Rich Broker, Poor Broker: Breaking Free and Building Wealth in Real Estate with the “Cashflow Quadrant”
By now, everyone is nauseatingly familiar with the mantra, “Work smarter, not harder”.
However sick of the expression you may be, as a professional in the real estate industry, can say that you actually consider this concept on a regular basis and actively practice it?
…Because what we see in this industry is an ideology centered around putting our heads down and logging long hours every week. This “hustle ‘till you drop” philosophy seems to be the more prevalent mantra the business culture of North America. The average person believes if they just put a little more effort into their work and take on a few extra projects or clients, they will eventually find success.
The unfortunate reality is the average person working in real estate will never find freedom they’re after, or the success they believe their hard work entitles them to. Their level of wealth will forever be directly correlated to how many hours they are willing to sacrifice with their nose to the grindstone…“hustling”.
Don’t Sweat, Succeed!
Consider a situation where “working” is represented by biking up and down a series of hills in the countryside. If a worker simply jumped on a bike and started pedaling as hard and fast as they could, they would cover a very small distance and soon become tired and worn out.
A second “worker” analyzes how their bicycle functions, mastering the gears to reduce the amount of effort required. They also consult a local expert, obtaining the route with the least amount of inclines. This person will expend less energy, save time, and end up going much further.
It doesn’t matter if you are the hardest working individual to ever enter the real estate industry; if you don’t take a step back and embrace certain techniques and technologies to increase your efficiency, you will never reach your greatest potential.
Remember, just because you are busy, doesn’t mean that you will be successful.
The “Cashflow Quadrant” and Real Estate
In order to take your success to the next level, you first need to realize where you fall in the Cashflow Quadrant (CQ).
The CQ is a simple methodology created by businessman Robert Kiyosaki, who became a household name with his best-selling book Rich Dad Poor Dad.
The system categorizes workers into quadrants based on how they work to make money and their capacity for wealth and success: Employee (E), Self-Employed (S), Business Owner (B) and Investor (I).
While Kiyosaki’s CQ is powerful tool to analyze careers in general, its implications for the real estate industry are even more profound. To tailor it for real estate, we’ve adapted some of Kiyosaki’s terminology below.
Employee (E): Brokerage Employee
If you work as a real estate brokerage employee, you fall into the CQ’s first category, the E quadrant. You probably value job security and shy away from career uncertainty. You work hard, enjoy benefits and marginally increase your compensation over the years.
Eventually, members in this quadrant hit a salary ceiling making higher levels of wealth impossible to reach.
Self-Employed (S): Active Agent
As a real estate agent, you work for yourself and fall into the second category of the CQ: the S sector. You have found success due to your personality and you are the only element that determines if you earn income or not. Some real estate agents will find a larger amount of success by hiring an administrative assistant to complete some of the simple tasks, such as emailing clients and completing paperwork. This frees up the agents time allowing them to do what they do best: selling.
However, there are only so many hours in a week to sell properties. Even if an agent increases the average value of the homes they sell, or doubles their close rate, they will still eventually hit an income ceiling. If an agent wants to maintain this high earning level, they will often have to work many long hours, week after week. Ever heard of those people who make fistfulls of money, but work so much they never have any time to spend it? These are those people. We’ll assume you’re not interested in this lifestyle, and you’d rather keep reading.
So! Next up…
Business Owner (B): Team Lead, Broker-Owner
If you’re a broker or team leader, you most likely have other agents and staff working for you, placing you in the CQ’s B quadrant.
Members of this quadrant start to touch true freedom. Broker owners’ and team leaders’ incomes are no longer dictated by the hours they work themselves. Of course, they still must maintain a vigilant eye on their business’s analytics to ensure overall business health and team performance.
Investor (I): High-Growth Business Owner
Only a few lucky, intelligent people reach the high-growth business owner quadrant and become truly “rich.”
The members of this quadrant are investors who have learned a few essential lessons, including:
How to find and motivate individuals to work hard and earn income for them.
The importance of spending money on technology that fully automates their business.
How to remove themselves as bottlenecks to their own business growth.
The high-growth business owners’ earning potential has no ceiling, and their income is fully independent of their time.
By now you should’ve figured out what part of the CQ you belong in. If you’re not satisfied with your current position, there are steps to catapult yourself into the Investor section of the Cashflow Quadrant.
Before you begin diverting funds to new technologies or hiring more support staff, however, it’s vital to first develop the perspective of an Investor: work smarter not harder.
Work Smarter in 3 steps with 4 words
An individual who truly understands wealth creation in the real estate industry realizes the power of getting others to work for them. But more importantly, they understand that they need to improve the efficiency of their entire operation.
As you begin to think about the process of catapulting yourself into the next section of the Cashflow Quadrant, keep four words in mind.
So many business owners spend the majority of their time completing tasks that have very little impact on increasing the profits of their organization. As a leader in your quadrant, you should analyze every task that is completed regularly and determine the value it is contributing to your bottom line.
By focusing on the actions that bring you the most success and eliminating those that create the most headaches and costs, you can streamline your business and instantly boost profitability. A great philosophy to follow when deciding what to concentrate on is the 80/20 principle.
The key areas of a real estate organization that should be focused on to maximize sales and market presence are generating quality leads, efficient customer management, technology integration, simple-concise reporting and brand awareness. These are the pillars of success in real estate (the 20% of tasks that generate over 80% of revenues). Success can be found be focusing on these and eliminating the other tasks that are draining your resources.
Simplify and Automate
Once you have determined a task is fundamental to your business, you should ask yourself, how can the process or task be simplified and streamlined? Once an action has been reduced to its simplest form, you can then automate this task and reduce the amount of repetitive work required.
In the real estate market of today, the most efficient way to make a task easier and have it completed automatically is to integrate technology directly into your processes.
Before systems like kvCORE, a real estate brokerage had to get their leads the old fashion way: “Pounding the pavement” or “smiling and dialing”. Customer Relationship Management (CRM) toolss were almost non-existent, typically a loose system of handwritten notes and unorganized excel files. Business analytics and reports? Before technology integration these words were almost never uttered in a real estate office.
If you want to take your business to the next level, you need to fully embrace technology, or find yourself left behind in the dust of others.
More quality leads equals more sales. Use tools that bring leads right to your team through effective landing pages and online ad campaign conversions.
Effective lead distribution features are engineered to get the right lead to the right person at the right time. The agent is provided with all the information required, and reports are then automatically generated for managers or owners to review.
By delegating the daily tasks and functions of a brokerage, the owner can focus on investing in new opportunities, letting their existing capital create more wealth for their business. This is when you finally enter the final section of the Cashflow Quadrant and can capitalize on an uncapped earning potential. A business owner with an efficient system in place is calm, in control, and creating new earning opportunities every single day.
We firmly believe the path to success in the real estate industry is found by fully embracing technology.
By utilizing the power of business intelligence, behavioral automation and hyper-optimized online marketing, your agents receive a continuous stream of quality leads. And with the proper delegation technology in place, those leads translate into the success and freedom reserved only for those in the “I” sector.
The choice is yours.
Will you work hard, or will you work smart?
[Download our PDF] to see exactly how simple “smart work” can be.By Joe Skousen Filed in: 222
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