We Are Selling with Lee Woodward
We Are Selling is a weekly podcast about real estate, business and tackling life's challenges. Hosted by renowned real estate industry coach, Lee Woodward, learn from experts in their field and maximise your life.
We Are Selling with Lee Woodward
Building A Profitable Real Estate Team With Break Even Clarity
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We break down why great solo agents build teams that look successful yet leave them with nothing at the end of the month. With accountant and benchmarking specialist Chris Mercer, we lay out the break-even maths, the real cost of hiring, and the incentive traps that quietly blow up EBUs.
• Moving from solo agent to an effective business unit with real overheads and obligations
• The three motives for hiring and why “write more to make more” fails under overhead
• The true cost of staff including superannuation and hidden leave liabilities
• Thinking in deal volume and seasonality rather than just GCI
• Mapping functions before headcount using part-time roles and outsourcing
• Setting a break-even baseline before any splits or bonuses
• Designing incentives that reward contribution without inflating entitlement
• Protecting brand standards and clarifying whether the EBU is a career or a pathway
• Consolidating in changing markets and monitoring numbers with evidence, not ego
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Why Real Estate Teams Fail
SPEAKER_00Hello and welcome back to the podcast We Are Selling. Today I'm doing a topic by request from the industry of something that has gone very wrong. And what's gone very wrong is we see a great single solo agent going well in their career, getting good results, good customer feedback, and then they think their next step is to grow or scale their business. The heading of today's topic is building a profitable and sustainable real estate team. And although this is a brilliant idea, depending on timing and understanding, across the country it's gone incredibly wrong where the pay structures set up by the lead agent had no background or knowledge. It's not their fault. They thought they were doing the right thing. They copied other people. Rang, what do you pay your people? What do you pay your people? And suddenly there was nothing left. The leverage agents coming through at a very young age to learn this craft of real estate sales from the master have earned some incredible income and in some cases too much, which means the team didn't survive and ended in divorce. For all my agents across the country, I don't want to see that fog. Today I'm going to bring some clarity, bring in one of the very best real estate business accounting minds in this country. I'm using a specialist, and that specialist is Mr. Chris Mercer. Now, Chris began his career in accounting and business analysts. He noticed that most business owners focused on revenue rather than profit. Now I say business owners because Chris works with thousands of businesses to show them that difference. And if you're going to run a team, that is a real estate business. It's not just a little team, it's the same principles. Well, after two decades of financial analysis and software development, Chris now does benchmarking and allows companies to get clarity or gain visibility on their numbers. And his system measures and manages and maximizes the profitability. So there's no one more qualified. I'm going straight to the top. Please welcome to our program, Mr. Chris Merza.
SPEAKER_01Thanks for having me, Lee.
SPEAKER_00Now, Chris, in that intro, it's uh a lot you've done there, and how many businesses have you looked at and actually analyzed?
SPEAKER_01So since the beginning, uh you know, uh obviously the time was very white. It's a big group, 900 offices uh around the traps and doing KPI software for the entire group. Then post that time from 2008, my 20th year now with the live group, we've you know, done you know, thousands of businesses over that time doing you know health checks, doing their books, just doing uh reviews or assisting in their strategic growth. So, yeah, several thousand, I would say. That means when I'm looking at the numbers and I say to people, I know what I'm talking about because I've seen it all, that is that's the case. I can tell you what the truth is.
SPEAKER_00One reason I wanted you to appear today, and I really appreciate you giving us your time, is you are functional, practical, it's not emotional. Whereas when people want to build a team, it actually starts out in this soulful, we'll change the world together, but no one's looking at these facts. So today my goal is business maturity, and let's jump straight
Solo Agent To Business Unit
SPEAKER_00into it. Running an A team or any team, you're moving from solo agent to effective business unit. This means becoming a real estate business with people, expenses, systems, and financial obligations. Where does this go, Ron, from your perspective, where a great salesperson who may not have learned business yet finds himself in a pothole with the team?
SPEAKER_01I think it goes back to you've got to go back to the origins of the life cycle of an agent. You talk about the life cycle of a business. Yeah, a business is trying to get established, they're gonna try to find good people, they find out good people are hard to get, then you get good people, and they sort of go through a cash um sort of burn to get through that, and then they might be able to get to an enduring phase where the business can be maintained and operational post-just one person turning out the work every day. The agent life cycle is not much different. Start with people with a lot of energy, a lot of motivation, not a lot of experience, but they're gonna come in and they're gonna want to win. And winning's all about the listings. First of all, they're just trying to survive, and then they go, right, I'm starting to get good at this. Or I heard some guys say, Oh, I should be doing more of this and less of that. So they get a person on to aid them, might call it a buyer agent or so on. That moment they make that choice, they'll think, well, you know, should the business give that to me? Or do they become an EBU? So first thing is, do they have a risk appetite to take on overheads, which means they start each month in the negatives. But the reason someone's taking that risk, I've got three reasons. Is it to win the market share award? Is it to win the most GCI award? Or is it to make more money? And without knowing each person we're talking about, often that can be the misguided truth where they believe if I write more, I'll make more. And that is not the case when you're bringing on overhead. And especially if you do it in a way which says, I'll build the castle and they will come. That means I'll put the team on and I'll do deals. That has no business case. That means it's a lot of hope and a lot of ego. But what we don't want people to do is to think it's hard to map out what these new sort of profit points are that you need to as you increase the cost base of your EBU. And for so many people, it's just the lack of knowledge, the lack of clarity about what those different profit points are. Break even, profitability, maximum profitability. Because at the end of the day, Lee, every agent, every individual has a certain capacity of revenue capability, and you're either fulfilling that to the fullest or you're only half full. And these are the types of conversations that need to be had if you want to understand what's it all about. How do I know when I'm making money?
SPEAKER_00Chris, a common question we're asked in a training perspective, which is not a financial perspective, is when should I put on my next people? And as you know, beautifully explained there, people are going for the award, meaning I wrote the most GCI in the year. What it cost you to do was never brought into it. And I don't want to sound down on this, but today has to hit on these key points where it's gone wrong. And I've had so many great agents who I've coached over the years move into the team-based world and say, there's just nothing left. I did better when I was by myself. And I'm coaching, I'm training, I've got all these things going on, or this person I've just trained up and they've just been poached by somebody else, and they start to feel what that is like and the distraction of that. So that's why I want to have that tone within what we do today. Just to reflect back, when I did the original EBU day in Sydney, we had 330 people turn up because they were interested in this is the next way to go. Because many audios before me have said this is all you need to do if you're not doing dollar productive tasks. And there was this very big theme around you're not successful unless you have people around you. And unfortunately, a lot of people scaled themselves broke. It financially didn't add up. It looked amazing, but the numbers weren't there on what's left over versus turnover. And in that original model, we did bring up that, you know, you've got your lead agent, you've got your leverage agent. And then the one that was foggy was I want my own business administrator, my own operations person, because I want to give red carpet service. I don't want to use the office resources. Now, the office resources were there as essential services, but I don't want to be in a queue. I don't want to wait. I want to do it now. So this decision was made that I want my own person, and a person can be put on. But Chris, could you just explain to our listener knowing the true cost per hour of when you are putting a salary-based person on versus a task-paid person? But we'll start with the salary.
SPEAKER_01So
The Real Cost Of A Hire
SPEAKER_01for the average person who's running an EBU, they didn't come out of an accounting or finance school. Their skill set is deal-doing, negotiating, and you know, they've got the ability to be a dog on a bone. They've got that that killer instinct to to get out there and have the front and the guts to be told no, but they pick up a few yeses and there's a big career to be made out of that. That's a that's the sort of skills required to have the resilience to make it and the have the skill to make it as a lead agent. The second part is, well, how good are you at planning? Because when people don't know what they're doing, they make simple things complex. When you know what you're talking about, you make complex things simple. And this is the simplicity of an eighty-five thousand dollar salary person. I'll make it eighty-four, so it's an easy number. If I divide that by twelve, that's seven thousand dollars a month. If you looked at what you were doing before you put that person on and what you were making, and say you looked at it in a month, it was a month is an easier amount to swallow. I like to look at quarters, um, so that's $21,000 a quarter, because the quarter is a natural season of real estate, but we'll just stick it months so I can make my point. If I went one month before I had nobody and I was running along, and now this month I've put a person on. If I write the same amount of money as I did the previous month before, and then pay them, they get the same com percentage, forget any of the uh percentages, just say it's f 50%, whatever the number is. It doesn't matter what how high or low that figure is. The month where I've got the PA, I'm $7,000 worth off. In GCI terms, depending on your percentage, if it's $50, double that. That's $14,000 in GCI. So where I wrote $14,000 last month and might have got paid, this month I wrote $14,000. I'm immediately got nothing because the payment to the employee agent, the leverage agent, or the internet agent is taking up that first $14,000. So you start negative $14,000 if you want to look at that way. How does that sound? It's a simple analogy.
SPEAKER_00Chris, so good. And just for our listener who's processing that, another error is oh, it's only seven grand, that's one sale. And that would be the big biggest myth where they look at gross commission as real money versus what comes out, what that is, and the cost of the person.
SPEAKER_01There's another part I haven't said to you yet, Lee, that when you look at the total cost of employment of a $7,000 salary, which includes Suba, it's an extra 34%. That's uh leave loading, that is um personal leave, holiday pay, are not accrued and not taken. This figure is 34%. So if I take $7,000, I would always factor in over the five-year employment of this person. That you know, 35% on top of that. So you could certainly see a hidden $3,000 of cost because you've got this liability. Now you don't find out how much that liability is until they leave and you have to write the check on departure. You've got to remember, don't oversimplify things, but as I say, know your numbers. That means I need more than $14,000 to cover the direct costs of the monthly costs of the employee, but I've got some hidden costs too that will build up. Long service leave, all these things. So what that says is the agents tend to be too direct in benefiting their agent teams. They see it as money and money out. In a way, I just said this agent needs to write $14,000 if you get paid seven. That's what a lead agent has to be able to do. They know they write $500,000 to get paid $250,000 or $300,000 if they're on a slightly higher percentage. The thing here is, but when they're rewarding their team, they're almost rewarding these people with a salary from dollar one. So the employees of this lead agent aren't even suffering the I have to write money before I get paid sensation to their own team. So what they start to do is inadvertently spoiling the team, which means that team members never likely to ever want to be a debit credit agent or a commission-only agent themselves because they won't understand how they have to work to make a hundred grand when they're making that quite easily off the back of the lead agent. So we've got this whole thing about one, the real cost of people, and secondly, how they work to be paid. And this is where you create a what a disappointment factor or not facing the reality of how hard it is to make money as a lead agent.
SPEAKER_00Now, Chris, this is such an important part of our program, and I want to speak from a couple of voices here. So all week prior to your consent to come on the program, I hit the phones, I made 35 phone calls, and I spoke to lead agents, I spoke to leverage agents. It really concerned me on one, the leverage agent, having no concept of their salary being that's what you paid to do as a job, versus they would see the gross coming in that we did X amount for the month. I should get a big cut of that, you know, look at the money you're earning or the car you're driving. And there was just no connection to the cost of you. And when we've covered cost, there may be a bonus, but this percentage per sale straight away and no thought to marketing or the next sales or whatever we come through means that all all and actually every EBU bar two were operating with no break-even point. And Chris, that caused the biggest challenge. And then the lister is like, how do I tell them? How do I even explain to them that there's just nothing left over? And they've and and they've just been offered a job by another lead agent uh on more money because he's got even worse knowledge than me. And sometimes it's like, you know what, go, because all yours. What's your thoughts on that?
SPEAKER_01It's a comedy, Shalee. I've just opened this this this this always made me laugh. It was uh Eddie Murphy and um Jerry Seinfeld in that driving cars and coffee thing. And they were driving, and Jerry Seinfeld says to Eddie, he goes, you know, I see two homeless guys talking to each other. He goes, I don't know if it's punching down or not, but when I see two homeless guys talking to each other, I always think one of those guys is giving the other guy advice. So we're not listening to agents who are overpaying entitled leverage uh leverage agents, uh PAs or assistants, and another person wants to snatch them up and pay them even better. Never let a fall or your enemy stop making mistakes. It would be let them go. I'll tell you what, the right conversation should always be to the leverage agent. This is what you need to do to keep your job. You need to be bringing in more opportunities, more appraisals, more deals for me to come in and close. I'm the person paying wages, you need to tell me where you are. This is what you need to do. And I've told you this in our previous conversations over the last 15 years, Lee. That if you think having a PA is like someone jumping in the car with you and going to all your your your meetings together, you don't have a PA, you've got a fan. And there's no money in having a fan. That's just an ego straight. So and so, oh, you were so good in that meeting. Well, that's the worst waste of money ever. What you need is a leverage agent, which means they're out there as a growing up with big boy pants on, making an impact in the marketplace. But what they don't have the ability to do is list or impress people with their own name. These leverage agents only have the ability to be effective by saying the lead agent's name and the lead agent's track record and the lead agent CV to get then a meeting for the lead agent.
SPEAKER_00Never forget that. Very powerful. And Chris, when we look at these models, and there's no right or wrong to this, but there is facts and figures to this. In my research this week, the ones that did seem happier were one, they had great essential services in the business they're in, and that was their stickability. It's why they stick with the company. You know, everything in my AML or my checklist, everything's done. I love it, and I don't need to put on someone to do that role. That's really powerful. The ones that didn't felt it was to the standard they they wanted, and they may want to be doing above what somebody else wants to do, and there's a whole conversation in that, they were using an outsourced person, international team member, like the famous Chelsea who does all my marketing for me. Uh, she's one of my most important team members. She's not on the ground, I pay a fixed fee per month, there is no soup or anything like that, and that's not the reason I have her. She's an incredible worker, and those workers do so well because they don't need to take phone calls, they're purely administration. If someone's making phone calls and speaking, it's a different type of person. But you've got to know when the business can afford that type of person versus where you are now because you're giving it away and you're not returning it back. So you're selling more houses, but there's less money.
SPEAKER_01Let's
Capacity Is Deals Not GCI
SPEAKER_01work out a simple EVU lifecycle. You know, take someone, an individual listing agent, who's gotten success. The average person, from my own experience, can work in a professional, full-serviced office. Okay? I always say 35 sales. So whether it was 30 or 35, but let's just say it's 30, 35. Now, if we take 30 as a number from Nathman Easy, the average commissioner deal in Australia, the Eastern Seaboard, would be around $20,000. That's lower in the countryside and higher in the top end of the markets, but say it's $20,000. 30 deals times $20, $600K. Now, the thing that people forget is the reason you need a PA is because of capacity, not dollars. I've got someone who's averaging $100,000 at 30 deals, they're doing $3 million. They do the same amount of work as the person doing $600,000. So it's not about GCI, it's about deals. Now, when you put the second person on, you go, I'm starting to get busy. And that's because seasonality says you don't do 30 deals at two and a half a month, two and a half deals per month, 30. You do one, two, zero, one, five. And it's the month where you do five auctions and you've got no support other than the offer support, and you just you know you're pushing phone calls off, you're not handling the inquiry and prospecting for the next month. You really are busy and selling, but you're just trying to make sure you get across the line in one piece, especially in today's market, too, where the success rate's driving. So this is where people go, I need some help. Okay, well, the first thing is have you considered part-time help? No, I don't need someone full-time, do you? Do you need a leverage agent? Or do you just need a someone who's like an EA, someone who's a personal, this is a personal coordinator, the admin style.
SPEAKER_00Well, Chris, just on that, if we build around functions before adding headcount, you know, let's identify those functions. Open homes, you've got a stack of opens. There's plenty of people that will work Saturdays and very talented at open homes. Tellemarketing. I myself use a great company called WeCall For You. I give them a call list, they do the calls, I get a report, I don't have to speak to anyone, no one has a siki. If they do, it's got nothing to do with me, and I have that function covered. There's administration, bookkeeping. Chris, you do the bookkeeping for many businesses. You don't need an internal one, that is a service. Office support depends on what's on offer from the office. And you know, an office that offers lower support quite often is paying a higher fee because they're paying you a fee for or paying you a percentage for a service they don't provide. So there's no right or wrong on that. And then there's casual part-time help and off-site specialist or the full-time hire. But the full-time hire, you've really got to, as you beautifully explained before, know that full cost and expectation of what I call their commitment list each week for keeping their role.
SPEAKER_01Yeah. Well, that's that's right. And and just remember this you've got to you've got to remember that when you bring on an employee, you're responsible for that employee being occupied and productive. That is don't turn up and work it out. You've got to instruct them. You need to lead. You need to have a plan. Oh, so why do you employ me? What's your answer? Oh, yeah, I just spoke to someone who said I need to help. You need to have a plan. So a lot of people would be speaking to people like yourself, Lee, talking to the business owners, and this is where leadership in your office. Just you know, I'm a person that says leadership has value. Agents work for good leaders have a big advantage because they're getting sound advice. When you're talking to your mates and you're getting what you think's the truth because people think they know what they're saying, it sounds good, but it doesn't pass the pub test of or the smell test. It's it's it's it's Someone's assertion, it's not based on fact, it sounds good, but it's missing, it's got caps all over it. So for me, first thing you do when you look to put someone on is work out what the roles and the responsibilities and the outcomes are that you would expect for that person to come on to make it worthwhile. What you know, that whole thing, what's success look like? I love it, but that's actually quite a quite a good way to say what would success look like for this. Second thing, Lee, is this we always go back to seasonality. So where should I put that person on? So give the example. If I had a gift store that made little trinket type presents and stuff for people, would I like to start that business on the 1st of December? Or would I start that business on the 25th of January when 50% of your turnover is going to be over the Christmas and New Year period? Now, why would you start the business in January? You must start just before the high season. So you should be putting your staff on just before your listing pipe, which is filling up, is about to explode. So you go July, maybe it's January, because you're getting ready for February. Don't put them on when you're going into May, June, when your listings are coming off and you're just selling the last things. You really are getting ready for your high season. So that's the most affordable way to get them up and running and pay for their pay for their sort of increased cost when you most likely have a big, big settlement period.
Break Even Before Any Bonuses
SPEAKER_00Now, Chris, let's go to this key point of revenue to break even. As people haven't been running a break-even, money comes in, it's split straight away. And no one gave thought to pays, salaries, marketing is a definite cost of sale that must happen to find the next one. The office share that goes back to the business so that you don't have to have the running costs of all the other stuff and all the portals and the tech stack, which is just ridiculous, and then every operating cost. So revenue to break even. Give us a guide on what we need to know about that before bonusable revenue.
SPEAKER_01So there's two numbers to keep this simple. Again, take into account all the complexity. There's the 100% of GCI. That's the total gross commission X GST. Now, why do I say XGST? Because not everyone's running an EBU as an independent contractor. There are a number of agents who are doing this inside a business as an employee. So I've got to have A, you're an employee or contractor is a toggle. Uh why that's important. Well, where's the employee agents? Who are they employed by? So the EBU is the uh person in charge of the um agents, but actually it's the business, the business owner, the person that's got the shop, they're the ones whose employment accounts been used. So never forget that. So if you're an independent contractor, it is your employee, but he may be working inside someone else's company. So that's still valid too. But coming into it, say you do four sales of the month, and I'm using in big numbers because I need I think big numbers give the space, all right? So four sales, I'll go back to my sort of 20 grand a deal, that's 80 grand. And uh four sales is above average, but if you've got a PA, you've got to remember that's there. So just remember there's eighty thousand dollars for the month. Done. All settled, money in the bank. The first thing you've got to work out is what's the agent share of that. Now, the agent share is the 100% less the office share. Now, if you want to work out what that number is roughly, that number, if you're on 60%, I'm just gonna say 60%, that means that the office share is 40%. Now, this depends whether a franchise fee has come off it or not, because some people want 60% of 92 or 60% of 100, they're quite different numbers. So that could toggle a little bit by the franchise fee. But I'm just gonna keep it simple. Let's say it's 60-40. So that means that the agent is gonna have only 60% of that 100% as their share. So they're gonna take $48,000 of that $80, and that's great. Now, the second thing then is, well, what does that mean for the agent? You know, well, if you're trying to look at how much gross commission you have to earn to cover costs, let's go to the cost of PA support, EBU support. We said before it's seven grand, I'll just use that number. I've got that little factor of total cost of employment, about 30%. So if it was generous and said, look, let's make it 20%, because you know, we don't need to worry about long service leave, that's down the track. So let's just go there and say it's 20%. I'm gonna use that number just to have something that's fourteen hundred dollars. That makes it eight thousand four hundred. Those people got calculator out, that's seven thousand plus fourteen hundred. Now there's a bit of cost. Now, that is actually quite that's the that this is the break-even impact of staff investment by an EBU. So just let me finish that. It's a staff investment. Then you've got the personal profile investment of you know, your agent marketing, but there's one other one, which is shortfall of property advertising that you don't get from the vendors. They are more difficult to work out when you'll have that impact each month, because I would like to think people getting all the vendor paid back. Personal marketing is a choice, there's a 10% of your turnover, whatever you've got a number, but you might have a fixed fee. So say we add 2,000 for that. This person likes to market properly, but I'm never gonna put the property marketing shortfall in into my standard cost breaking because that's a discipline, and the lead generator, the lead age is the one doing that. So let's just focus on marketing your profile and the PA investment. So $8,400 for the PA and then $2,000 for that, that's $10,400 of cost. Forget the colours, don't care about them, because that's like for like that $10,400. How much GCI do I need to write to cover $10,400 if I'm getting 60% of the turnover? Well, it's very simple. You divide that figure by 0.6. Well, that's 60%. So if you go 10,400, let's get my coca later here and divide that by 0.6. It's real sound. 400 divided by 0.6, 17,333. That is what you require to cover the cost of that PA and your personal marketing.
SPEAKER_00Now, Chris, can I throw in another question? Let's say the lead agent is on a salary of 120,000 a year, just below the tax thresholds there. If we include that, because the agent can't just wait for the end payday, they've got bills and mortgages to pay as well. So if they had a discipline to say, I'm going on a salary as part of this break-even cost alongside my leverage agent, what are we looking at there?
SPEAKER_01So you're adding $10,000 a month, is that what you're saying? Correct. Or plus $10. That's $27,066 per month in GCI to cover their base salary for the agent and those other costs operating without shortfalls of marketing. That is the standard monthly minimum that you'd have to write to support yourself on that salary.
SPEAKER_00And if we allowed just for some other costs like gifts and things like that that we have, and we may even have someone helping out doing some mailbox drops or they're doing some telemarketing for us, let's round that up to a number. When we look at a bonusable revenue, when should the break-even point be done? Is it monthly or quarterly? But if we if it was monthly for everyone's benefit, what is the break-even before the percentage splits? If there are percentage splits.
SPEAKER_01Okay, so this is the psychology of the deal. I'm gonna say this clearly: it depends whether or not people want to be a leader, which is you're providing people a job and you're paying them to turn up to do that job. And the job is in real estate and dealing with vendors and buyers and doing what you tell them to do. They don't have a voice. They either like the job or they don't. So somehow they've said yes to your job. Secondly, is when you pay them. I would only pay on a quarterly basis for PAs who are doing what you call service PAs. Well, I would have paid it quicker than that. Yeah, it's not another in the country that pays bonuses where people are in an administrative role at all. Maybe an annual bonus. Yeah, here we are. I've got someone on $80,000 and they're going, when's my bonus? Yeah, what? Just think of this like oh, this is how warped it's become. The people that say, well, I'm expecting a bonus every month. Why? You've got to sell at a job. The team's got to hit its targets. So, first and foremost, in a service industry, anyone who's got that service role, even without knowing the mechanics of why. The minimum commission that Reef talk about for a commissionary agent is 31.5% plus super. It works out to be 35%. Now, that's roughly means someone would have to write three times their salary to get paid a bonus. So if I took someone who was on seven grand, forget the on costs, I'm going, well, immediately, I'm not paying you any bonuses unless you're written, you know, our turnovers three times your salary, give or take, which would be $21,000 in comp. And then I go, now I think about what I pay you. I might pay you a higher percentage after that point rather than this low percentage from dollar one. Again, people need to get past. I feel like I need to pay bonuses every month. It's like we're here to build a business and build the juggernaut. Lee, if a listing agent started in a new business, how long would it take them to sell one house and settle it? Just think, list this, list the property, go through it, find a buyer, wait for the settlement after exchange. It's a minimum of eight weeks.
SPEAKER_00It's a minimum of eight weeks for that one transaction. Correct.
SPEAKER_01One transaction? Yeah, I put a PA on and they're talking about bonuses in the first month. What would they have even done? So we've got to get back to reward for effort and risk reward. So I'm saying give people a minimum number of deals you've got to do. Don't get caught up in dollars. Look at the deals. I need to know if my average deal was 15 grand a deal or 20 or 30. Work it out, and that does have an impact. But work out what number of deals you need to do to make sure that you're Abby that we've done enough to cover those base costs. Then after that, I'd be looking at saying as a bonus. The second thing is service standards. Do you want this person to be trying to list property without talking to you and trying to sign it up and bring it back to you when you don't know what the necessary say book to you? Have they lost a few without telling you? They burnt some listings and leads. What's your advice around that lead? We were talking about a leverage agent or admin agent. Again, we've got to make sure the leader is in control. So again, what's the nature of the person? At the start, they're getting the getting their teeth stuck in. But then when you've had this PA with you for a couple of years, they become essentially a debit credit agent inside your business. That's a different standard of maturity. And the fact that is they can list quite effectively when they're using your name, the top agent. They're not that good when they don't have the ability to list with that. So they know that, but they are really, really good at listing. They have great scripts and dialogues, they're mature and all that stuff. They're really, really effective. And you know that they're picking up listings in areas that you don't. That's a different standard. I don't think that we're talking about that type of EVU. So that one does go into what is a typically EVU package of a typical Debra Credit agent. This first one, we're talking about the percentage of every deal. But I just want to understand this. I always say to listing agents, gee, that person's on a good deal because you do 100 sales a year. So every time you list a property, especially the $10 million ones or the highest market ones, that agent who could never list them goes, Go you. Good on you. I'm so happy. I can't wait to see my bonus check. Yet the work's all been done by you. They're just riding that train. That's the wrong incentive package.
SPEAKER_00Chris, there was so much wonderful information in what you just said. And to dive back into that.
Incentives That Protect Your Brand
SPEAKER_00An agent who has a good name in the community has spent 15 years building that, claiming doors, and bringing it all together. And then suddenly someone's under your name, the tentacles can get out too far, and a dramatic drop of standards or words or delivery has happened and it affects your brand. So for all the leverage agents thinking, you know, that white line fever, I can just take the ball over the line myself. Uh, careful then, because you are not the league player. You only have a jersey because the person next to you is leveraging versus being out there by yourself. And at any point you had the decision to be out there by yourself, but you wanted to go on a team because you need protection, you need leadership, and you need guidance. The other thing you just mentioned was, you know, after three years. This is another point. If I was a lead agent prepared to give an opportunity to a leverage agent, I'm not doing it for seven months for you to build your database up under my protection and then become a competitor. I'm expecting a minimum of three years that we work as a team. I'm not here to shield you from the deep, dark potholes of the real estate industry because you didn't want to go and do it yourself. You've got to make sure, and I love that saying, Chris, when all the money passes hands, what did you contribute? And this is a contribution back into a team. That's what a team is. And this is the side, this is why I say the leader has power.
SPEAKER_01Yeah, this agent's great. Yeah, it's always the short man. Yeah, the short guy is always the one sort of causing the fights, but it's because the seven-foot-tall guy behind him, he feels confident in saying this stuff. There's some of this is going on. You know, the lead agents sometimes get it wrong. We've just gone through the mechanics, and I'm talking about risk reward and effort for return, who did what. We want to reward people for that, but not too fast too early. Don't try to make your EVU people feel that they're more important than they are. Essentially, they might do they might just be cleaning the tables. You know, it's really just a menial functional role. They're not all listing agents. If you constantly try to turn everyone into a listing agent, if they had that DNA, they would be on their own. So they're not you. They are definitely not your confidence and risk appetite and motivation. Yet they can be very effective underneath your security blanket or umbrella for market share and market presence. Now that means they become quite effective, but they don't have the right stuff to be themselves. And I'll give you a very simple analogy of this: the backup singers to rock star band lead singers. And everyone says, Well, this person's really, I'm going to step in front. You can just see they just don't have that stagecraft or stage presence to be the lead singer, even though they've got a beautiful voice. What the X factor is, it's very hard to describe. Now, this is just me. Talk about what I've seen over many, many years.
SPEAKER_00This is such a great point. It's actually a good documentary called Um 12 Steps from Stardom. And it's all about the big back-end singers for the Stone, Sting, incredible voices, but they're not that lead person who would sell an arena out of 50,000. In my research, the happiest effective business unit team members I spoke to don't want to be a lead agent. They love being the buyer's manager. They love doing that part of the role. They love doing the openings, getting the data out and then escalating the lead to the lead agent. I really liked that of now, this is my role. I don't see it as a temporary thing before taking on the main role against the person who helped me. There's a whole conversation out there, and our listeners are feeling that right now. And Chris, it's no different to my world of public speaking. I have lots of people say, I'd love to be a public speaker and do a complete salesperson course like you, which sounds romantic, but then you've got to go and put $70,000 down for the venue, the AV, the marketing, the staff to run it, everything to be there. That goes on the line first, and then people have got to show up. And if they don't, you lose that money. Well, it's no different of being a leverage agent who's not putting the money up up front, but wants the reward as we go. Life just doesn't work that way. And in a real estate agent scenario, the money up front is the claiming doors for 10 years and prospecting and mailbox drops to have a name in the community. That just doesn't happen overnight. And as I see everywhere, these brilliant lead agents who've mastered their craft, they are the front performer. They make it look so easy, and it looks easy, and everyone thinks they can do it. But there's timing to it, and for every leverage agent, listen to this, learn the craft properly. Want to talk about protect the future fund and client experience. For future revenue, we have to make sure we're putting money aside for prospecting and marketing, lead generation systems, measure the return on investment, like what is bringing in the return, gifts and deliveries, service technology, and post-settlement support. What's your thoughts on having money put aside, which is part of this break-even point for the future fund?
SPEAKER_01I don't know what the right answer here is. It's like some people might be investing heavily, but maybe in the wrong things, and other people find quite power-for-pound effective stuff. When I see people talk about what's to set aside, of course, set aside what you can. Well done. I do find real estate agents to be what some of the most their diary management and time management is just second to none, right? They teach anyone how to how to how to handle their diary with a you know multiple different expectations from different landlords and vendors and all sorts of buyers that you've got to do. So time is money. I wouldn't get too carried away with bringing it. If you think you need to always have, say, 50 grand a year in growth, and I call it growth, then put that in your budget. But you've got to pick what book you're gonna read this year or what conference you're gonna go to this year, what journals you're gonna read, or who who who you who you're following. And yeah, whatever mentoring you might want to do. I think mentoring is a great thing. I think everyone should have a a person that they speed to who's disaffected is is an arm's length to them, tells them the truth, right? And encourages them to be better, not to that that's how that person will make you make make more money. They they feel that by helping you make more money or saving you from going down further than you need to, that they'll get the reward for helping you win, right? Not they win by just ripping you off and trying to keep the meetings going. So I do think for finding proper people that have got the right motivation to help is very, very effective because it's a lonely place out there. Now that may be the owner of the business you're working in, right? So you can try to find smart ways to leverage the business resources that are available if you respect them.
SPEAKER_00Chris, just on that, I I think at this point of the audio, people have got to make a decision here of decide whether the EBU is a long-term professional unit, or is it a training pathway for future standalone agents? So I've got some principles that say, Lee, I'll pay half of that person. So the lead agents getting great return on investment, but I'm expecting that person to be a standalone agent one day, which is completely fine if the rules of relationship are clear on that particular point.
SPEAKER_01I'm always talking to the person who I'm giving advice for the best interest of them. So if I'm speaking to a business owner, I might have a different view on why they want to maintain the relationship with the PAs than what the EVU is. And that's because you always want to make sure everyone in the business has got a relationship with the person ultimately paying the rent. But if I'm talking to the PA, a professional EVU, always employ your own staff.
SPEAKER_00Never think, oh, I just took that person on because I was doing the boss a favour. Interesting, isn't it? Because the person joins the leader, and if it didn't come in that way, it's like suppliers are part of your A team. Your photographers, signboard providers, telemarketers. These are all part of this team, but again, there's a cost to it, and that's what this program's really bringing to all members of the EBU in a neutral way. Chris, you and I are not affected by the listeners' view of this information. We are doing it as a reflection. We know there's a challenge out there, and I'm hoping this bridges the gap to avoid some of the divorces of people jumping teams, leaving teams when you may have been seeing it wrong, which brings up this point.
Right Size The Team For Cycles
SPEAKER_00You know, why build an EBU? And we started off with that if you reach capacity. I've got some people that, you know, they've been in real estate a long period of time. They think, I'm gonna put these people on because I want time back. I'm gonna go missing a little bit. I'm not gonna do the hours I've done, and that's a different decision.
SPEAKER_01Yeah, it's a lifestyle call. I I'll tell you what, Lee, is nothing more disappointing. When you see people lose hope in their dream. You see the confusion and then you see the frustration. What will happen is when they get to that point, the business owners who let the person run the race, they might not have listened. But ultimately, when people like myself are involved and I'm hearing it, I'll speak to someone and say, So what so what's going wrong? Brent, you've had a record month, yeah. The average person says, Oh, but you're doing 1.5, 1.8 million. You used to be on a hill. And they'll go, yeah. I said, So I'll tell you what, what's the problem? Because no one rings me just to have a chat about how well they're going. I'm talking to people, it's not because life's good, right? So good chat, good to hear you've got a record year. And I just say then, okay, let me ask you two questions. How many PAs have you got in your team? Oh, three. And you? Yeah. Okay. Are you doing 120 deals? No, we did 95. You're breaking even. You need to be doing 120 deals. That's when you'll feel richer. If you're only doing 90, you might want a card person. Why have you got four? So who told you to go to four? Whose model were you following? Whose model did you think you were following, but you didn't actually know what it was? I can make you more money right now, get rid of one of your PAs, and you'll feel richer. But they are stuck to, I've got this plan. I said, Well, what was your plan? Your plan was wrong. You've never done 120 deals. That's the thing. You want to scale your capacity as you scale your success. It's not this width of the team that will get you more listings. You may have a team that's too big for your listing ability, even though your ambition is here to do that. And you're paying for that every month. So what happens is when you pay that for every month and you look at your group certificate at the end of the year, you go, shit, I was making more money when I was just doing 800 grand on my own. That is true. But you don't have stickability. You don't have stickiness in your turnover. You're one car crash away from doing no business, and you got you can't go on holiday when you're on your own. So the business width is important for your ability to be able to sustain high performance. You must have capacity to handle deals when you're not at work. That just keeps you sane because you can only run so fast for so long. I can't answer every question in the world when reviewing top agents, but what I would say is what's the secret to the most successful EBUs? They've gapped the level of their minimum turnover, even in a recession, and the cost of their basic team. What they aren't doing is constantly trying to grow their turnover capacity by saying I need a bigger team. What they've done is they've got to a level of one or two, normally the team that's three, and they're riding around two and a half to three million. They've gapped it. They're safe. It's the guys going from 500 and 600, trying to get to 1.5, and they're trying to do that with extra capacity of people just running around making calls. That's it's 50-50 whether or not you're better off just at that point. But once you've mastered your team roles and responsibilities, you've got your packages. So don't pay people because you think they all should be getting paid top dollar because you want to show success. No, be tight with your money, be clear with your staff, be demanding of your staff. That's how good people make money. And you don't underpay people when you're paying them 80 grand a year to go put flags out and open for inspections and say hi to people. That's not underpaid. I would suggest that that role is a person that's keen to work in property, enjoys dealing with face to face with people and uh likes talking about how the suburbs going, they're property people. You don't need to be all paying them with your ambition, with what you think money's worth to you. Well, the point is they're not you. You don't want to cause inflation in your admin team. You've got to keep those salaries at the right level. And secondly, you don't try to make everyone a listing agent. Because if you put the blowtorch on people that don't have that risk appetite, you'll create anxiety and caution and fear. And they'll feel stressed. They don't want to feel that. That's why they're happy to work for you. Well, that's why you don't overpay them because they have that thermometer, the sort of limit on their ability to be productive. They don't want to feel that they are a listing agent and living and dying by their successor deals. They want to be in a team environment. So pay them that way. So stop overpaying. Take advantage of the resources at your disposal in your business. They're the cheapest and they're the best, and they're relying to your team and all that. And if you don't have it, then go and outsource it. But you don't always have to pay full time for it. You can just pay it for part-time and utilize them and think a little harder about how you spend your money. And the offshore stuff, great, but for every single person and every single role, you should have it mapped out clearly by speaking to people like yourself, Lee, about why those roles are those. And then train them and train them and train them to be up to the standard and the productivity that you expect. You don't want people to feel busy running 10 minute miles. They should feel busy when they're running four minute miles. That's when they should know. That's what busy is in world class. Not they're busy and exhausted when you're running 10 minute miles. That's just not world class. That's not that's not productive enough. And often that's misguided as well. But look, I don't want to sort of sound like a noal. I'm just talking about the general frameworks. And if the agency get it wrong, they just think putting more people on, more money will come in, and therefore they'll make more money. That is not the case when you saw the costs and how much money you have to write extra to cover it. And then that's just a break-even. How much more do you write to get a decent enough return on that investment? And that would be double again. So make sure you're getting full capacity opportunity utilized by doing more deals because you've got more people.
SPEAKER_00Now, Chris, this brings us to a brilliant action of this audio. And if we start with this destination and reverse engineer the business you want, the first thing you would do is define the income, lifestyle, client experience, and working hours you want in 12 months. Then work backwards into the required GCI, market share roles, costs, and activity. Yep. And then from this audio, use evidence, not entitlement or emotion, to adjust the model to protect the relationships.
SPEAKER_01Correct? And I'm going to throw one more in there. Live groups, REAP, dashboard, profit and productivity portal. One of the things people forget is the market goes in cycles. So since COVID, there was a $630,000 settlement year to 2021. The next year, it was about $480,000. So who didn't do $150,000 deals? Sometimes people need to look at this market right now and see the number of deals that will be done this year will be less than what was done last year, no matter how much you want to do more. So make sure you watch the market. Don't think it's always going to be good or always going to be bad, but watch the deals per market. How many listings per month are coming into your marketplace? You need to see the macro environment too, Lee. So I'll call this to all your your your agent listers out there, and I'm sort of a person that's got the independence to call this. This is not a time to be growing your capacity. This is a time to consolidate and watch your money, protect your money, and then wait for the worm to turn. Now the wind turns in markets like post-GFC, post-uh 2016-17 sort of nowhereville market with the Chinese market sort of stopping allowing people to borrow money and buy property in Australia. Post-COVID or pre-COVID, it changes overnight, doesn't it, Lee? It's like a wind change. All of a sudden the buyers are back and people are doing deals. Or the buyers disappear. It's a one-weekend shift. It's like all of a sudden it's gone from, oh bang, it stops. Don't try to predict when that is, but be ready for it. And then when the wind comes back in your sales, get the people you need to come back on there. I know I should get rid of people that have been with you for years unnecessarily, but please, it's not going to be a better story for everyone if the lead agent can no longer afford to pay their bills.
SPEAKER_00Couldn't agree more. So, Chris, let's put this down into some actionable items for people. We've already talked about clarify the destination. Second one would be to establish the financial baseline, that break-even point, map out the work before adding people, like know what these people are going to do, and that's what I call a commitment list. You know, I've just had a person lead my team who was a beautiful person, but they couldn't keep their commitments. So I've hired someone who can keep the commitments. Otherwise, in my world, I've got to do a podcast every week. It's my commitment. I can't not do it. It's not an option. Design the sustainable revenue. I think people have been just giving money away here, there, and everywhere per deal with no break-even. We've discussed that. Protect that future revenue and service. Like having money put aside. Chris, I'd love your view on this one. If I was about to start an effective business unit today and I've listened to this audio, I would work out that breakeven point and say, right, I'm going to go hard myself and put this money aside that I've got three months revenue of the model. So when we do start, I've got some reserves there to do it versus we should be okay. That way I'm already putting money aside and understanding the numbers versus I'm just going to be the best lister in the country. And then from there, my last couple of points and I'd love you to add to this is hire for the role, that fit and longevity. And then monitor and adjust. As you just said, I I don't want to free up that person's future, but we're all going to come down if the unit can't function anymore, we'll end up locked. Chris, final things from you. What should they finally consider in this action plan?
SPEAKER_01They need to remember that winning the bottom line race is what it's really about. But no one's going to tell you that the bottom line race is not about the revenue race. So they'll think it's about revenue turning into bottom line, but that is not the what not the race that wins. The race that wins is the bottom line, your business model. For agents looking at people on stage getting the awards and going, yeah, I want to be that person next year. I don't want to sort of crush people's willingness to go for awards because there is marketability behind it, but I'd rather be paying my bills than winning awards. And so the motivation to grow, no one should ever grow to a position which puts them in vulnerability, makes them vulnerable to economic loss on a significant basis, because no one can force you to do this. So what I'm highlighting is never grow by going and go, I'm gonna go into a loss position so I can grow. No one told you to go put three people on tomorrow and increase your cost by 20 grand a month and just have a go. What you should do is grow and be even more profitable. And you can do that by l sitting down and just looking at the numbers. Everyone should speak to a smart, informed trainer, expert in real estate and map out the numbers. Don't do it back in the envelope and on a whim. Do it with someone who knows what they're talking about and has your best interests at heart. No one's going to stop your ambition. Let's help you fulfill it, but don't do it the dumb way. And just over overconfident, it will just work itself out. That mindset's caused a lot of people, when it didn't work out, to end up just sitting, you know, disgruntled, angry, frustrated, and worse than off, worse off. They could have done it without that pain. They can learn from other people's experience to fast to prevent those types of obvious um disappointments. But they need to take the time to listen and be present to hear it and then put it to action. So you set and forget once you've done it. And that's the best thing I can ask them to do is do the work before they start spending the money.
SPEAKER_00Absolutely amazing.
Profit Dashboards And The Wrap
SPEAKER_00Now, Chris, you've been helping so many officers understand profitability with your platform, your consistent analyzing of this industry. Coming up, you're going to be doing that for the agent. Tell us what that is.
SPEAKER_01REAP dashboard, REAP standing for Real Estate Agency Profitability Dashboard, is my standard view of all the sales and PM division plus directors and the performing and you know underlying drivers of those divisions and productivity. So that's all done on a multi-tened platform. But what we're excited to announce is we're going to add not a business login, but an EVU login. It's going to be called Repage It. And that means we're going to be able to put any EVU out there that would like to see how am I going from a top line, the team's GCI, not the 100% GCI, because you know, at the end of the day we've got to show you what you're making out of your money, the team salaries that you've got below that, the unrecovered advertising from marketing, or the personal profile spend, what you're spending on your cars, client gifts, all these types of consumables. And what it will show is so for them, all the deals you've done, so how many sales, how many listings you've done, we'll be tracking all these non-financial KPIs so we can see the salaries and the number of staff you've got. And we'll be able to show everyone how people are making money. And then because it's on a multi-tenative platform, you'll be able to see who does it well, who's not doing it so well. So you can look out for the pitfalls, why they happen, not because it was someone saying, because of what the data says. So we want to give this opportunity for all the people in real estate, all the EBUs out there, to have a source of knowledge about don't have to guess what you're gonna make. Let's show you how it works, and then you'll be much more comfortable with what you can do to fix it, or keep doing what you're doing well. So I'm really excited to bring that out, and that will be coming online in the next uh six to eight weeks.
SPEAKER_00Well, Chris, in line with that, and I haven't um asked you, and I'm gonna do it live on air, we're about to announce the dates for the future EBU day, which will be in Sydney. Chris, would you come along and show us how that works?
SPEAKER_01I would love to do that, Lee. And anything to help the EBUs out there that are driving a lot of the sales and the risks they take. I'm here to help those people. That's what live the live group set out to do is to help people who are taking a risk and having a go by protecting their bottom line.
SPEAKER_00Absolutely amazing. Chris Mercer, thank you for way over delivering what I needed you to do today, but I knew you were the man for the job, and we look forward to seeing you at the EBU day in the future. Awesome. Thanks, Lee. Today's programme is brought to you by the Agencies Portal, Australia's first AI platform, which saves 7 to 12 hours of admin per listing. It includes agency settlements, which removes 90% of the settlement admin. Reduces risk but keeps you in control. Visit the agencyportal.com.au or call 1300 001 371. I'll Lee Woodward. Thank you for listening and I'll be back next week.