business decision?
What makes an agent decide to start a team in the first place?
Sometimes, its the plan right from the beginning. Some people get into real estate planning to build a team. This could be an agent's ego or competitive nature, or it could be as simple as their belief that a real estate team is a solid business to own.
More often though, agents don’t fully understand the landscape of the business before they step into it. They end up building a team because they are at capacity doing the business they have and can’t serve all their customers or continue to grow.
A busy agent starts out with baby steps by hiring an assistant. They bring in someone to do the stuff they aren’t good at: checking emails, filing deals, posting their marketing in a timely manner and helping manage their calendars.
If you're working as hard as you can, and you bring in the RIGHT admin, your business will grow a LOT. Pretty soon you will be back at capacity, and the only way to continue growing is through more agents.
From here the path diverges a little:
Some agents grow a small team of 1-2 admins and 1-3 agents and leave it at that
Other agents find the growth exciting and get hooked on leadership
Moving from business operator to business owner
“If you don’t have a maid, you ARE the maid”. This old quote reflects the fact that when things need to get done, it's on you. If you don't have someone else to do them, it means you have a J-O-B.
Building a team means you have the opportunity to start handing off tasks to others, allowing you to focus on what you're great at.
This typically means handing off administrative tasks first. This is universally a best practice: it’s the lowest cost to hire out and often not the agents strong suit if they are talented in sales. At this stage, though, you're still operating your business. You are in the trenches making the calls, serving clients and managing everything else on your plate.
To transition from operator to owner you need to go through the process of hiring yourself out of your jobs again and again. First administrative, then fulfilment (showing buyers, etc) then sales. Eventually, all that’s left is leadership, which is where you begin to fulfil the role of business owner. At some point you may even leverage leadership to someone else in your organization and truly operate the business from the owner seat.
Profitability
A big part of the reason people do this is because they will make more money. Right?
The answer isn't that simple.
Teams do NOT always make more money. Growing requires paying other people for their help, causing your expenses go up. A LOT. This is okay if you write more deals, however it's not always that simple.
The other factor is that, in real estate, the things you do take time to transact and show up in your wallet. If you bring in a new assistant, you start paying their salary and spending time with them for the first few months while they learn the ropes. It's not until they're competent that you'll begin to have more time to invest in sales.
There's a lag in the business before you start seeing results.
With any kind of growth, you have to get through the hump: you need to work it long enough that it has time to kick in. All while supporting the time and expense the growth makes you take on, not to mention your mindset while you figure it all out. Agents bringing on team members need to plan ahead for this.
So do teams make more money? Yes and no.
Teams make a much larger figure on the “top line”. The gross income will be the combination of many peoples contributions, but the expenses will as well. And so it takes more closed deals to make the same net income when compared to a individual agent.
The opportunity with a team is this: When done right, the owner can make a lot more Per Hour. Also, in the long run, the owner can make a much larger overall profit IF they grow the team correctly.
So what does the future hold for teams?
Teams will continue to take on more of the marketplace. Teams make it possible to have specialists serving different parts of a transaction. This leverages the unique abilities of all the group members to create something really special. There are a number of teams which have built out such an outstanding foundation that they are now expanding into outside markets and “powering” others teams with their support. I’m looking forward to watching as these larger businesses continue to develop and grow, it’s a fascinating development which makes sense on a lot of levels and will likely become a more visible part of the international landscape over the next decade.
So is the future of the individual agent doomed?
I don’t think so. Real estate has always been a belly to belly sport and the industry is based on a local product which plays well for individuals starting up. But individuals are definitely facing steep competition. Teams have economies of scale allowing them to bring a lot of value to the consumer. This will continue to tighten the margins of smaller individual operators. Overall, this business continues to be challenging for everyone. But if you have the grit to pick up and chase your goals there will always be a place here for you.
As always, thanks for your time.
Sean