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“Sensible people get paid for doing what they enjoy doing.” – Alan Watts

 

image with quote "In my experience, many entrepreneurs are driven by impact. And leverage is the most powerful concept to grasp if you want to have more impact without working harder."

The Undeniable Magic of Leverage

 

My first brush with entrepreneurship happened shortly after I left a company that had been acquired. I found myself in a situation where I was searching for something different – something where I had more skin in the game.

Through a series of fortunate connections, I accepted a partnership role in a real estate investment company in Boise, Idaho. I sold my house in Portland and moved to Boise to begin a new chapter of life.

I assumed the role of general manager where I worked with a lot of Real Estate Agents.

I learned that agents are independent contractors – they aren’t paid by their brokerage. In fact, they pay their broker (Keller Williams for example) a portion of their earnings. Agents only earn money on commissions when clients sell or buy a house.

No clients, no money. Many clients, lots of money.

The unleveraged real estate agent is doing roughly a normal job. The leveraged real estate agent is the owner of a large business with uncapped earning potential.

This makes it the perfect playground to explore ways people “doing the same job” are playing a very different game.

Leverage Example: Four Types of Real Estate Agents

Here, I will show you exactly how Leverage wins, and how the winners are leveraged.

I’ll introduce you to four different types of real estate agents that I experienced. I’ll be using fictitious names to protect their identities:

  • Jarod, a normal agent.
  • Chrystal, the #1 agent in her office.
  • Becky, the #1 agent in the city.
  • Ben Caballero, the #1 realtor in the country.

Meet Jarod, the agent.

Jarod is a slightly-below-average real estate agent. He does about 6 transactions a year for his friends and connections. He shares his listings on social media and mails birthday cards to clients.

His 6 transactions a year earned him $40,000-$50,000 after expenses. Since he wants to keep as much of that revenue as possible for his personal earnings, he does everything himself: answering the phone, setting appointments, calling contractors, driving clients, holding open houses, and client paperwork.

Jarod has a flexible schedule, although he works on more nights and weekends since that’s when clients want to look at houses. Overall, he has an average salary for working 40-50 hours per week of work.

Meet Chrystal, the #1 agent in her office.

Chrystal is in the top 1% of agents. She became an agent as her second career after working as an executive assistant and brought that expertise to her business as an agent.

Chrystal’s marketing savvy got her 12 client transactions in her first year, and she earned over $100,000. Wanting to keep growing, she invested some of that revenue into an assistant (Transaction Coordinator) so she could focus on high-value client relationships.

She also continued to re-invest in marketing, so that in year two, she had 20 clients and the staff and tools in place to handle all those clients.

In year 2 she earned $200,000 and with further reinvestment, her growth continued toward 50 transactions a year and $400,000+ in yearly earnings.

Meet Becky, #1 agent in Boise.

Becky is in the top 0.01% of agents by transactions and sales volume. At first, she was a successful agent like Chrystal, but she made a huge level-up with leverage when she started a team and hired agents to work for her on a split-commission basis.

She also began partnering with higher volume builders in the area to gain even more leverage for her and her team.

Between her reputation, systems, and current clients, she could ensure success for the agents on her team, to the extent that they would be glad to pay her a percentage of their earnings. Becky’s team expanded during the few years I knew her and became 20+ agents.

While Becky is still a licensed and practicing agent with clients, her day-to-day looks more like a CEO who spends time recruiting new agents, coaching her team, nurturing partnerships, and allocating resources for maximum impact.

The kicker? Becky’s reputation and earning power are so strong as the #1 agent in Boise that she negotiated a large discount from her broker, so the costs are lower for her team.

The last year I worked with Becky, her team did $250 million in sales volume, earning Becky somewhere around $6,250,000 per year – personally.

Meet Ben Caballero, #1 agent in the country.

Okay, Ben Caballero has been the #1 agent in the US for the past 10 years and I’m using his real name. While I don’t know him personally, he is the only agent in US history ever to exceed $1 BILLION in real estate sales.

In 2022, Ben sold $3.01 BILLION of real estate. Yes, I’m going to keep capitalizing BILLION because I want to emphasize the outsized result.

6,178 home sales in 2022.

Jarod sold 6 per year. Ben sold 119 every week. 

It’s just wild.

How did he do it? Leverage.

A quote from his own website:

“Ben is an acclaimed innovator and technological pioneer. His drive to leverage technology has allowed him to reach unprecedented, historic levels of sales. Ben has developed a proprietary SaaS platform, HomesUSA.com, to aid him in servicing his clients. His individual record-setting production is only possible due to the efficiencies it enables.”

Let’s take a closer look at how Ben uses leverage to outperform everyone else:

  • Ben only sells new-construction houses built by high-volume builders. He partners with 60+ companies that have hundreds or thousands of homes to sell. Partnering with established builders = Relationship and Specialization Leverage
  • Ben has a team of 22 staff. Ben’s team = People Leverage
  • Ben built a proprietary software platform for builders to track and manage the sales of new homes. Ben’s investment in a SaaS platform = Product and Technology Leverage

Ben’s personal income is harder to estimate. Napkin math puts it comfortably above $100 million per year. If he’s not already a billionaire, Ben is well on the way.

To Summarize

We have 4 real estate agents: Jarod, Chrystal, Becky, and Ben.

We have incomes ranging from $40,000 to $100 million per year.

And we can see how no-leverage Jarod is playing a very different game from Chrystal, who has added some leverage to her skillset, applying resources to get much more done and build a successful small business.

Becky’s leverage comes in the form of building a team of agents, developing strong partnerships, and creating strong processes. She’s focused on finding new agents for her team, and helping her team be successful. Becky focuses on building her People, Partnership, and Process Leverage.

And Ben – well, we can see how Ben is playing a far different game from Becky. Ben has built his leverage via a team (People), relationships with volume builders (Partners), and creating a software platform to do the heavy lifting (Product/Technology).

This unique combination of Leverage has made Ben the most successful and highest paid real estate agent in the US.

In my experience, many entrepreneurs are driven by impact. And leverage is the most powerful concept to grasp if you want to have more impact without working harder.

My hope is now that you’ve seen these examples of leverage in a new light and that you’ll begin to think more creatively and consider ways that you can employ it in your own work.

As leaders, creators, and entrepreneurs, we all have the same opportunity to work smarter instead of harder. And employing leverage is the key.

Live bravely,

Michael

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