It’s a common real estate problem - the principal of a real estate business is the best salespeople in the office and their personal performance is inextricably linked to the business’ performance and profitability. Try as they might, many principals struggle unsuccessfully for years with this issue, never managing to create a standalone business which does not hinge on their personal listings.
But as Matt Sims would tell you, not only is it possible to be a non-selling principal, it’s the only way to create a real estate sales business which is worth something to sell and not just a different job with more headaches. Now running a corporate mentoring program for other business owners facing the same issue, Matt is happy to share the story of his own successful transition to non-selling principal.
Matt’s achievements in his Ferntree Gully real estate business can only be described as astounding. Located 29 km east of Melbourne’s CBD at the base of the Dandenong ranges, the business was 87th in the Ray White Victoria network with minimal market share when Matt bought it in September 2005.
Fast forward to late 2009; it’s now the sixth top office in the network (even though the average sale value in the area is much lower than many offices further down the ladder) with over 20% market share in the local area - and it’s still growing. While Matt was a “selling” principal in the early stages, within 18 months he had effectively extricated himself from personally listing properties, having built a capable team to replace himself.
To set the scene, Matt’s 17 year working career has been entirely within the real estate industry. A salesman for nearly 10 years and subsequently holding a corporate role for three, he spent a lot of time refining the basics before deciding to become a principal. He describes himself as an average salesman, although one suspects this statement is more indicative of his modesty than his ability - perhaps a rare trait in the property industry.
When he took over the Ferntree Gully business, he had one salesman with just a month’s experience. Over the next two months he doorknocked almost frenetically, working on building a database from his appraisals. His next step was to recruit a trainee and an experienced salesman who came from outside the area. For the rest of that year, Matt secured almost every listing for the office while his three staff conducted open homes, handled enquiries and worked buyers.
Three months after buying the business in December 2005, Matt had already finalised his exit strategy from working in the business and by the end of the following year planned to be totally dedicated to working on it. He spent that year personally building turnover while recruiting to fill the gap he knew he would leave in stepping away from sales. Another couple of trainees, a rookie and one experienced salesperson from a competitor later, he took the final plunge and happily, turnover held firm.
He has continued building on that initial success by recruiting a mix of experienced and non-experienced people over the next three years with excellent staff retention - in all that time only one person has not worked out and is no longer part of the team. In total, Matt now has 24 people working in the business including himself; eight salespeople, four P.A.’s, one trainee, four property management staff, a business development associate and five administrative staff.
Matt believes key driver of his success has been his ability to look at the business objectively and evaluate its strengths and weaknesses on a continual basis. At each stage he has dedicated his attention to the weakest link, working on improving that part of the business and strengthening it himself, then recruiting and training personnel to take over from him. Then it’s on to the next thing.
In the sales side of his business, Matt says the foundation of his success is an efficient database. Although he says he’s still learning in this area, he has strict rules about how often every client on the database must be contacted, either by phone or in person. On top of contact from the relevant salesperson, the office generates regular written communication to contacts on the database as well.
The team have agreed a set schedule for canvassing and there’s a mix of group and individual activity.
“The team has voted the prospecting program into place - we operate mostly as a democracy, although I do have certain expectations of outcome. But they have every say in how they get there” Matt says.
Matt also runs a set schedule of training and mentoring for his people, with six set meetings every week. He has fortnightly one-on-ones with most of his staff and monthly Key Performance Indicator reviews.
Fifteen months ago, Matt identified property management as the greatest weakness in his business and set about resolving the issues. He decided to learn everything about how to best operate in property management and fix this side of his business, step by step. For seven months, he worked in property management himself, growing the rent roll and putting effective systems and processes in place. His plan was to be out of the role by the end of 2009 and so far, he’s on track to do so. From a non-existent rent roll four years ago, Ferntree Gully now has 330 properties under management. Less than 100 of those have been purchased over the past two years and the rest are from organic growth.
Looking forward, Matt plans to again focus on the sales team in 2010, adding several new salespeople and growing turnover. He also has the goal to grow the database even further, believing this is fundamental to market share growth.
In his mentoring program for principals, Matt says he sees many people stuck in the rut of being a selling principal. He says the most common issue he hears those principals saying is that no-one can sell as well as them.
“From what I’ve seen, the biggest step to being a non-selling principal is making a mental adjustment.”
“Almost every principal in every office was the best salesperson once upon a time. A principal who wants to stop selling has to understand a few things; firstly, their salespeople don’t need to do it as well as they did and secondly, that they will probably need to replace themselves with three people, not one person” Matt says.
“The margins are different - instead of the office getting 100% of a principal’s commission, it get’s maybe 40% of a salesperson. So, if a principal is turning over $500k in gross commission, they will probably need three people writing $350K to replace him or herself.”
Matt says the key is to coordinate the replacement gradually so as not to shock the bottom line and forcing the principal back into selling.
“I see so many principals who have stepped away from selling two, three times and have ended up back on the tools when it just doesn’t work out. They haven’t set up a solid foundation and then end up thinking it’s just not possible to be a non-selling principal.”
Matt’s advice is to gradually recruit a mix of people - trainees, rookies and experienced people with a solid track record.
“I don’t hold much with trying to recruit “superstars” - I think it’s a mistake in the early stages. You’re better off breeding people, bringing them up on your way of doing business.”
“And lastly, temper it - initially at least you have to have a plan which will preserve your culture. You can think about the option of superstars later.”
