I was giving a speech in Calgary recently and got completely stumped by a question from the audience.
I was explaining how every industry has an example of a business that scaled beyond the owner by focusing on something that is teachable to employees, valuable to customers and repeatable enough to create a recurring stream of revenue.
I shared examples from the automotive sector and professional services when a woman in the back row raised her hand and called out, “I’m a real estate agent — is there anything I can do to make my business more sellable?”
I was baffled. I raced through the inventory of usual examples in my mind and couldn’t think of one that involved a real estate agent. Clearly, the real estate itself is sellable, but could you actually build a sellable sales agency when the only assets are salespeople? After a few awkward moments, I confessed I could not think of an example.
It is harder to find scalable models in certain industries, and being an independent real estate agent may be one of the toughest. On the flight home, I kept thinking about her question and wondered if any real estate agents had ever built a sellable book of business. Then I remembered Brad J. Lamb Realty and wondered whether Brad Lamb had built a sellable business. Mr. Lamb is a real estate agent who is best known for selling condos in downtown Toronto.
Mr. Lamb has done a good job of scaling his agency beyond himself. First of all, he has specialized in condos in downtown Toronto. That allows him to teach new salespeople the basics of one thing: the Toronto condo market. Contrast that with the typical real estate agent who has to invest years to learn how to sell all kinds of property: family homes, semidetached homes, row houses, brand-new homes, vacant land, fixer-uppers and, yes, condos. Learning the idiosyncrasies of various home types takes years, but by focusing on only Toronto condos, Mr. Lamb’s company has vastly shortened the time it takes to get a new agent up to speed.
The second element of building a scalable company is finding something of value that is not commoditized. One could argue real estate agents are a dime a dozen, but here again, Mr. Lamb has done a good job of differentiating his company by narrowing its focus to condos. His agents have unique knowledge about buildings, rental potential, condo boards, market rates for annual fees and the amenities of nearly every building in Toronto. As a result, if you’ve bought a condo in Toronto in the past five years, my guess is you have at least considered using Mr. Lamb’s company.
The third and final element of building a scalable company is creating recurring revenue. Here I’d have to give Mr. Lamb half marks. By its nature, real estate sales does not lend itself to recurring revenue, but by specializing in condos, Mr. Lamb has created the next best thing: turnover on condos is a lot higher than that on family homes, so we could argue that by focusing on condos, he gets some recurring revenue as buyers move up. It is also likely that he has many clients who buy condos from him as investments on a semi-regular basis. Those repeat customers provide the basis for some recurring revenue.
Real estate sales is a very difficult business to scale up. Good agents make a decent living but they are only as good as their last deal, and most of them retire with nothing much to sell. Mr. Lamb has done a good job of building his business beyond just him, and I dare say he could fetch a tidy sum if he ever wanted to sell it.
Special to the Globe and Mail
John Warrillow is the author of Built To Sell: Turn Your Business Into One You Can Sell. Throughout his career as an entrepreneur, Mr. Warrillow has started and exited four companies. Most recently he transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model subscription business, which he sold to The Corporate Executive Board in 2008. He is the author of Drilling for Gold and in 2008 was recognized by BtoB Magazine’s “Who’s Who” list as one of America’s most influential business-to-business marketers.