I came across an interesting Facebook post the other day.
Real estate agents were expressing their frustration at the overwhelming number of opportunities to run their businesses. It seems everyone, they said, has a solution – from how to run your business to how to generate leads.
So how do you know if their solution is a good fit for your business?
These questions, and the anxiety that comes with them, happen because many agents, and teams, lack a strategy – a clear set of guiding principles that provides a benchmark for everything they do.
Think about it; when you lack focus everything appears to be an opportunity. Everything looks like the answer.
In this article, I want to introduce you to the idea, and the benefits, of developing a business strategy – one that actually eliminates anxiety and helps you achieve greater clarity about your business.
What is a business strategy?
Business strategy can be defined as a set of priorities that determine the direction of your business. A good strategy provides clarity about what you want your business to become, what markets you’ll serve, how you will compete and what systems you need to operate efficiently and effectively.
A business strategy differs from a plan in that a plan outlines how you will accomplish your strategy. Strategy is much more about the “who, what, where, and why” – whereas a plan is more concerned about the “how”.
For example, let’s say you want to serve homeowners of luxury homes in a specific area of your community. The decision to focus on that market segment is part of your strategy. Positioning your services as the agent who produces the best results for their high-end clientele is part of your strategy. Your plan includes how you will build awareness with homeowners in that market and how you will achieve the superior results.
Strategy is about how you’re unique.
Try as many agents do to be all things to all people, having a strategy requires that you identify a market niche you can serve and finding a way to differentiate your services from the competition. Strategy isn’t about being the dominant agent or team in your market. It’s about serving a segment of your market in a way that is both unique and provides value to your target audience that is difficult for other agents or teams to match.
Think about the hamburger business.
McDonald’s isn’t exactly known for producing high-quality, healthy food. But for it’s target customer – those who want an affordable meal quickly – they are a strong contender.
Then think of 5 Guys. You’ll wait longer to get your hamburger, and you’ll pay more than you will at McDonald’s. For those who want a better product and are willing to wait and pay a higher price, however, 5 Guys has carved out an enviable position in the market.
Then consider the $100 hamburger at M:BRGR in New York. Clearly they are not worried about serving the same customer as McDonald’s or 5 Guys – yet all of these restaurants succeed by serving a well-defined target audience.
So you have a choice. . .
You can continue to chase deals all over town.
Or you can create a strategy that helps you focus. You can identify one or two niche markets where you can build your business.
And you can refine your business to reflect what is really important to your target audience, eliminating any distractions that don’t help you compete.
How to create your business strategy.
You will find that creating a business strategy is an iterative process. There’s a lot of “chicken and egg” to creating a strategy, trying to determine what comes first. You start with your vision, or aspirations, and then find the right market to serve. Then you’ll find you’re going back to your vision to establish benchmarks to determine if you’re achieving the goals you set.
Step 1: Identify a fairly broad vision for what you want to see your business become and how you will measure your progress.
The reason I suggest starting with a broad vision is that it allows for flexibility on how you reach your ultimate goal. If you define your long-range vision too narrowly, you may miss opportunities, that while may not have been part of your original plan, would still enable you to reach your final destination. Your plan will be much more focused in identifying how you will implement your strategy.
Do you want to work as an independent agent? Build a team? Start your own brokerage company?
What types of clients would you like to have? Would you rather work with sellers, buyers or a bit of both?
My vision was to earn over $1 million per year without building a team. All I had to do was to figure out how, right?
I knew there were only three ways to grow a business. Those include;
- Acquiring more clients: This typically entails having administrative and sales support staff. While this is appropriate for teams, I wanted to avoid having to build a team.
- Charging your clients more: In real estate this can be accomplished in three ways; either charging a higher fee, selling higher priced homes – or both.
- Selling more to your existing clients: There are typically only two groups this applies to in residential real estate – investors and home builders. I didn’t want to work with investors because, in my book, they weren’t willing to spend enough. Builders in my area, however, routinely spent $500,000 and up on lots and built new homes priced from $1,500,000 or more.
Step 2: Identify which markets you will serve. Just as important, identify which markets you will choose not to serve.
The truth is, you can’t serve everyone. Nor would you want to.
You should select a target audience that reflects your interests, capabilities and, to some extent, your social circles.
I chose to focus on two target audiences; sellers of luxury resales within a 2.5 mile radius of my home and low-volume, high-end home builders. I had to revisit the first step to identify the goals I had that could be measured. The goals against which I could measure my progress became units listed, sales volume and market share. As those key metrics increased, I knew I was making progress towards the long-term vision I had for my business.
Step 3: Determine how you will choose to win against competitors serving the same markets.
In the area surrounding my home, I surveyed a few hundred homeowners to identify what they wanted most from a real estate agent. The survey revealed that they were most interested in results. They explained that they had heard every promise and seen every dog-and-pony show. What really mattered the most to them was having an agent who could get their home sold quickly, at the highest possible price and with the least amount of stress.
A quick check of our local MLS supported their concerns. At the time, less than 30% of all listings sold during the initial listing period – requiring over 70% to be re-listed. Homes were routinely selling at discounts from the original list price averaging 20%.
It became apparent that the best way to compete was to guarantee superior results to homeowners selling their homes.
Once again, I revisited the benchmarks for how I would measure my progress. This time I had to track the results my clients achieved compared to the market averages.
Step 4: Identify the necessary capabilities that will allow you to compete in your chosen manner.
Suppose you want to earn a high income and your chosen market is low-end homes. In most cases you will need a team to handle the volume of transactions necessary to achieve your income goals. Is your current brokerage firm supportive of teams? If not, your current brokerage relationship may not provide the necessary capabilities you need to achieve your vision. A change may be necessary.
There are multiple options for acquiring the capabilities you need to compete;
- You can develop them from within through courses and training,
- You can identify people with the requisite skills and knowledge to join your team,
- Or you can turn to outsourcing services such as marketing, lead generation and transaction management.
To continue the example of my business, I had to determine how I could consistently achieve superior results for my clients. I examined every step of the listing process, from how properties were being priced to how they were being marketed, looking for ways to improve. This required constant testing to see what worked – and what didn’t work.
Step 5: Determine what systems are necessary for you to build and maintain your capabilities.
From lead generation to how you manage your client relationships and transactions, your systems will largely determine your success. They allow you to achieve consistent results even when things get hectic.
Imagine that your vision is to work with investors who purchase, renovate and flip homes. The way you’ve chosen to compete is to provide your investor clients with well-researched rehab opportunities. You will, therefore, need systems for identifying and analyzing potential properties for their profit potential.
When you have tremendous clarity about your vision for your business, it is easier to ignore the distractions that don’t add value to your business – or your clients. You have a clear picture of your ideal client, who they are, where they live and what their lives are like.
You also know what they value from a real estate agent and you can focus your attention on providing only those services, or results, that they value most.
And it’s easier to identify how you can compete effectively and what capabilities, resources and systems you need to support your business.
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