Building Your Team: Hiring & Compensation

Chapter: Building Your Team: Hiring & Compensation

This chapter explores the critical aspects of building a successful real estate team for solo agents aiming for high performance. We will delve into the strategic hiring process and the science behind compensation models, ensuring your team is motivated, productive, and aligned with your business goals.

1. Strategic Team Building: The Foundation for Growth

Many agents prematurely focus on sales support, especially buyer agents, neglecting the importance of a solid administrative foundation. Salespeople often lack the necessary systems-thinking and implementation skills critical for business efficiency. hiring administrative support❓❓ first allows you to concentrate on high-value activities: lead generation, buyer appointments, and listing appointments.

1.1 Prioritizing Administrative Support:

• Rationale: Frees up your time for core revenue-generating activities.
• Sequence: Your first few hires should be administrative, tailored to your production limits.
• Goal: To eventually dedicate yourself exclusively to lead generation, listing, and selling, with your team handling all administrative tasks.

1.2 Graduated Sales Team Expansion:

• Rationale: Avoids overwhelming you with sales management tasks prematurely.
• Progression:
  1. Showing Assistant: Handles buyer showings, allowing you to focus on consultations, negotiations, and offer preparation.
  2. Buyer Specialist(s): Manages the buyer side of transactions, allowing you to dedicate more time to listings.
  3. Lead Buyer Specialist: Manages other buyer specialists and showing assistants, ensuring accountability to business goals.

1.3 Key Administrative Roles:

• Marketing & Administrative Manager: Often your first hire, eventually managing the entire administrative team and helping implement systems and tools.
• Transaction Coordinator: Handles contract-to-close processes, vendor management, and client communication.
• Listing Manager: Creates CMAs, manages listing marketing, and handles seller communication/administration.
• Lead Coordinator: Receives, sources, assigns, and tracks leads through a database.
• Telemarketer: Generates leads through outbound calling.
• Assistant: Provides general administrative support.
• Runner: Handles physical tasks outside the office.

Example: Imagine you are spending 20 hours per week on administrative tasks. Hiring an assistant at \$20/hour (costing \$400/week) could free you to spend those 20 hours on lead generation, potentially yielding significantly more revenue. If your average commission is \$5,000 and you convert just one additional lead per week due to the extra time, that’s a \$5,000 increase in revenue against a \$400 expense.

2. The Millionaire Real Estate Agent Organizational Model

The ultimate goal is to create a “7th Level” business, where you can step out of day-to-day operations and earn passive income. This requires exceptional talent in key positions:

• Marketing & Administrative Manager: Drives lead generation systems and manages the administrative team.
• Lead Buyer Specialist: Manages buyer business and the buyer team.
• Lead Listing Specialist: Manages the seller side of the business.

These three individuals become your key points of leverage.

2.1 Visualizing the Team Structure:

Imagine your business as a three-legged stool. Each leg must be strong to provide stability:

1. Administration: Upto 5 members.
2. Buyer Team: Up to 5 members (including the Lead Buyer Specialist).
3. Seller Team: Up to 2 members (including the Lead Listing Specialist).

2.2 Job Descriptions & Performance Standards:

• Every position must have a written job description outlining core responsibilities and performance standards. This ensures clarity and accountability.

3. Scientific Hiring Practices: Finding & Attracting Top Talent

Continuous talent acquisition is crucial. Even with a stellar team, proactively seeking potential replacements ensures resilience.

3.1 Seven Recruiting Sources:

1. Ads: Local newspapers are often effective.
2. Allied Resources: Leverage your network of vendors (title companies, lenders) for referrals.
3. Job Websites: Target local job boards and real estate-specific platforms.
4. Temporary Employment Agencies: “Try before you buy” approach, but candidates may❓ also be uncommitted.
5. Permanent Employment Agencies: Screened candidates but typically involve placement fees.
6. Other Agents in Your Marketplace: Seek individuals looking for career changes or growth opportunities.
7. Real Estate Schools: Tap into newly licensed agents without pre-existing bad habits.

3.2 Example Advertising Copy:

“Immediate opening for assistant to assist real estate executive. You should be an organizer, a fast learner, a positive person, and a great communicator. Good word-processing and computer skills are a must. You’ll work in a fast-paced real estate office in ____(City/State). We offer an exciting atmosphere in a people-oriented business. This is not an entry-level position. Your first step is to send your résumé to ___________(e-mail) or fax to ____________(fax number).”

4. The Science of Compensation: Motivating & Retaining Your Team

Developing a compensation model that attracts and retains talent is crucial for long-term success.

4.1 The Nine Major Compensation Options:

1. Salary: Primary for administrative and back-office staff. Be competitive within your local market.
2. Commissions: Primarily for sales personnel (buyer specialists, listing specialists).
3. Pay Expenses: Salaried employees typically have all work-related expenses paid. Commissioned employees may have some base expenses covered.
4. Bonuses: Tied to specific, quantifiable goals (individual or company-wide). Paid annually is recommended to accurately assess profitability.
5. Profit Sharing: Shares a percentage of net profits with eligible employees. Requires transparency and open books.
6. Retirement Plan: Start with simple options like a non-matching 401k or a simple IRA.
7. Insurance Benefits: Can be cost-effectively outsourced through a Professional Employer Organization (PEO).
8. Vacation Time and Sick Leave: Standard benefits to ensure employee well-being and work-life balance.
9. Equity Opportunities: Consider offering equity in new real estate ventures or spin-off companies to reward exceptional contributions.

4.2 Compensation Models:

• Administration & Accounting:
  • Salary at market rate.
  • Paid expenses.
  • Aggressive bonuses or profit sharing.
  • Retirement plan, insurance benefits, and vacation/sick leave.
• Sales & Marketing:
  • Commission-based for buyer specialists, salary-based for seller specialists (can evolve).
  • Some expenses paid.
  • Aggressive bonuses or profit sharing.
  • Equity opportunities for key performers.
• Management:
  • Salary at market rate.
  • Paid expenses.
  • Aggressive bonuses or profit sharing.
  • Retirement plan, insurance benefits, and vacation/sick leave.
  • Equity opportunities for key individuals.

4.3 Mathematical considerations

• Employee Value Proposition (EVP): this is the total value that an employee receives from their employment, encompassing salary, benefits, career development opportunities, and work environment. Maximizing the EVP relative to compensation cost increases employee satisfaction.

• Compensation to Revenue Ratio (CRR):

  • CRR = (Total Compensation Costs) / (Total Revenue)
  • This metric helps ensure that employee compensation is aligned with revenue generation.

• ROI for Training: To ensure the costs associated with training and onboarding new employees are justified.

  • ROI = ((Increase in Revenue from Trained Employee - Cost of Training) / Cost of Training) * 100%

4.4 Profit Sharing Plan Example:

• Time period: January 1 through December 31 of each calendar year.
• Eligibility: Must be with the company for six months to participate.
• Losses: Carried forward indefinitely. Losses are never forgiven.
• Plan Choice: Employees may choose between their current bonus plan or the profit share plan, but not both.
• Maximum Profit Share: Profit share dollars not to exceed 50% of base salary.
• Payment Timing: Profit share dollars to be paid at year-end.
• Termination: Should employee leave prior to year-end for any reason, the profit share for that year would be waived.
• Ownership: Current company owners will not participate in the plan.
• Profit Sharing Pool Creation:
  • First \$100,000 net profits = 0% Profit Share
  • Second \$200,000 net profits = 5% Profit Share
  • Above \$300,000 net profits = 10% Profit Share

• Distribution of the Profit Sharing Pool:

  • Each employee receives:

    • 1 unit per year with the company
    • 1 unit per \$1,000 of salary

  • Example:

    • John has been with the company 2 years: 1 x 2 years = 2 units
    • John makes \$36,000 per year: 1 x 36K = + 36 units
    • John’s TOTAL UNITS = 38 units
    • Total units of all people in the company = 380 units
    • John has 10% of all the units: 38 / 380 = 10%
    • John receives 10% of the pool, not to exceed 50% of his base salary.

Example: Assume profit = \$300,000; profit share pool = \$10,000, John would get \$1,000 (10%). if profit = \$400,000; profit share pool = \$20,000, John would get \$2,000. if profit = \$500,000; profit share pool = \$30,000, John would get \$3,000

4.5 Key Compensation Considerations:

• Reward what you expect. Tie compensation to desired behaviors and results.
• Fairness and transparency. Ensure your compensation model is perceived as fair by all team members.
• Flexibility. Adapt your compensation strategies to evolving market conditions and individual performance.
• Employee Lifetime Value (ELTV) A forward-looking metric that estimates the total value an employee will contribute to the organization over the course of their employment.

4.6 Legal considerations

• Always consult an employment lawyer to make sure your hiring and compensation policies are in compliance with local laws.

5. Top-Grading: A Continuous Pursuit of Excellence

The “top-grading” philosophy involves continuously seeking and acquiring top talent. Never stop scouting for individuals who can enhance your team, even if your current team is performing well.

Conclusion

Building a high-performing real estate team requires a strategic approach to hiring and compensation. By prioritizing administrative support, focusing on key leverage positions, implementing scientific hiring practices, and developing motivating compensation models, you can empower your team to achieve exceptional results and propel your business to the next level. Remember to reward desired outcomes, maintain a mindset focused on continuous improvement (top-grading), and foster a culture of teamwork and accountability.