Keller Williams Realty is probably the most innovative real estate brokerage to hit the scene in a long time. Gary Keller, the author of The Millionaire Real Estate Agent and The Millionaire Real Estate Investor, founded the brokerage along with Joe Williams in 1983. It started out with just a single office in Austin, Texas. Fast forward to April of 2014, Keller Williams had 100,575 agents and was the largest real estate brokerage in the United States!
Some of this success has been attributed to Keller Williams being able to lure top agents away from other brokerages with a 70/30 commission split (as opposed to the more common 50/50 split at the time). Keller Williams also has a particular focus on teams, which allows for agents to better spend their time by delegating lower level tasks to team members. Those team members, usually newer agents, can gain valuable experience working for a team before moving out on their own (or creating their own team). It also allows for more specialization instead of forcing every agent to be a one man shop.
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An Emphasis on Models & Systems
But what I want to focus on in this article is Keller Williams’ emphasis on models and systems. As they put it on their own website, “Keller Williams has always succeeded by leveraging systems to build great businesses.”
Gary Keller notes a passage he read in Unlimited Power by Tony Robbins, “Long ago, I realized that success leaves clues, that people who produce outstanding results do specific things to create those results” (The Millionaire Real Estate Agent, 36).
This passage gave Keller an epiphany. Most people build their businesses backwards. They put creativity at the base and models (i.e. systems) on top, whereas it should be the other way around. He describes this as an upside down triangle that is unstable by its very nature.
Businesses should be built on a model with systems as the integral component. Then creativity should be used to alter and adjust the model. In other words, creativity goes on top of the triangle with a model as the base. This is because creativity, being fluid by its very nature, is simply too all over the place to build a consistent business with. In many ways, this idea is similar to Jim Collin’s concept of “freedom within a framework” that he discusses in Good to Great.
Keller notes that your business (and your personal life) can only go as far as the model you are currently using allows. Eventually, that model will hit a plateau, and in order to breakthrough, you will need to improve the model.
This is one of the reasons Keller Williams is a big fan of teams. They not only allow more experienced members to optimize their time, but they are great for mentoring and transmitting successful models to more and more of their agents. There’s no need to reinvent the wheel, folks.
A Deeper Look at the Keller Williams Model
As an example of this approach, we can look a little deeper into Keller Williams’ model. No business model works and no system is useful without measurable data, so Keller Williams puts a lot of focus on building a system to measure all the important data. As Gary Keller puts it in his book:
“There are three critical areas of focus in your Economic Model. First, you need to focus on knowing the key numbers you must hit. […] Then you’ll have to focus on the number of appointments you must make, the driving numbers in your Economic Model, and the conversion rate you must achieve, the key variable in the equation. (The Millionaire Real Estate Agent, 130)
Most people, according to Keller, are not sure where their money will come from or which costs (marketing, administration, etc.) are bringing results and which aren’t. The first key to any system, therefore, is to track and measure the data coming in so you have something to make decisions off of.
The links to real estate investment should be clear. Tracking your marketing dollars and monitoring which sources are providing the most and best leads is essential to optimize the money and time that you spend.
How to Apply Systems to Your Real Estate Business
But that is just the beginning. Systems can and should be applied throughout your business. We buy and hold, and systems are absolutely essential. Our focus is on mostly houses and smaller multifamily properties, and so we do off-site management. While this is anecdotal, it seems to us that many successful investors top out at around 100 doors. From several, we’ve heard that they have no intention of getting any more. And while that’s perfectly fine, we have no interest in stopping there. It seems to us that one of the problems that many of these investors face is that it simply becomes more and more difficult to manage such a large array of properties even with the help of employees.
The issue is that employees will either need direction or a system, or you will have to let them just do their own thing (I highly recommend against this). Every system you build and every policy you make allows the company to run without you or at the very least, operate without running through you. You simply don’t have enough time in the day or mental energy to make a decision on everything that comes up.
What my brother does in management, for example, is that every time he comes across a new situation, he tries not just to solve it, but also to create a policy for that type of situation. Yes, every situation is different, but they usually can be placed into categories. As time goes on, there are fewer and fewer situations that we don’t have a ready-made response to.
It’s best to view your business as a series of systems. There should be a how-to manual of sorts (not necessarily written down, although that’s good, too) for each major activity, be it marketing, selling, leasing, maintenance, rehab, financing, etc. These systems save valuable time and mental energy to be used on that creativity that rests atop your model versus wasting it on just trying to get through the day. They also allow you to replicate yourself so you can focus on higher level problems and opportunities.
This is the approach that Keller Williams took, and given their success, it should be apparent that such a systematic approach is also a successful approach.
What systems do you have set up that are essential to your real estate business?
Let me know your thoughts with a comment.