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 has found a way to scale beyond the owner by focusing on something that is teachable to employees, valuable to customers and repeatable so as to create a recurring stream of revenue.
After sharing examples from the automotive and professional services sectors, 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?'
The question baffled me. 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 tangible assets in real estate are sellable, but could you actually build a sellable sales agency when the only assets are the salespeople? After a few awkward moments, I confessed that I could not think of an example.
It's harder to find scalable models in some 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 if its eponymous owner had built a sellable business. Lamb is a real estate agent best known for selling condos in downtown Toronto.
Lamb has done a good job of scaling his agency beyond himself. First of all, his business is highly specialized. That allows him to teach new salespeople about one thing: the Toronto condo market. Contrast that with the typical real estate agent who has 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, 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, Lamb has done a good job of differentiating his company by narrowing its focus. 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 bought a condo in Toronto in the past five years, my guess is you at least considered using Lamb's company.
The third and final element of building a scalable company is creating recurring revenue. Here I'd have to give Lamb half marks. By its very nature, the real estate sales business does not lend itself to recurring revenue. However, by specializing in condos, Lamb has created the next best thing: turnover on condos is a lot higher than on family homes, so I could argue that by focusing on condos, he gets some recurring revenue as buyers move up. It's also likely that he has 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 are only as good as their last deal, and most retire with nothing much to sell. Brad Lamb has done a good job building his business beyond just him, and I dare say he could fetch a tidy sum if he ever wanted to sell it.
John Warrillow is the author of Built to Sell: Turn Your Business into One You Can Sell. He has started and exited four companies. Most recently John transformed Warrillow & Co. from a boutique consultancy into a recurring revenue model subscription business, which was acquired by The Corporate Executive Board. In 2008 he was recognized by BtoB Magazine's 'Who's Who' list as one of America's most influential business-to-business marketers.