Today I am going to share with you what I believe has been the single most influential and powerful business principle that I have relied upon during the last 10+ years of being in business. I think about this one principle nearly every day. It has become a filter to help me focus on what is truly significant, not only in business but also personally. It was undoubtedly one of the most important contributing factors that enabled me to sell 50 homes during my first full year in the business. In 2007 it helped me break through a plateau of approximately 50 homes sold, to over 120 transactions in one year. It has also been a key factor in my continued ability to be able to set boundaries within my business and take God-honoring rest time with my family. I knew I needed to write about this powerful principle early on because it will be something I will continually refer back to as I add more content to this blog. So, here it is….
The “80/20 Principle” states simply that 20 produces 80. I was fortunate enough to learn about the power of this principle and its far-reaching implications into every area of my life early on in my career – after reading John Maxwell’s book, “Developing the Leader Within You.” Here are some examples…. Approximately 20% of your education produced 80% of the results; most likely reading, writing, and arithmetic. Approximately 20% of the sales force in any given company generates 80% of the sales. Approximately 80% of your business will be generated from 20% of your lead sources. And the reverse can be true as well…20% of your clients are usually producing 80% of your headaches!! In a another post entitled, “Ripple Effects,” I stated that approximately 80% of the anxiety and stress in your life is being caused by 20% of your problems or concerns. So, how does this principle affect you today? How can you apply this one principle in your business right now so you can see dramatic results in income and productivity? Here is what is so essential for you to understand. You can literally boil your entire career down to two underlying objectives….
One: Define and Re-define what YOUR 20% is
Two: Systematically Delegate or Sacrifice Elsewhere so you can spend more time in YOUR 20%
That’s it!! It’s that easy!
So the question you should be asking yourself right now is: What is MY 20%? What activities are truly income- producing for a real estate agent? These activities will change as your business grows, but if you are selling less than 100 homes per year, I would recommend YOUR 20% to focus on the acronym that I learned from Mike Ferry early on in my career. You have to stay on the P.L.A.N.
Prospecting– this involves talking to “new-people” who may be interested in buying/selling a home to see if they are a “lead”
Lead follow-up—this involves consistently following up on the leads you generated while prospecting
Appointments—(with motivated and qualified buyers and sellers)
Negotiating Contracts
Your success as a real estate agent will be determined by how much time you spend doing these 4 activities every day. It’s important to recognize that MOST of the activities that MOST agents are spending their time doing are NOT income- producing activities, and this is the primary reason that MOST agents are not selling at a high level.
The next question you should ask yourself is: What non-income-producing activities do I need to delegate or eliminate?
- Showing non-qualified or unmotivated buyers
- Meeting with non-qualified sellers ( I will go over what “non-qualified” means in a future post)
- Putting out and picking up yard signs and flyers
- Realtor luncheons and “networking” events with other realtors
- Setting up listings (taking photos, room measurements, installing yard signs, etc….)
- Taking courses so you can get more initials after your name
- Dropping off/picking up checks, contracts, etc…
- Posting on facebook, twitter, etc…
- Running comps
- Administrative paperwork
- Searching for homes for buyers
- Final walk-throughs
- Attending closings
- Checking email and voicemail
- Socializing with other agents in the office
I could go on and on, but the fact is, the majority of what real estate agents are doing on a daily basis is NOT income-producing. So you are looking at this list and probably thinking several things. You are thinking many of these activities “have to be done” to provide great customer service. You might be saying, “Well Mike, I got 3 deals last year from Facebook. How can you say it’s non-income-producing?” Let me give you a few key ideas to ponder….
- The decisions to delegate/sacrifice certain activities will be very difficult. I made a tough decision during my first couple years in the business to NOT GO TO CLOSINGS. What? Why not? Well let’s do the math… I realized that on average I would lose at least 2 hours of time for every closing I attended when I factor in drive time and time at the closing table. Attending 2-4 closings per month equates to 4-8 hours per month, or 48-96 hours per year spent sitting at the closing table. If I spent that same amount of time prospecting, making 12 contacts per hour which would equate to 48-96 extra contacts per month or 576-1152 new contacts per year, then I would likely sell 5-10 more homes every year by not going to closings. Let’s take that one step further – an extra $15,000-$30,000 per year assuming the average commission check is $3,000. You may be thinking I made a decision to give poor customer service. I don’t believe so. I implemented a system where I went over the HUD1 from my office with the client prior to them going to closing. I prepared a “What to Expect at Closing” document to send to them prior to arriving at closing, and I made sure all of their questions were answered before they got there. Whenever possible, I arranged for the closing to be at my office so I could simply “pop-in” to say hello and thank you very much for your business, and then get back to work. You will often have to give up what is “good” for what is “best” during a certain season of your business. This is one example of the way I applied the 80/20 in my career.
- It’s not always about the fact that you made money doing a particular activity. You must take every decision a step further and ask…How much money could I have made if I spent that same amount of time invested in a different activity? I find this question to be very important when it comes to things like social networking, phone time, etc…
- It’s not about being BUSY! Everyone is BUSY! It’s about being PRODUCTIVE! It’s probably fair to say that most of the agents in your office are BUSY, but few are highly PRODUCTIVE.
- Simply defining what “type of clients” you will work with will make the 80/20 much easier. Are you willing to work with buyers? If so…what type of buyers will you work with? What type of sellers will you work with? Early on, I decided to set very strict parameters on pre-qualifying the clients I worked with. This decision gave me lots of extra time to be more efficient, spend more time at home with my family, eliminated lots of unnecessary headaches and frustration, and ultimately gave me greater control over my business.
- Keep in mind…YOUR 20% will change as your business grows.
I hope this helps you understand the fundamentals of the 80/20 principle. There are many more applications for 80/20 that I will discuss in future posts but the foundation has been outlined here. This one principle should bring focus and clarity to your daily schedule and help you evaluate where you should be spending your time. I have found that the greatest leaders scrutinize every minute of their day and invest their time wisely. In fact, they will tell you that much of their success came not from what they chose to do; rather from what they chose not to do! …So go find YOUR 20%!
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