How many of you entered this business, either as a real estate agent or a mortgage originator, because you liked the freedom it afforded you? My guess is that most of you did. It’s wonderful to be able to set your own hours, develop your own method of doing things, not have a limit on how much you can earn, and generally work without anyone staring over your shoulder. But that freedom you desire so much doesn’t come free.
What most people don’t realize is that when they choose to become an agent or originator they are also choosing to become a business owner. Unfortunately, not many of us understand what that entails. We’ve come from a corporate environment or maybe we’re fresh out of college. Either way, we’ve grown accustom to having other people tell us what to do – we have an employee not an owner mentality.
Develop a Business Model
If sustainability is your goal then you must begin to think like a business owner. You need a business model that defines goals and activities. You need to have the metrics in place to measure the efficiency of what you are doing. You need to understand the return on investment (ROI) of your time and money.
For example, most people in this industry don’t know where their referrals come from. Is that marketing plan you spent hundreds on bringing you referrals? Or is working your database consistently the main generator? You need to be able to answer these questions if you hope to build a sustainable business. You need a predictable model.
Predictability comes in measuring activities and efficiency rates for getting referrals – the lifeblood of this business. What happens far too often is that we get lazy when times are good. We become reactive order takers; too busy to maintain the activities that will keep business coming to us when things slow down. And when business does slow down, we quickly fall into a scarcity mindset.
It takes discipline to keep the scarcity mindset at bay. It takes having a plan that you work the same way regardless of how busy you are. It takes doing activities that you know will generate business consistently no matter what. If you stop working your plan, your plan will stop working. It’s really that simple. This business is all risk, all the time. You must be actively focused on earning partner referrals from the very beginning. If you build a predictable referral model, and you keep the discipline to work it even when you are busy, you can create sustainability.
Key Components of a Good Business Model
A business model for sustainability starts with an effective business plan. Research states that only about 5% of people in the mortgage and real estate industries have any kind of business plan, let alone one that is effective. There are 3 major reasons why you need a business plan.
First, it allows you to share your strategy, priorities, and specific action steps with your spouse, significant other, management team, and partners. You want others to support your business plan so you need to share it with them so they can align their actions with yours or at least understand when you might have to put in that 60 hour week.
Second, it helps you to deal with displacement. When you consciously decide to spend your time or other resources doing a particular thing to move your business plan forward, you’ve also consciously decided not to do something else. That is displacement. Being aware that you’ve already made these decisions keeps you from falling into distraction traps.
Third, it is the primary vehicle by which you grow your business and in turn develop new business alliances and referral partners. Here is where the metrics start to pay off. They give you the data for what you should be doing every day and help you understand the levers that control the desired output you want.
A solid business plan includes the following:
- Business vision
- Production and activity goals
- Levers (where you get business and how you plan on increasing those resources)
- Non-negotiable activity plan
- Marketing plan
I also include my I AM Statements for business as a reminder to focus on mindset as well.