The Holy Grail of Business: Repeat, Refer, Review
The majority of businesses utilize some variation and combination of these basic lead generation models:
earn their new customers from face-to-face interactions,
earn their new customers through other business referrals and relationships,
find new customers through marketing programs, or
earn new customers with the Cadillac of business models:
Repeat, Referral, and (Internet) Review (“3R” model).
Face-to-face interactions with potential customers are highly valuable, but as your business grows, they come at a high cost for your most treasured commodity: time. Finding customers through marketing certainly is common, but it does take a toll on your finances. It is the 3R model — Repeat customers, Referrals from past customers, and online Reviews of past customers—that form the foundation for a highly successful business.
Why?
Because, once established, a 3R model – and we could add a fourth R for Relational – is self-generating.
Once you have earned the reputation that makes past customers want to refer you to new ones, and to take the time to post Internet reviews that further drive new customers to your business, you have built a mighty, highly sustainable machine. Your reputation does the heavy lifting for you, and you no longer have to spend time and money trying to drum up new business. Rather, that new business comes to you.
Essentially, a 3R business is like benefitting from good karma: the world rewards you for having done a great job during a prior experience.
3R is Not for Everyone
Developing a 3R business is not easy. People who lack the passion, time, or energy to provide the general public with the level of quality service that generates repeat business will never build a 3R business. And, eventually, they will either go out of business or simply burn out.
These agents will work like a hamster on a wheel each day, yet fail to earn their next customer because they did not provide sufficient service to make their past customers want to work with them again. They devote all their time to getting a customer, and none to keep them. They do not even reach the first R: repeat business.
The 87%.
Sadly, I have personally seen many real estate agents (and teams) burn out this way, and then simply disappear from the real estate scene. I’ve seen them work hard to get a customer, only to then fail to provide the top-level service needed to bring that customer back. Or, if they provide good service, once the transaction is completed, they fail to have contact with those customers again in order to develop them into a 3R customer base.
For those agents, in their short-sightedness, it is often about quick money, and not about service. And so, inevitably, within a five year period, they end up leaving the business to return to life in a W-2 job. They become part of the reason that the failure rate for new real estate agents is so high: according to a 2014 NAR study, a staggering 87% of them fail within five years.
They become what some in the industry refer to as “cream of the crap,” offering little or no value to the public until they eventually realize they don’t have what it takes to remain in this highly competitive profession. Harsh? Sure. But often true.
Sometimes, though, within that 87%, are a mix of agents who do provide great service but couldn't figure out how to generate customers, because sales -- getting a customer – requires a different skillset, often a different personality, than what is needed to run a successful business. And they fail to acquire the skills and knowledge required to do both.
Sometimes, these 87% may fail because there is so little profit pie left after their commission splits, such as a brokerage that takes more than 30% of their gross revenue off the top. When they end up losing their profit margin, essentially selling houses to make their broker rich while they do all the work, they eventually go out of business.
In many ways, that 87% failure rate is not surprising. A successful real estate business requires that you not only generate business and consistently provide great service, but also hire and manage other people for leveraging, plus understand finance and accounting.
Often, you end up moonwalking your way out of real estate sales tasks using people and technology, and end up becoming a recruiter and leader. That all requires a fire-in-the-belly and a wide-reaching skillset that, frankly, most people are not equipped to handle, choose not to handle, or just aren’t willing to learn.
The 13%.
But what about the remaining 13% of agents who beat the odds to make it through the start-up phase? These are the agents with whom Momentum often seeks conversations to learn what makes them survive and thrive. What they tell us is enlightening.
Some of them may already be service based and building a 3R business. Others may simply have the grit to keep going, not clear on what they are doing right or wrong, but determined to make it anyway.
Many of them have the fortitude, and simply lack the knowledge and skills, to run a business. They may be hitting a ceiling because they don't have the support, systems, scripts, or business plan that will work with their lifestyle.
After working with literally hundreds of agents over the past few years, I find it isn’t hard to identify agents who are relational rather than transactional.
The 1%
Within that 13% of agent survivors, reside the cream of the crop, what our local MLS (and I personally) consider about 1% of agents who are doing it all—great service without burnout.
How do we identify the 1%? Their business grows each year, along with their level of service, as they tweak and modify their business to become more automated and efficient, yet remain a relational business model.
After working with literally hundreds of agents over the past few years, I find it isn’t hard to identify agents who are relational rather than transactional. One hint is to check out their website. Is it about them, their team, or the customer experience that they can provide? What is their profile focus? Is it a big picture of them (big ego/ level 1 leadership), of their team (compassionate leader), or is it related to their brand's reputation for service (big picture thinker)?
Great Service; Little Profit
Within the universe of great relational agents and teams, there are many that post impressive sales numbers -- but little profit.
We’ve noticed them as we have attended conferences, spoken at major events, and rubbed shoulders with Mega agents and teams. Often, they are great at providing service but lack finance and accounting skills to tell them what their margins are on each sale. They might, for example, hire too many agents that don’t produce—often failing to train them and set expectations—and that eats into their profit. Sometimes they end up going backwards, giving up and going back to a solo agent model who works really hard and then eventually burns out.
Big Players Come out When a Business Starts to Die
We have observed a lot of the real estate businesses stalling out, burning out, just plain dying off.
And as that happens, we’ve seen the big players like Zillow, Realtor.com, and other iBuyers, swoop in to grab market share. That is easy to do when you have a business model that is scalable and does not need to utilize full-service real estate agents.
These big tech companies are spending their time working on their businesses while the entire agent community is spending their time in the business, unable to see the forest through the trees.
Call to Action
It's time for an industry wake-up call. Real estate is a relational business and the key to success is building a customer base that works with and for you. If you are dedicated to service as your business core, but finding it a challenge to get your business fully operating as a 3R model, give us a call. We’ve been there and done that. We have developed solutions for the problems you face.
And if you are already among the great relational agents, I applaud you.
You are the true professionals, and I trust you will continue to grow. Keep it up! We love you.
But, if you ever lose motivation or want to brainstorm, contact Momentum. Seriously.
Because this isn't just about Momentum as a brokerage, it’s about saving an industry from itself.
We are committed to helping service-based folks grow and take over the business of buying and selling real estate in Florida. Are you interested?
Learn more here: https://www.momentumjax.com/mission
