Both are viable options for a real estate professional and choosing the right model matters. In this week’s blog, we will unpack the difference between a practice and a business and give you some clear examples so you can choose the best model for you.
A Practice is where individuals provide services to clients. Key to a practice is the reputation of the individuals providing the service. This could be one person or a cooperative of several people.
A business sells a product or service. The marketing and branding are focused on the service, not the provider. A brokerage is a business. Some real estate teams are businesses.
A REALTOR® who finds clients based on their reputation through referrals, word of mouth, and personal connections through social interactions online or in person, has a practice.
A REALTOR® who creates incoming inquiries from marketing and has a team of people who can deliver a superior product consistently has a business.
There are benefits and drawbacks to each. Let’s assess:
Real Estate Practice – Benefits
Built on reputation – in your control
Focussed on providing excellent service
Simplicity – easier to earn clients
Cash flow predictability
Real Estate Practice – Drawbacks:
Goodwill is fleeting – one must maintain a reputation relentlessly
Wealth must be continually generated
Growth limitation
Real Estate Business – Benefits
Scalable
Equity potential
Potential for passive income
Real Estate Business – Drawbacks
Complexity – building and maintaining multiple systems
Management structure and skills
Marketing – significantly more and better needed.
As a real estate coach/consultant, I hear from hundreds of agents that they want to build a team. The reason is often that they want the benefits of having a business versus a practice. I get it. Running a successful real estate practice takes a lot of work consistently over time. It’s challenging to find life balance, we must face our internal resistance daily, and if you don’t have the skills required to attract and close clients, it can be a frustrating grind to eke out a living.
For those who do have the skills, a practice can be very lucrative, emotionally rewarding, and offer the freedom that many of us crave. Canada has many excellent real estate practitioners who are making over $1m, even $2m per year in GCI and living meaningful and balanced lives. Mike Majeski at Re/Max Specialists is a great example.
A business on the other hand offers a vision of freedom, abundance, and control. We imagine ourselves overseeing a team of happy productive real estate agents who are doing all the leg work of selling homes. While we enjoy our evenings and weekends living life, they are out with clients, getting deals done, and generating revenue for our business.
It’s an attractive vision but there is nothing easy about building a profitable team. Some great examples are The Faris Team, Justin Havre, and The Golfi Team. There are, of course, others but for every successful team, there are hundreds that don’t make much money and cause the leaders a ton of stress.
There are compelling reasons to want to build a business and it can be done. You’ll need to commit to building a whole new set of skills. What got you here, won’t get you there.
To build a successful business, you’ll need a product to sell that is competitive in the marketplace, the marketing savvy to get that product known, the innovation to build systems that work, and the management skills to build and maintain a team of exceptional people. Each of these steps has its unique challenges. The most significant is the product. Can your team of people offer a better product than a great practitioner? If they can’t, you’ve got a foundational problem.
Where I see success in real estate is when people deliberately choose one model or the other and commit to gaining the skills required to master it. The middle ground – a hybrid of practice and business, is what we mostly see in residential real estate teams and they are doomed to fail.
Think deeply about which model you want and become excellent at it.
If you are committed to being a practitioner, I may be a good coach for you. If you are committed to building a business, choose a coaching organization focused on team building. It does not need to be real estate-specific. If you are unsure and would like a one-time coaching/consulting call with me,book here.
“If you want what you haven’t had, you must do what you haven’t done”
