Why This Broker Spends $155,000 per Month on Lead Generation…
For most new broker owners, the idea of shelling out more than the price of a brand new Porsche on lead generation every month is pretty hard to swallow. Most of the time, many brokers don’t even spend a dime on lead generation. After all, they’re paying the damn rent! Why should agents, especially newer ones, expect to be given leads for nothing? Most brokers would laugh if you brought this up in a meeting.
Luke Monroe is not like most brokers.
The Investors Approach to Attracting & Keeping Talent
While Luke Monroe isn’t exactly an outsider to the industry, he came to residential brokerage from the harsh, cut-throat world of investing.
He began by focusing on the mistakes of other brokerages make when trying to expand into new farm areas. They always start out with expensive office spaces, branding, ad campaigns, the works.
Then they scramble to find talent and get them working.
Instead of the traditional model, Luke decided to run the brick and mortar side of his business, Kendrick Realty in Pleasant Hill and Orange County California lean, and invest heavily in the lifeblood of any brokerage. While doing so, he began undercutting the competition by buying leads DIRECTLY from Zillow, Realtor.com and a few other sources.
Luke’s strategy was massively successful. He was not only able to recruit and keep top talent, but devised a points based training program that saw brand new agents closing deals in their first month and recently opened up a second office in Orange County.
The Close: Interview with Luke Monroe
The interview with Luke includes: how he scaled his lead generation, where he buys leads, how his teams nurture leads and more.
… Where your company is because that makes sense for all of those things basically to happen. For us, I am buying leads where I have the opportunity to do it. Where it makes sense according to our metrics, as opposed to just where I live. We’ll find the opportunity first, secure the lead source, and then find the agent to take advantage of, plug into our system, take advantage of that lead source second.
So, it’s very important to me as the broker and also kind of to our brand and our promise to our realtors that the leads always come first. I’m never going to say, “Hey, join our brokerage and then we’ll try to find some leads, and all of these good things will happen.” The order is reversed where I’m saying, “Hey, look at the screen. This is what I have coming in in the area. Currently, we don’t have somebody here. That could be you; let’s talk about that as an opportunity.”
Right, I think that’s a really smart way to handle it because you’re going to the places where you think there’s going to be new business. Maybe a missed opportunity where other brokerages are kind of dropping the ball, which is pretty frequent, I’ve had at least in New York. So, one other thing that a lot of the smaller teams, or people that are just starting a boutique brokerage, one of the biggest kind of pain points they have is scaling, scaling your business.
It makes sense because you’re already outlaying money, maybe you’re renting office space, you’re hiring two ISAs instead of one. So, it’s a little scary, you know? So, can you talk about maybe when you guys were starting out, even from an agent level, or maybe as a brokerage level; whichever you think would be more apropos here. And then just how do you, “Okay, look. I’m spending 400 bucks a month and I’m doing okay.” How do you make the call to say, “Okay, I’m going to just 10x this thing and go up to three grand a month or five grand.” How do you make that decision? Is there a tipping point that you guys have found over the years? It’s like, “Okay, now we can turn up the heat.”
Yes, but I think the timeline for us was much more condensed. I came to our brokerages from a real-estate investment background. I didn’t have a background in real-estate brokerage operations, which has been to our advantage and disadvantage in the sense that we weren’t constrained by the group-think of how it’s been done in the past. But also, the reason this happened that way for so long is some of those things make a lot of sense. That we had to discover on our own, so to speak. When we were setting up our brokerage, the first one in Northern California, it was really with the end in sight. I didn’t have an interest in starting with one agent trying to do more organic growth, figure out how to make it work with one person and then go to the second and the third and the fourth. We were buying leads primarily at that point from Realtor.com, and the reason I liked that product is because it let us scale very quickly. It gave us a little bit of predictability and it let me go from being a no-one. No brokerage, no agents, to being one of the 20 largest buyers of real-estate advertising in the country where we were still in my living room before we got our first office.
So, we were able to achieve scale very quickly. That was very important to what we were trying to do because a lot of people that have worked with online leads before and usually struggle with online leads. In my view, the problem they have is that they can’t achieve scale. So, they’re spending 500, 1000 bucks a month and that’s getting them three or five leads a month. You can’t do anything about that. You can’t build systems around it, it’s not predictable; you can’t build scale from that. You have to be available 24/7 for an entire month to take eight phone calls that could come in at any hour of the day. That’s just not effective in my mind for anybody.
So, one of the first things that I knew I had to do was get to a scale a certain number of leads that would allow me to justify having an in-house call center team. Basically in-house ISAs so that we could 24-7 respond to every lead as it came in, whether the agent was available or not, and start engaging that client, start a conversation and be able to move those relationships forward. So, when we’re talking about, “Where do we start. Did we start at $125,000 a month?” No, but I think we started at $30,000 a month and grew at five or six thousand a month since then pretty consistently to get to where we are now.
And that was necessary, kind of, to create that scale. It was difficult also, certainly at the time obviously, it’s a big cash outlay for what we had as an unproven concept, and the call center team salary’s were all in addition to the direct ad sense. It was a very expensive business model to set up, but I had a very strong belief that it was going to work. There were some questions along the way that whether or not it would work with me or with somebody else, but I knew that it was going to be a successful strategy.
Yeah, it’s really interesting because it’s sort of the opposite of what most people think a brokerage is … They conceive of how a brokerage starts or how a brokerage grows and it seems like you’re taking kind of, “Oh, we got the great people and we scrimp and save. We got the good people, and then better people, then we hire slightly better.” And you’re like, “Well, why don’t we get the market first?” Let’s get the customers then maybe we start build up the team to work those customers.
And that seems like how it works in most other businesses. You need the product itself and you need the customers sort of first and foremost. Having a huge staff of people who are paid, which I think that’s sort of maybe one of the flaws of the system in the real-estate issue where, “Oh, no one gets any salary.” And it’s easy to justify just a body count. Getting thirty people and you get some sort of spread out distribution where 10% reduces 80% of the deals.
Let’s sort of switch gears a little bit and see if we can drill down into the weeds a little. So, do you find … and this is something, again, that is a super common question. And again, it’s a very personal answer and it’s something that’s going to change depending upon what skill levels someones at etc, etc. Do you find that there’s a different quality of leads, say, from a Zillow premier agent or a realtor, or maybe boutique company’s with bold leads, or market leads, or any of those guys. Have you found a qualitative and/or quantitative difference where like, “Hey, Zillow’s great for seller leads, realtor’s great for buyer leads, I get crummy leads or bold leads” or something. Can you talk a little bit about that?
Yeah, I think there’s always a difference in quality from lead source. We buy primarily from Realtor.com because I’ve found the overall quality of the leads coming through Realitor.com to be superior to the leads we get from any other source. We do buy from Zillow, we buy from TORCHx, we buy from Boom Town, we buy from several other lead sources as well, as well as generating our own leads. So, our own ad words and real-estate website, at this point those things are all in place to augment the lead generation we’re doing with Realtor.com as the consistent base for our lead generation.
Okay, cool. It’s also like I said. It’s really, really hard to … Because a lot of times people will say, “Oh, well, I signed up for Zillow or realtor, or TORCHx or whatever, “Oh, I stand there for three months and I got nothing.” And there’s so many variables. It’s like a social science experiment in sense because it’s like, “What season did you sign up, what kind of lead nurturing program do you have?” There’s so many, so many, so many variables that it’s hard to get a review from an agent who’s getting a small amount of leads and to take it seriously sometimes, you know? So, really, really-
I think that’s very much the case.
Yeah, so again. You read a lot of these reviews online and you’re like, “Ah, this company sucks, they’re terrible.” Well again, you’re talking about four tipping points, maybe you need to scale it up just a bit. You go from 500 to 650, who knows, maybe that’s the tipping point where you get 10 more leads or six more leads or three more good leads. It’s always a tricky thing, so it’s good, nice to hear someone who’s thing is that scale to sort of have the similar idea here. Now even more nitty gritty, I heard that you guys built a custom CRM and I’m just curious since, again, CRMs are a dime a dozen. There’s so many CRMs, and all the features are feature creeps, so they haven’t [inaudible 00:10:26] what weren’t you guys getting from stock CRMs that are on the market? What features were you missing when you said, “Look, we need our own solution here.”
I think the biggest features, honestly, that we’re missing was a true brokerage management level oversight built into CRM. Most of the products that were available did an okay job at doing whatever it was they were supposed to do. Typically, it was at the agent level for essentially just organizing data. For me, when we’re spending that much money, I need to know exactly where it’s going, who’s doing what with it, how we’re performing on it. And that wasn’t a level of transparency I could get from any other products existing on the market. It was worth it, made sense for us to develop in-house. In addition to that, there are things that come up on the recording, on the interaction side that we thought were important.
In many cases those features … it’s not necessarily about adding additional features to the CRM so much as it is streamlining the experience. I think there are many CRMs that are out there that have far too many features, and so that user really gets lost. In the, “Do I sign them up for a 3DX lead on this campaign?” Nobody’s going to remember all of that stuff. We want to keep it simple so that our agent’s user experience is very efficient and the data’s very easy to track and we can create standardization and keep everybody moving foreword; including all of the leads moving foreword as quickly as possible.
Yeah, I think that’s well said, again, the feature creep. Granted, they have to, it’s sort of an arms race in a sense because there are so many CRMs on the market that if they’re not offering the latest bells and whistles and, “No, we’re AI.” Whatever people are saying is AI these days. But then often the latest bells and whistles are kind of done in the water and people aren’t going to spend the 60 bucks a month. And I think, again, building your own seems like it’s going to be something that’s going to be a lot easier to do going forward. Hopefully it will be a little less expensive. People can kind of cobble together a system from disparate parts, and Insightly or something is free and you work that into dot loop that you get from your association. So, I think we’re going to get to a point where a lot of that stuff is free, and I think also that a lot of times the tools don’t really matter. Do you give your agents their own IDX website? It seems kind of moot at this point.
Yeah, at this point our agents don’t have their own IDX websites, and that is something that we’re kind of playing around with because we do have, for the company, several IDX websites that we operate. We have an interest in doing more hyper localized branding around our agents, but on what we would call their territory level. So, a grouping of several zip codes, not necessarily the being higher MLS IDX feed. So, at this point we don’t have anything that’s in place, but it is something that we’ve talked about and are still considering.
I think that’s something that’s maybe a little redundant, almost, in some senses because if you have your brokerage website, you’re based on the brokerage website, okay fine, it’s not your website quote unquote. At the end of the day people are looking on Zillow, people are looking on Realtor, and you guys are getting the leads before they get disillusioned with Realtor and Zillow and then they go to some random realtor site and it’s like … 100% chance they’re going to be at Zillow and Realtor, and there’s a 1% chance they’re going to be on a random realtor’s website.
So, I think a lot of people are maybe pushing money into the wrong thing. And they’re not cheap, the place through sites you can get for … Okay, the baseline one is free, but it’s very, very limited. People are spending 250 a month, and I think that it’s fine if that’s what you want to do and you’re sort of on your own, but if you have a decent brokerage, I think it makes more sense to focus on that. Especially since trying to rank an individual realtor’s site on Google is a full time job.
It’s very tough.
We write articles for a living. We rely on Google for a living, we literally have an entire SEO team that does nothing but do that. At a brokerage level, sure, yeah. You build out individual pages for sort of mini, micro neighborhoods and you long-tail keywords that have very low search volume. But if you build that 1000 pages that are for these very low search volume keywords that people are very interested in, again, your really small neighborhood, maybe 20 people search for Alemeda Heights, I just made that up, it probably is a neighborhood in Southern California. Alemeda Heights best block, the best block to live, etc.
A very small number of people will search there, but if you build out your site to catch all of those keywords, eventually you cobble that together and then you can get a few thousand page views a month, something like that. But again, at a realtor level it’s so much work and I think people are kind of fed a false bill of goods where it’s like, “Hey, here get this website for 250 a month, then you can rank on Google above Zillow.”
That’s not a viable way to go, but for us when we look at that, and one of the reasons we are considering potentially doing that in the future is because we can peel off, like you said, some of the long-tail keywords for the very few leads. But if we can come up with an agent website template that just becomes part of a SAS platform that the brokerage has developed. Agents come on, we’re plugging a bio, we’re plugging in a photo, we’re plugging in your local IDX, but it’s all controlled by the brokerage so we’re not paying 250 an agent for all of these websites. It’s just a part of what we can offer our agents and we can peel off another one or two leaves a month, but higher quality leads more likely to convert, that’s something we have an interest in. But at this point we need a latter to climb up the tree to get to that fruit. There’s a lot more low hanging fruit that is a lot easier for us to convert at this point.
Definitely, definitely. So yeah, I guess the last question is just about recruitment. And I think that’s the second, even scarier pin-point than, “How do we grow.” It’s “How do I recruit good people, A. And then how the hell do you keep those people. Especially when you have company’s like Compass that are coming out. I remember I was thinking Compass started out in Manhattan, and they were called Urban Compass and they hired a bunch of college kids with red backpacks to go take pictures of big apartments. And that didn’t work, it was failed pretty much immediately, but they had some D.C. money and they said, “Look, we’re going to recruit agents from Corcoran and Sothebys and Stribling, we’re just going to pay them.”
And I think it’s such a cutthroat, maybe even more cutthroat than getting needs is getting the quality talent. And I know we talked to Barbara Corcoran about a year ago and we’re like look, “This is a different era in the 80s. As a startup, how did you get the top talent from the the old school players, she’s like, “I literally and go, and if they made a big sale, they had a deal, I would send them a bouquet of flowers because he knew that their brokerages didn’t care, you know?” The broker wasn’t patting him on the back and taking him out to dinner, the broker was like, “Thank you.” And then … So, no one seemed to care about the agent back then.
So, as far as I think now you guys are probably going to have a super easy time. I’m sure there’s people lining up out your door because they know they’re going to get awesome leads from you guys. Was that always the way you handled recruiting? Or did you have a different strategy that you decided to just say, “Hey, we’re going to give you tons of leads?”
Yeah, so I’ll actually tell you two funny things on recruiting, and then get a little bit more serious. When we were starting, one of the things we discovered over time with recruiting, we put ads on Craigslist, on Indeed, on Monster, on all of the other job board sites. In our job tagline, one of the things that we do, and we were telling our agents, “Hey, this is going to make it really easy to recruit. I’m going to spend $4000 a month on lead generation just for you.” The response we got back from that was really low. It shocked me. I’m trying to give you gold and you’re telling me, “No, no, no, I’m good.” So, anyway my partner found this Facebook post for somebody else doing recruiting in Orlando from another broker who said, we do, I think it was $800 of lead generation for you a month. And he’s looking at this Facebook post and it’s got a ton of comments. People saying, “Wow, this is amazing, it’s too good to be true. We need to sign up here.” For us the ah-ha moment was, people just … you think it’s too good to be true.
They’re not even engaging with our ad to come to us to have a conversation because they’re saying, “Nah, nobody is going to spend three or four thousand dollars a month on real-estate ads to grow my business.” That’s not how the industry works. And so, we started changing the ad, and we brought it to 3000 and then to 25,000 and then to 2,000 a month and the lower we made the number for what we do for our realtors, the more response we got back. That was fascinating. We didn’t actually change anything that we do on our side. We still do the same lead generation, but the perception just to get people to start the conversation and understand what we’re doing was very different. So, I thought you would appreciate that.
That’s great, yeah.
And the other thing that we’re doing now. I’m in Orange county this week. I just wrapped up the Realtor.com top 20 conference down here and we’re staying over a couple more days because we’re looking at starting our next office in Orange County. One of the things we did, I put up the same ads to start talking to an office manager and talking to agents to join us for this office. The thing that we changed for that ad was how the first sentence says, “Join our growing team. Be a part of this startup getting up on the ground floor.” Basically those keywords: new company, startup, it’s exciting. The response has just been tremendous. It helps that we are growing, we are expanding, we are having success. People identify and like that, but just saying, “Hey, we’re a startup and we’re coming to open a new office and you can be in on the ground floor” has really gotten a lot of people excited. Which again, for us is the same thing everywhere we go, but just changing that little bit of our presentation has gotten people very excited about what we’re doing and wanting to come and join us. That’s been great. As far as …
So, I was just going to say. Going back to the original question just as far as recruiting, what we’re trying to do. When one of the biggest things, honestly, that we look for in recruitment is what my wife calls people who want to grow the pie. Somebody who is coming to us because they are excited about doing better. They’re excited about us doing better, they’re excited about clients doing better. One of the things that … Here I am with my two offices and forty agents telling Compass what I think they need to work on.
One of the things that I’d have a concern with in that growth model is so much of what they’re doing. Paying agents to come on board. They’re getting really great top quality agents, but it’s just the latest shiny object. So, if you’ll come join me because I paid you this, then you’ll go join somebody else because they paid you this plus what, right? For us, I am very proud of all of the agents that are part of our team, and the retention that we have with those agents because we really have a great relationship where it is truly mutually beneficial for us, for our agents, for our client. Everybody is growing their business together, and that’s something that is really central to how we function as a business. I’m not going into a new office saying, “Okay, we need to get deep penetration, we need to get to 200 agents.” Our focus is much more on an office is going to be 15 or 20 people. We’re all going to get along very well in a smaller set-up, and that’s how we can all be successful together.
Yeah, and again such an important lesson. The broker joint I worked for in Brooklyn a couple years ago, we’ll remain nameless for now, but same thing. The broker focused on small area that was just gentrifying like mad and there was new developments and there was some land use things that have changed. That’s what we had, we had a small team. I think we had twenty something people and it was five or so years before you say, “Okay, let’s get another office out in Crossford heights and let’s, you know. So, it’s just a slow growth thing but after, I think about 10 years, the company was totally dominating a huge swath of North Brooklyn. Which, when we started out, it wasn’t such a valuable … I mean, it was still a valuable …
It doesn’t matter what, even an area that has low home price is still valuable because there’s a lot of movement there and a lot of people moving, whatever. But still, it’s just a slow growth sort of strategy, and the one thing he said that kind of stuck with me is basically what you said. And he’s like, “Look, I could hire 10 times as many agents as I have with the drop of a hat. New York City we have exclusive buildings or I have a waterfront.” But he’s like, “I don’t want you.” I want to know everybody I worked for. I want everyone to get along, I want to have sort of a teamwork thing where it’s … a lot of agents sort of see their co-workers as the competition, which they are in some sense. But we truly felt like a team. I would walk into work and I’d know everybody there and, “Hey, can you take this showing for me?” Or, “Hey just saw this crazy listing, you got to bring your client.” etc.
I really think that’s critical to building the strong foundation that any brokerage can grow from. Especially the way we’re set up with our territories, our agents can feel like a team. There’s no concern that I’m going to take leads from you or you’re going to take leads from me because everybody knows that I get the leads that come in to my territory and my zip code. They come just to me. So, we’re not in competition, we can be friends, we can collaborate, and we can grow together, which I think is really an unfortunate miss for many other brokerages because everybody is in competition. I can never really be your friend because we are colleagues, but competitors. And the way we’re set up, what you just described really can happen. We can get along together, you can watch my leads when I’m on vacation, I’ll watch yours while you go on vacation. Part of what the brokerage does is provide the consistency and trust that our agents aren’t worried about, “I have to get every lead.” Because they know that we’re good at it. We’re going to deliver on that promise. There’s always going to be more opportunity so we really can collaborate as friends, as a team; not just as competitors.
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