Transform 2017 Week 12 Mark McLeod: The Core Product of Real Estate, Building an Ecosystem
Here are the highlights from our Super Six session with Mark McLeod.
Coach: Mark McLeod, Chief of Growth, Ray White
- The most successful real estate agents are the one who build ecosystems around their communities
- Trust is your core product: the business isn’t about scripts and dialogues, it’s about understanding.
“This is a fantastic business, guys. Take the time, be patient, hasten slowly, and build a business, and I have no doubt you will succeed.”
I have a few really strong beliefs. First one is skill is highly overrated. I’ve seen plenty of people with great skill not making any money.
I try to get people to understand this industry. There’s a lot to be said about scripts and dialogues, but I also have a belief that if you understand what you’re trying to do in the transaction, the scripts and dialogue will make themselves available naturally to you.
So often in our industry – particularly many agents and particularly with a number of real estate coaches with the next shiny thing – the agents want to look at the next shiny thing.
The most successful real estate agents are the ones who build ecosystems. Very much in our business and what we’re doing, we’re working with agents to build ecosystems around their communities and it’s the fact of those ecosystems that people start to grab success.
Every industry in the world has a core product. Every industry in the world has a core product. When you develop your core product, your business doubles, quadruples, goes through the roof. I’m constantly amazed how many people are in our industry that actually don’t understand what our core product is.
What’s McDonald’s core product? Time. McDonald’s core product is time. It’s core product is time, all the other things are products, but its core product is time. In 1982 in Australia, McDonald’s doubled their turnover, what did they do?
They added drive-thrus, 100%. Drive-thrus never changed the burgers, never changed the fries, but it enhanced their core product. When you enhance your core product, your business doubles.
So what’s our core product? It never ceases to amaze me at how many people come into our industry and they don’t know what our core product is. Time’s up.
Trust is our core product. Now, this industry is imbecilic in the way it approaches that. Think about it logically, when an owner calls in four agents, what are they effectively saying?
I don’t trust any of them. So the vendor can’t make the decision on the trophy cascade, so they have to cross ‘trust out’.
Then they go to the next level of decision making, which is fees and methods, and what we don’t understand is that we created the discounters. This industry created the discounters because it refused to drive towards core products.
Let’s talk about Open Agent, your Local Agent Finder, all the lead generation houses. How many of those vendors do you think go to those parties when they trust an agent?
None. We created them as well. The industry goes up in arms, people wax lyrically on Facebook about all their discounts. We created them. Until the industry accepts that we created them, we’re going to continue to be usurped.
Until we fully understand what makes this industry tick. Trust is our core product. Every waking moment what you have to do is build trust. The only way to do that is to build an ecosystem in your business.
Stock is the most overrated commodity in a real estate business. What is not overrated is stock that you can sell and there are two different things. Until you build a proper stock management system, you’ll always have trouble with stock when the market’s flat.
We have had businesses that have never had a downturn, even through the GFC. Their businesses continued to grow because all they do when the market’s flat, they allocate more time to stock management.
So our industry, if we can go over here, is a really simple industry that many people have tried to make far more complicated than what it really is.
It’s like a pipe: stock in, stock out. Depending on your demographic and depending on the economy, there will be a blockage somewhere.
At the moment in Baldivis, the blockage is on stock out. You only have so many hours in a week, so you have to allocate more hours to stock management. Get a report so you understand that.
In a part of Sydney in the last couple of the years, the blockage has been on stock in. So, once you become aware of the flow of a real estate business, you’re able to allocate time, effort, and resources to actually make sure that you are directing your hours and efforts to the right part of your business.
Each one of you will have what we call an ‘efficiency factor’. The efficiency factor is the year divided by your days on market.
So let’s take Nikki again, days on market in Baldivis in Western Australia would be 100, give or take? Yep. So that means that 365 divided by 100, which means that you have an efficiency factor of 3.65. Let’s call it 3.5 so I can do the maths.
You carry 10 listings, you have a clearance rate of 60%. Now, understand that days on markets and clearance rates are like a seesaw. When days on markets go up, clearance rates drop. When clearance rates go up, days on markets drop.
So it’s unlikely that you would have a 60% clearance rate when your days on market are 100. It’s nearly impossible to keep your clearance rate above 50% when your days on markets are 100.
So let’s put that down as 50. You carry 10 listings and you have a 50% clearance rate, which means you sell five out of 10. You multiply that by your efficiency factor, which is 3.5, and on that model there you would make 18 sales for the year.
That’s never enough sales, so what do agents do? Try to get more stock, that’s exactly what you’ve done. So you’ve put more stock, so you’ve taken the 10 to 20, and what’s happened to your efficiency factor and your days on markets?
So you’ve actually tried to fix the problem with the wrong thing because people don’t understand our business. This business isn’t about scripts and dialogue, it’s about understanding and people don’t understand.
Stock is the worst thing you do here. You’ve got to get efficiency through this number, not the front end. What’s happened in our industry is that people think stock fixes everything. It fixes everything when the market’s booming at the front end of the stocking, but it doesn’t fix the back end. An actual fact, it tightens the backend up.
Here’s the problem that’s looming. With social media, with ability for our customers to go and raid us online, all that type of stuff, we start to give customers worse and worse experiences.
What actually happens is that most agents, whatever they’re writing in year two to year three, is what they’re doomed to write for the rest of their careers. Unless you make a substantial change to your business.
Now, what happens is that you can see on the board there, that because most people plateau is because they run what we call an opportunistic style business. They don’t run these structures, so they’ll go to this weekend’s open hoping next month’s stock turns up.
Now, what that does is take an enormous amount of your hours and an enormous amount of your ability to grow. Capacity is a killer. Most people fail because A, they can’t manage the freedom, and B, they just don’t get enough time in the day to do the things that actually matter.
What we need to do, or what we try to do, is good people to build what we call ‘core businesses’. Now, core businesses are where 60-80% of your stock comes from the system. Comes from the database, through the pipeline, into your stock management system.
Now, when we see stock coming from the core, we see a number of things. Already in Western Australia, Nikki, we are seeing high clearances by nearly 20% from people who come through our core channels, why?
When they trust us, what do they listen to? They listen to our price feedback, so they clear more. Once again, not only does trust work at the listing table, trust works at the selling table.
So you get called in by three agents, they don’t trust you. You get the business because it was your turn and/or you’ve got some skills in that area, but then it’s hard to clear the stock because that trust is not driving through.
All stock’s not equal. Stock that comes through database pipeline – through the channel – has high fees, better VPA contribution, better choice of method, and better clearance. So, someone who have 10 listings in Western Australia, that came from opportunistic, and 10 lists from core, completely different agents. One understands the industry, one doesn’t.
Our industry is based upon the development of relationships. It’s relationships that give us the core stock that builds the trust.
Your business is not defined by where you operate, it’s defined by how you think and what you do. It’s defined by every decision that you’re making today not to do something.
The ability to grow a real estate business has nothing to do with your ability to sell. It’s got to do with your ability expand capacity and understand what runs our business.
It’s understanding looking at your business as stock in, stock out. Where’s the deficiency? And allocating hours to those areas.
The guys that I’ve worked with that have gone from 500 to 1.5, I’ve never spoken to them once about how to sell a home because guess what? They already know how to do that. It’s about understanding the things that make the difference.
This is a gift, this industry. People walk up to us and go, “Here’s our greatest asset, please help me with it.” For example, I know from our work that we have a 30% higher selling rate when our agents use vendor reports. If you’re not using vendor reports, I only have one word to say to you, isn’t the vendor unlucky they chose you? That’s the reality of this business. That’s the reality.
This is a fantastic business, guys, take the time, be patient, hasten slowly, and build a business, and I have no doubt you will succeed.