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How to Run a Real Estate Business: Finding Wisdom in a Baseball Storm

“Last night I went to a boxing match and a hockey game broke out.”  (Ba-da-bum-ching.) That’s an oldie but a goodie.  I had a similar experience recently:  I went to a baseball game and a business class broke out.  About an hour north of me is the Padres Single A affiliate, The Storm.  If you’re a fan of baseball and haven’t made it to a minor league game, you really should; they are a blast.  But that’s a different story.  Because I attended the game with a friend from the Padres organization, I was lucky enough to meet the Storm’s President, Dave Oster and we got to talk a little business.

What’s that you say?  What does minor league baseball have to do with real estate?  By now you should know that business is business.  In the end, if you’re an agent, you’re running a business and I suggest we take every opportunity we get to learn from other successful business people.  As a matter of fact, I’m going to come right out and say you learn more from someone running a business different from yours than you’ll ever learn going to another 5000 seat auditorium and listening to some “real estate expert” who hasn’t sold anything but seats for years.  (Sorry… another tangent).

When Dave and I first got to talking, my goal was to ask him about his marketing philosophy.  I am always interested in learning what someone can share on marketing.  It’s been my experience that most people (and agents in particular) do a poor job of it.  Actually, that’s misleading.  The problem most people have is they don’t know the difference between advertising and marketing.  Genuine Chris Johnson wrote a post yesterday (and Jeff Brown is famous for them :) ) wherein they lay out that difference, but I wonder how many people are seeing it.  In any case, that’s another post for another day because Dave gave me a humdinger of an answer.  During the course of our conversation though, he said something you almost never hear, yet it may be the most important concept in running a business.  That’s today’s topic.

I was asking, in a very general way, about the group of people who work for him.  After a bit of hesitation Dave said (and I’m paraphrasing):  “It’s hard for me to answer questions about everyone who works here as a whole.  I see them as two very distinct groups: there’s those who create revenue and then there’s everyone else…  everyone else being a cost.”  That is probably the most important concept any one of us will ever learn about running a business.  Sound simple?  Play it through.  Let’s stick to baseball for a moment: the people taking tickets are certainly taking in revenue; so are they creating revenue or are they a cost?  That’s right, they’re on the debit side.  Same goes for the people behind the hot dog window and the ushers and even the guy who turns the lights on.  They may all be important (God knows the beer vendors are important) but they all count as costs.  Who creates revenue?  Anyone whose actions or ideas directly translate into more people coming through the gates.  This is so rarely understood that even the big guys get it wrong.  But if you start to view business, any business… your business, through this lens – profits go up.

Real estate, believe it or not, adapts to this way of thinking quite easily.  If you are a rainmaker, which is to say: if you are someone who goes out and brings in closed business, then you are a revenue creator.  Everyone surrounding you, however, represents a cost no matter how important they might be.  Your transaction coordinator? Cost.  Your trusted assistant?  Cost.  Your buyer’s agent, your receptionist, even your broker?  They are all a drain on your revenue.  Why is this important?  Because small business owners often lose track of the bottom line.  We lose track of who’s important – and that’s a sure way to lose your money too.  The first thing any business owner should do is take a look around and categorize every single person who gets paid… including themselves.  You will normally find there is one, maybe two people who are generating closed sales: revenue.  Everyone else who gets paid is getting paid out of those revenues.  That does not mean what they do is unimportant.  It might even be integral.  But it does allow you to assess your resources with a much more accurate eye.  It also aides in creating chains of command.  Far, far too many people in the work-a-day world believe they are important to a company when in fact their position might be important.  They themselves are simply a cost and their importance is tenuous at best.

There’s one other way to look at this and maybe it will help.  Those who generate revenue are integral to the firm.  Those who are a cost might fill a role that is integral, but they themselves are replaceable.  Get it?  Your assistant might be very important to your success, but he can be replaced.  How do you replace the person who generates actual revenue?  Never lose sight of the ledger in your business.

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  • 4 comments

    4 Comments so far

    1. Ian Greenleigh August 20th, 2009 11:04 am

      Hmmm, will this work again? (jk)

      Our minor league affiliate is owned by Nolan Ryan and managed by his son. Needless to say, awesome. Round Rock Express owns. This guy sounds great, too.

    2. Jeff Brown August 20th, 2009 4:08 pm

      I remember when Dad had an employee on the debit side of the ledger ‘demand’ a raise after only three months on the job. Her job was indeed necessary, as Dad never hired ‘salaried help’ as he called them, unless it was imperative. I’ll never forget what he said, when explaining for the third time, why she wasn’t gonna get a raise.

      “I could train any high school freshman with a solid ‘B’ average to do your job in a few days. You’re as replaceable as a paper napkin. Is there anything else?”

      There wasn’t. But he told me his agents were even more replaceable if they weren’t consistently producing. I never forgot that.

      You always seem to find the real nuggets, Sean.

    3. [...] BloodhoundBlog.com | How to Run a Real Estate Business: Finding Wisdom in a Baseball Storm | Nationa… http://www.bloodhoundrealty.com/BloodhoundBlog/?p=9554 – view page – cached National real estate industry marketing and technology blog written by, for and about real estate professionals. Realtors, lenders and professional investors come together to provide expert analysis of real estate marketing and technology trends., In the world of business there are only two groups: revenue generators and costs. — From the page [...]

    4. Robert Worthington August 21st, 2009 1:26 pm

      I will surely remember your wise words about running a business from the standpoint of a revenue generator versus a debtor. I have never once looked at business in that mindset before.