Talking to Lars Hedenborg about building a successful real estate business for episode #49 was one of the most fascinating conversations I have had on The Morales Show. Hedenborg, founder of Real Estate B School, the Business Freedom podcast, and author of the book Scale or Die, is a fascinating example of how building a successful real estate business is a combination of smart sweat and smart mindset -- and what I mean by ‘smart sweat’ will become clear as I explain what Lars told me about his journey in real estate and how he got to the point where he works one day a week while selling hundreds of homes a year.
How Lars Hedenborg Built a Successful Real Estate Business
Looking back on his career, Hedenborg told me he was surprised with what he was willing to do -- and put up with -- to build his business. He started by working for a local agent as an investor, before getting his license and working as an agent. He worked seven days a week for 22 months and sold 71 homes before he realized that he was letting work keep him from being with his son as he grew up. He didn’t want his business life to get in the way of things that mattered, and so he took a radical approach to reevaluating his career: he decided to value his time.
According to Hedenborg’s calculations, despite his wild success at selling homes, in those first 22 months he was working so much that his hourly income was only $18. He decided then and there that he was going to get to the point where he was making $250 an hour, or $500,000 at 40 hours a week. With that mentality, he was going to sweat smart, only doing the most valuable-per-hour work and delegating the lower-value work to others. He started small, spending a couple years getting to $50 an hour, but soon enough he reached his goal.
Why a Time Study is Important for Building a Successful Real Estate Business
What Hedenborg explained to me was that this kind of personal business development is applicable to anyone, not just real estate agents. Having the mindset that your time is valuable, and working toward optimizing your use of time, is vital to success in any business.
At the Real Estate B School, the first thing they have their new students do is a ‘time study’ called the Business Freedom Planner. For two weeks, these students document their use of time in 15-minute increments from the moment they wake up until the moment they go to sleep. While these kinds of studies show just how much time we waste on social media and television, they also help give a sense of exactly how you spend your time working, broken down by task.
By figuring out which tasks are taking the most time, but pay the least, you can then begin to understand what activities you should begin delegate, hiring administrators and employees to do this low-value work for you. Only by ridding yourself of these time-wasters will you ever manage an hourly salary that supports a life of financial freedom.
Hiring Your First Assistant
It is shocking, but 85% of real estate agents don’t have administrative support, even though the overwhelming majority of their daily tasks are administrative. Yet at some point, you have to focus on what makes you money: making sales. As you scale, Hedenborg suggests that you spend 10% of your topline GCI on administrative support: if you’re making $200,000 over 20 deals, $20,000 of that should go to an administrator.
While that may seem like a lot, you only need to save three months of that salary before you hire, which is only $5,000. Yet with that 10% spend, you can probably make $100,000 more in a year just with the time you have freed up. As you continue to scale, you’ll need to hire more administrators and employees, and this is why it’s good to think about your business processes as scalable systems. Lars: “How would you have to think about your business differently if you had to replicate it 10,000 times?”
Don’t Get Caught in the ‘Attract, Convert, Deliver’ Cycle
In real estate we have a saying: “Attract, Convert, Deliver, Scale,” but Hedenborg noted that agents get into what he calls a ‘vicious cycle’ of “Attract, Convert, Deliver.” Agents attract a potential client, convert them to a listing agreement, and deliver their service by selling their homes. However, since they spend all their time being hands-on at each stage of the process, when they have delivered their service they must go back to attracting new leads, meaning there is never time to scale!
The reason that delegating is so important to building a successful real estate business is that only with a support staff who can attract and convert leads while you deliver, you will never be able to grow, forever stuck chasing new clients instead of spending time scaling your business.
If you think you are trapped in this cycle, head on over to https://realestatebschool.com to check out Hedenborg’s podcast, a ton of free tools that can help you understand where your time is going, and to sign up for a coaching session with Lars. And don’t forget to watch Episode #49 in full, Like the video, and Subscribe to our channel.
