How to Build A $1 Million Net Income Real Estate Team w/ Chris Watters

October 28, 2021

Chris Watters, one of the top real estate agents in Austin, is our guest this week on Keeping it Real – LIVE from Inman Connect in Las Vegas!

In 3 years, back when he re-launched his real estate team correctly after burning it down, he went from earning $0 in real estate to $1 million dollars net income (after expenses), all while out of production. It’s a pretty incredible story on scaling up a real estate team.

In short, the secret is he started recruiting agents immediately to his online leads. In addition to that, Chris raised money from local businesses who benefit downstream from new movers (not on the settlement statement), all who chipped in financially toward his marketing costs to buy the online buyer and seller leads in the first place.

This is one of the fastest stories of scaling up a real estate team we’ve heard on Keeping it Real. We’re excited to interview Chris so you can model his success. If you’re working to build up your real estate team fast from scratch, this is one you should watch!

Here is a full transcript of our discussion:

Frank Klesitz:
Welcome everyone, this is Frank Klesitz. I want to welcome you to our Keeping it Real today. Thank you so much for joining us. I am at a little board room, if you will, at a hotel room just outside the Inman conference. So I’m down here in Las Vegas for the Inman event. Learning kind of what new… what’s going on with the industry, and one of my good friends, who’s been on the show before, but years ago, Chris Watters, is going to be joining us. And I just got off the phone with him. His flight switched. He had to switch his flight, so he’s going to do this show from McCarran Airport in Las Vegas. But I think he got randomly selected at TSA because he’s still on the line. So he’s going to be able to patch into us here very shortly and I have a really cool story I want to spend our time today with you talking about what Chris accomplished in Austin. I’ll just give you a brief backstory and then hopefully when he hops on here, once he’s able to get on his computer and join us for live, he’ll be able to go in more depth of how he scaled his real estate team. But essentially, let me give you a little quick rundown of what he did.

Frank Klesitz:
He started from scratch and built his real estate team in Austin to a level where he earned net profit. So this is a big difference between gross and net. This is not gross GCI, this is net after expenses. A million bucks. Isn’t that crazy? Netting a $1,000,000 after all expenses, and did it in three years. And he did it by kind of just putting a lot of… studying a lot of what real estate teams at the time were doing around the country and putting a lot of key positions in place and buying leads correctly and making sure he led the team to convert them to build a real estate team. The other thing I really respect about Chris is he started his own brokerage.

Frank Klesitz:
So basically I think he was with a national brand for maybe six months or a year. Peaced out from the national brand and did this all as his own real estate brokerage. So it’s one thing maybe if you’re tied to a national brand that it could maybe give you some connections and help you out, but he did this with his own brokerage. So it’s Watters International Realty, you can go check that out, google it, and you can see his company in Austin. And he was telling me the other night something like he’s franchised his team. So he took his team model and this concept of how you scale up quickly and took it to several other markets as a real franchise, and the number that came to mind, I’m sure it’s okay if I share this with you, is something like 60,000,000 in Gross commission income, following some of the principles that you’re going to hear today when he’s actually able to hop on here, which I’ll kind of share what I’ve learned from Chris and a friend and…

Frank Klesitz:
He wrote a book about it too, how he did it. So if you go to Amazon, you can go pick up a copy of The Million Dollar Real Estate Team. I actually helped him write it, he came up to my house and I interviewed him for 11 hours because I was so intrigued on how that’s possible. And we went chapter by chapter and we did the audio interviews and then we got it transcribed and from that became the book. If you actually want to go a little deeper on this, you can go check it out. So it looks like he’s going to join us right now. The author of The Million Dollar Real Estate Team live from Las Vegas, McCarran Airport. Probably little flustered getting his internet connection setup. And Chris, are you there my friend?

Chris Watters:
Hello, I’m here. How you doing, guys?

Frank Klesitz:
Awesome. Does your audio work or does your video work?

Chris Watters:
I’ll be sitting down in just a minute. [crosstalk 00:03:21]

Frank Klesitz:
Well I’m just getting the audience caught up to your back story. I was telling them you started your own brokerage. You went from making no money to earning net profit a $1,000,000 in three years. And because your flight leaves, we probably only have about 45 minutes to do before. You’re so kind to come with us on this interview, I wanted to get right to the point. I want you to share with the audience of how you scaled up so quickly, Chris. People have come to this interview because they’re like, whoa, that’s actually possible. What’s the little secret here? Because you also started without any money, this is also very important. It’s not like Chris went out and borrowed a whole bunch of money or sold equity in his company. He bootstrapped the whole thing to earn net 1,000,000 bucks. So I want to start here, Chris. I know some of your story is that you started by getting a BoomTown account back in the day before anything else.

Chris Watters:
On a credit card.

Frank Klesitz:
On a credit card. It would be the same thing as going to get a Real Geeks account on a credit card and buying the leads. Just because some other influencer that you looked up to was doing that, you figured that was a good idea, right?

Chris Watters:
Yep. And honestly, looking back, I wish I had just signed up for Real Geeks because BoomTown is $1000 plus per month and that money could have gone a long way. So I tell everybody now… and if you read my book, I mentioned Real Geeks is the best solution because it’s cost-effective, good at lead gen, it’s got everything you need, and it gives you lots of room to spend on lead gen. That extra $1,000, the delta between BoomTown and Real Geeks.

Frank Klesitz:
Yeah, that’s an extra $1,000 of lead generation you’re spending on versus the platform fee, 100%.

Chris Watters:
Yeah, I was in my ego too much then. I heard some influencer talk about BoomTown and so I was like I got to do it. And then I look back and I was like, man, that was a waste of $12,000 a year. I wasn’t ready for the Cadillac then but anyway everything worked out.

Frank Klesitz:
Look, the very first thing you did is you, on a credit card, to get this thing going has got yourself a CRM and you generated leads to it. But what’s really cool, to get the audience caught up in the story, is that you really did not want to follow up with leads yourself. And you immediately began recruiting agents to those leads. You skipped the whole, oh, I’m going to call these leads and go on the appointments. That’s not going to get me where I want to go, and you went out and recruited the agents directly to leads, right? Tell me how an appointment went and what you said to get the appointment to recruit them based upon the leads from Real Geeks, let’s say.

Chris Watters:
Yeah. So the thing that I did in the summer of 2010 was I… in the month of May, I started booking appointments in the morning with agents and then I would meet them in the afternoon and I spent the whole summer, May, June, and July, getting agents to sign letters of intent to join my team. I didn’t actually take their license on and sponsor them yet, and what I was doing over the course of the summer of 2010 was essentially pitching a vision and the things that I was going to offer them [crosstalk 00:06:30]-

Frank Klesitz:
And how old were you the time? You were, what? 28, 27?

Chris Watters:
24.

Frank Klesitz:
24?

Chris Watters:
24, yeah. 24 going on 25.

Frank Klesitz:
So 24-year-old kid going out to all these agents. Probably, what? 10, 15, 20 years older than you?

Chris Watters:
At least, yeah. So I basically told them, “Look, I’m going to give you one of the best pieces of tech, and more importantly, I’m going to give you leads so you can call prospective people and I get in front of them and get clients and close deals.” And so that was really my main value prop was the BoomTown system itself and more importantly, hey, I’m going to give you prospects ready to go.

Frank Klesitz:
Because those agents probably didn’t know about, even, that technology at that time, nor did they want to take the risk of spending the money like you would on your credit card.

Chris Watters:
Yeah. But what’s interesting is, here it is 2021 and a lot of people think it’s all about the tech, but the truth is most people just need leads and they don’t have the money to pay for them. So another one of my value props was, I was bankrolling the lead gen to the agents.

Frank Klesitz:
Yes.

Chris Watters:
And so I didn’t recognize that at the time but what I figured out is, the key differentiator why I was a 24 year old kid able to get agents to join me even considering, I didn’t know, I was not a subject matter expert agent by any means, I hardly sold any [crosstalk 00:08:00]

Frank Klesitz:
And the leads were the gold, that’s the currency in recruiting.

Chris Watters:
Yeah. Leads were the gold plus paying for them. You’re bankrolling the agent. So I spent the summer getting all these agents to sign LOIs, and in the morning I booked the appointments, in the afternoons I’d meet them. But I had a little time block allocated after I prospect the agents that was about one to two hours and I would call local businesses and say, “Hey, I’m starting this real estate company. We’re looking for a vendor to work with. You can get integrated into our training, get in front of our agents, and we’ll tell all of the agents that you’re going to work with our team. You need to build a close knit community with our vendors because they’re helping support us and you.” So I signed up three… I signed up a mortgage company, I signed up a roofing company, a homeowners insurance company, and there’s one other, I think it was a title company. I think I got somewhere between $2,500 and $5,000 per month and I had everybody post-date when the vendor services agreement would start. So I had all the agents signing LOIs, post-dated to say our launch was going to be August 1st.

Chris Watters:
So I spent May, June, and July prospecting agents getting LOIs signed. On August 1st is when we were going to start. I mean, I got all the vendors to sign the vendor agreements [inaudible 00:09:33], and for them to come onboard August 1st, and that’s when they would start contributing money directly to BoomTown. And signed up to BoomTown, told them I want this to-

Frank Klesitz:
So you zero costed the lead generation by bringing on a couple of vendors to help pay for it?

Chris Watters:
Yeah, exactly. So you asked me what are the key things to make it grow fast. Number one, it’s getting access to money, which I have discovered every single business that’s successful and scaling up, they go and raise money through venture capital. I obviously couldn’t do that for a real estate team. I didn’t have any credit. My credit card had like a $2,000 limit. So a key thing to scale fast is the money and the people. And to get the people, you need some kind of value proposition [crosstalk 00:10:27]. Yeah. The reason that they’re growing the lead-gen cost for the agent.

Frank Klesitz:
Chris, knowing what you know now, if you were to go out and do the same thing and offer those agents a split, how would you comp those agents, knowing what you know now? Not then, but what would be the split of the compensation, you would say, “Hey, if someone to go do this today, what should we offer?”

Chris Watters:
I would come out again offering a 50/50 split. If you’re giving them the leads, you’re paying for them, you’re paying for the tech, they’re not incurring all these fees like a lot of these brokerages charge monthly technology fees and insurance, all these random stuff. I think you do a 50/50 split out of the gate, and then… The next domino, I believe that you need to lockdown, as an aspiring team builder, to improve your value prop, get more agents to help you in just being more successful is getting an inside sales team to take over the prospecting.

Chris Watters:
If you survey agents, over 90% of them say that the worst part of their job is prospecting for clients. They want to meet people face-to-face, they do not want to be on the phone. Over nine out of 10 agents do not want to be on the phone. And so, that’s where you ultimately want to get because then you control the conversion rates, you get better ROI, your business is more predictable but you got to wait to build the cash reserves to afford an inside sales person. But that’s the next key domino in scaling up fast.

Frank Klesitz:
So let’s bring this together. So get yourself a CRM, go buy some leads in that CRM, go use those leads to go get target agents that just want someone to bankroll that lead generation. And then maybe go approach some other local businesses, which we won’t go into too depth yet, if we have time we will, to help offset some of that lead generation cost because they make money on a home sale, and it’s worth it to them to get access to that client because they’re contributing towards your lead generation costs. Because in home sales, it provides leads and it provides ultimate business for them. But once that’s done, the next big value proposition, besides bankrolling the leads, is hiring someone to actually call and follow up and nurture them to actually set an appointment. How much would you pay that ISA or the Inside Sales Assistant, to help with that part, knowing what you know now?

Chris Watters:
Yeah. So this is probably one of the areas I screwed up the most. And it’s one of the most misunderstood areas that is in the comp structure for inside sales. If you hear a lot of people talk about paying a low base or 30K a year, and tack on maybe 10% of gross GCI, that’s the worst idea ever. I tried it, failed miserably. The ideal setup, introduce market research on what do inside sales people make in the industry. And what I discovered is… I looked on Glassdoor, I think. There are more people with the title Inside Sales in their job title, more people with that title than realtors, in the entire country. So there’s this massive category of inside sales professionals that that’s what they do for their career. And so these guys are smart, right? So driven, hungry, aggressive, educated, smart people, going to do their research. So I’d encourage anybody that’s looking to get an ISA to go do some research on Glassdoor, PayScale, Salary.com, and find out what the base pay is of an inside sales rep. It varies at every single market.

Chris Watters:
And then the other key thing you have to figure out is you need to give them a little spit when they book the appointment. It doesn’t have to be a lot. It could be like 10 to 25 bucks. And then when the deal actually closes, then you give them a little kick around the back. Nothing crazy. We paid them five basis points. So for you guys who don’t know what base points mean, it’s like 0.05%, so on a $300,000 house five basis points is 150 bucks. That’s what we paid them on the backend. So they don’t have a lot of control on the backend side. The reason you want to pay them on the backside, though, something, is because you want them paying attention to asking some of the right questions to qualify and to ensure they’re not wasting [inaudible 00:15:00] time. Because there’s only so many appointments [inaudible 00:15:02].

Frank Klesitz:
Yeah. Chris, your audio is really challenging. Why don’t you mute out a little quick, while you’re on that tram. Just mute out really quick, while you’re on the tram. When you get out of the tram, go and mute out. So first off, let everyone know I’m super appreciative that Chris is coming on here. He’s super busy and he had to go change his flight. I apologize for the audio at the airport. But still, if you can actually listen to what he’s saying, this is incredibly valuable.

Frank Klesitz:
Chris, it sounds like maybe if someone goes and gets your book, The Million Dollar Real Estate Team, they can learn more about the concept of how you zero-costed your lead generation to generate the leads in the CRM in the first place. All right? That helped out tremendously. About 2,500 to $5,000 a month, huge. But here’s my questions, when does someone have the money to hire a real inside sales assistant? What? 50 grand a year, 60 grand a year? At what point, how much volume do you be doing where you’re comfortable writing that kind of check? And do you hire that person before an executive assistant on the administrative side of the business?

Chris Watters:
Yeah. So you want to hire an executive assistant first because you’re going to be the most skilled inside sales and outside sales rep. So you need to maximize your dollar income-producing activities and build your cash reserves and your cashflow. And then as your cash reserves build and your cashflow grows, you can afford to hire an inside sales rep. So for me, I lived super poor. Even though I was making good money, I lived like I was super poor, paying $600 a month in rent.

Frank Klesitz:
Yeah.

Chris Watters:
Sorry, I cut out there. So I was paying like $600 a month rent, my cost of living was super low. And so my goal was to get to 30K in cash reserves and to get my monthly income up to about 15,000 a month. And that basically covered the cost of my EA and my ISA, and it gave me enough money to live on. So you just need to figure out how much money do you need to live and then increase that cost of an ISA and an EA on top of your cost of living, and when you get there from a comfortable cashflow perspective, and you’ve got a couple months worth of reserves, flat-feeing in those expenses. So for example, if you got 15 fixed expenses per month, ideally you’re at a bare minimum of 30K sitting in cash reserves. That’s kind of a worst case. People recommend six months, 12 months, whatever. I mean, if you want to grow faster, you got to take some risks. You’re going to have to take a leap of faith with less money in cash reserves if you’re trying to grow really fast.

Frank Klesitz:
So let’s recap. Go get the leads in the CRM, go find some other vendors that would see value in contributing toward the marketing costs because they want to get access to pre-movers. That’s what they call it in the industry, a pre-mover list, and set that up correctly, which you can get more details, we don’t have time for that, but in Chris’s book. Then-

Chris Watters:
I’ll give everybody a copy of the book for free. I mean, it cost me six or seven bucks to print the book out but I’m happy to give anybody that’s listening to this a copy of the book for free. All I’d ask is to pay shipping. You can go find the book on Amazon, which sold… I think it sold over 20,000 copies.

Frank Klesitz:
Yeah, you probably have a direct link. Where is it? Where can people go?

Chris Watters:
Yeah. So it’s really long. It’s themilliondollarrealestateteam.com. Super long but it’s a writing page you can go to and that’s what I tell my friends to go to, to get the book for free. And all I ask is just pay the shipping. It cost me about 12 to 14 bucks to ship a book. The book’s like six to seven, shipping’s like six to seven. So I’ll cover the book, you just cover the shipping. And so you go to that landing page and you can download the book… Actually, you can get the book for free, you can just pay the shipping cost.

Frank Klesitz:
I told the audience I helped you write it. So go read the chapter on the brand ambassador program of how you find other vendors who want to get access to people who are moving that will help you contribute to your marketing expense. So you generate the leads, you go recruit agents to those leads, you get yourself an executive assistant, then it’s a matter of finding an inside sales assistant to help with the lead followup to set the appointments for the agents as a second big value proposition in addition to generate the leads. What’s next?

Chris Watters:
Yeah. So in my particular instance, I didn’t hire a local EA when I launched the team. I had a VA. So my VA was making like $600 to $700 a month doing a lot of administrative stuff. And then I hired a local EA but that wasn’t until our revenue was higher. So I didn’t hire an EA out of the gate. I think that’s important to mention that.

Frank Klesitz:
Okay. So hold on. This isn’t some 40, $50,000 executive assistant, you hired a virtual assistant for $600 to $700 a month to do your work first.

Chris Watters:
Yes, that’s right. My first assistant was a VA.

Frank Klesitz:
That’s a huge insight. And you were doing that back in 2011, when hiring someone overseas was pretty new.

Chris Watters:
Yeah. So I read Tim Ferriss’s book, The 4-Hour Workweek, in 2010. And the light bulbs were going off, like, oh my God, I can get an assistant to help me with all these random administrative tasks. And I heard about the software that will record your screen and it’ll record your voice, and so as I’m doing my day-to-day thing, I just started recording my screen and talking as I was doing my job. And I just created a library of videos and I put them in a folder and shared it in Dropbox and shared it with the VA. I’m like, “Here. Here’s everything I need you to do, and ask me questions.” What’s kind of crazy is that the VA, his name is [Jozel 00:21:26], he’s still with me to this day.

Frank Klesitz:
Still with you, huh?

Chris Watters:
It’ll be like 11 years next spring that he joined me.

Frank Klesitz:
That’s a huge insight is, Chris, how important is it for somebody in real estate who’s trying to scale up today to open their mind to using foreign labor on the administrative side of the business?

Chris Watters:
I mean, you don’t have to do it but you’ll be at a disadvantage. I mean, it’s going to slow you down. I don’t think you’re going to scale up like I did without a VA. I mean, I have multiple VA’s now. There’s definitely value in having local boots on the ground. My EA in the beginning wore a lot of different hats. She was dealing with getting HR docs ready when we hired a new agent, she was going and delivering stuff for me like a courier, she was talking to clients on my behalf, she was operating as a closing coordinator. She was wearing a ton of different hats and I could only have… you could only have so many boots on the ground, right? Courier, meeting the agents face-to-face to go through HR paperwork and stuff. I’m sure there’s a lot of those things I could’ve gotten a VA to do but I needed a local boots on the ground person, so.

Frank Klesitz:
Got it. Okay. So after we talked about EA, we talked about ISA, what’s the next building block to scale up quickly? I think we just lost Chris. One of these things I’m going to ask to get done for you guys to help you out is get this transcribed, because I know it’s a little [inaudible 00:22:58] but the content’s strong. So he’s going to come on back. Chris, you’re back.

Chris Watters:
Sorry about that, guys. I’m back. Sorry, guys.

Frank Klesitz:
No worries. No worries. I was telling everyone with your audio, I’m going to try and get this thing transcribed and post it so it’s easy to read. But the content’s strong. Thanks for doing this, Chris. What’s next? Virtual assistant, inside sales assistant, starting a vendor program, getting leads, straight easy in and out leads, to recruit agents to those leads. I mean, I want to find out when do you have to double down in actually getting these agents up to speed in your training?

Chris Watters:
That’s exactly right. So the next big thing-

Frank Klesitz:
Is that the next step?

Chris Watters:
Yes. So that’s where I failed. If you read the book, the first year I launched the team I recruited over a dozen and half agents. We had, I think, 20 agents roughly, including me that were recruited. And out of those 20 agents, 18 of them sold 18 homes. And so the other 80 homes were sold by me and one other guy.

Frank Klesitz:
So you were working your butt off to finance your own brokers. That’s a very common thing, isn’t it?

Chris Watters:
I was essentially taking my profits from all my hard work and putting it in and covering all these expenses for these other agents that they didn’t capitalize on. So in the summer of 2011, I’m like, “Man, I actually need to learn how to be a sales person.” Because even at that point in my career I’m like 25 and I did not have that great of a listing presentation. They basically gave people a CMA. I didn’t have any kind of formal presentation, nothing. I didn’t understand the process, my agents weren’t having any success, and it was a very humbling experience when I got my tax return because I thought I made a lot of money, and then I realized my adjusted gross income was pretty low. A lot less than I expected. And that year, I was so busy, I wasn’t even paying attention to that money. I was just paying our bills.

Frank Klesitz:
That’s crazy. With so many agents and you were going so crazy that first year. You just worked from the second you woke up to the second you went to be, didn’t you?

Chris Watters:
Yeah. I mean, those first three years were incredibly tough. I remember lots of nights being on the phone from 06:00 AM until one o’clock in the morning. You read books, self-help books that talk about your habits ultimately define your activities and then your activities drive your results. And so the key habits I had to build, which did not come naturally to me, was how to time lock, which you hear about that all the damn time, right? But I had to get super disciplined allocating one to two hours a day of lead gens, one to two hours calling agents, one or two hours calling vendors, and then in the afternoon and the evenings I’m meeting agents, vendors, and clients because I’m still selling houses. And so literally, those first three years were super, super hard. I mean, I remember… It’s funny. I can name this client I worked with, named Christina [Pagano 00:26:05]. Super sweet lady, she’s an attorney. And I was talking to her at one o’clock in the morning. She was buying three investment properties from me. Back then your option period, or feasibility period on a contract would expire at midnight. So she had multiple houses with me and we were negotiation through some houses that needed a lot of word. So it was a lot of hours. But time blocking is crucial, and then actually take action. Not only just time block, but actually apply effort.

Frank Klesitz:
Well, you were super driven. I mean, [crosstalk 00:26:37] question here. But also, one of the things I want to drive home for the audience of all these top people at their game that I’ve met, a pattern I want the audience to hear and myself included, is the pain of living so much below your means when your revenue is coming in. And so few people can do that, Chris. When you get those commission checks, there is something driving you to go throw it all back in your business and not go enjoy it.

Chris Watters:
Yep. Yeah.

Frank Klesitz:
Do you know what I mean?

Chris Watters:
Yeah. I mean, for me it was freedom. If I can keep investing money on people and surrounding myself with people, I’m going to more quickly get myself out of the day to day grind. And I remember reading a book called Awaken The Giant Within by Tony Robins and there were a lot of moments between 2010 and 2013 where I was like, God, I don’t know if I can keep doing this. And there was a part of the book where Tony talks about how in a lot of these times in life, when things are really, really difficult, mental health, all different things like that, when that kind of stuff’s going on, you need to zoom out for a minute and remind yourself that this is just a tiny moment in time. And when you look at the grand scheme of things in your career, 40 years, if you got a bad week, it’s one bad week out of a 40-year career. So if you can practice separating yourself from the suck, as I call it when you’re in those moments, the suck, and realize it’s just a moment in time, it’ll help you keep a sense of perspective to keep going when things really suck.

Chris Watters:
And so reading that book was super helpful for me. The other thing is regarding coaching. Another key thing that happened to me was in 2011 when I realized I didn’t know how to train sales people, and so I went and signed up for coaching. So the coaching program I got on board with, they don’t exist anymore, but it was called Kinder Reese Coaching. And what was great about them was they had these weekly calls. They had a call for your buyer’s agents, one for your listing agents, and so again, I have no training program or nothing. And so I signed up for it, I had my agents plugging into that, and then I was also learning myself with my agents, as I went along, in terms of what’s the process when you meet somebody face-to-face to get them committed to work with you.

Chris Watters:
And so I learned from a guy name Jay Kinder, asking him what’s that process look like. And he said very simplistically to me it’s kind of like playing baseball when you meet somebody for the first time. First base is about building rapport, connecting, building trust. Second base is about establishing yourself as an expert. So educating them on what’s going on in the market, creating credibility. And then third base is differentiating yourself. What can you do differently for them that no one else can do? And then the home plate is obviously getting them committed to working with you and signing the agreement.

Chris Watters:
So when I kind of understood that flow of how a face-to-face appointment went, that was super crucial. And then, I learned about inside sales. Every objection is an opportunity to ask a question, you go for the appointment. I used to just talk myself out of appointments. I wanted to try to establish myself as an expert on the phone and I would just throw up on them, trying to prove to them that I knew all this stuff on the phone. A huge mistake. So basically what I’ve discovered is to be a really successful agent or team leader, if you’re a team leader you got to teach this, you got to teach people how to be good at inside sales, and that’s a skill. You have to teach people how to be good at outside sales, that’s a skill. And then you need to teach them to be subject matter experts.

Chris Watters:
So if you as an agent or a team leader can knock those dominoes down, you’re going to have a tremendous amount of success. And what I basically figured out is the road to riches in real estate is learning how to convert somebody into a client that has no idea who you are. Anybody can go sign up their friend, their neighbor or whatever as a client, but you’re going to have a very small business and it’s going to grow very, very slow. Especially if you don’t have a sea of influence. So if you want to grow and scale fast, you got to learn how to convert people that have no idea who you are. And it’s about learning those skills to be able to do it.

Frank Klesitz:
Chris, that’s incredibly insightful. Let me sum up what I heard here. Is to, outside of some personal development insights of the pain of building a business living below your means, you needed to train these agents because you realized they were probably doing pretty poorly with their production versus yours. So you sign up for someone else’s coaching and threw them on their coaching. But during that process, you were learning and you were really kind of making some mental models to yourself and what you just shared. And ultimately, you created your own training. What would you recommend for an agent watching this, that went out and hired a couple of agents, did the whole thing, what they need to get these up to speed on that metaphor of first base, second base, third base. How should they go about delivering the training? Do they go get someone else’s, do they create their own? How do they deliver it? What are your thoughts?

Chris Watters:
If you’re a team leader or an aspiring team leader and you don’t have those skills developed yourself personally, then go get a coach. And there’s lots of these coaching companies that actually work with your team directly. So for example, I’ve been through all of them. I paid all of the coaches in this industry, and they’re all really great. But every coach kind of has a niche of what they’re really good at. So for example, one of my probably favorite coaches for inside sales is Dirk Zeller. He has a company called Real Estate Champions, he’s written a lot of books on inside sales. So if you’re trying to get coaching for yourself and your agents, I highly recommend Dirk Zeller for mastering inside sales. And then the outside sales piece is tricky because it’s hard to do that over Zoom. You’ve got to role play with people [crosstalk 00:32:56]-

Frank Klesitz:
Can you be a little clearer on what you mean by inside sales and outside sales from a specific definition relative to real estate?

Chris Watters:
Yeah. So I guess it’s not commonly spoken of. People don’t differentiate inside sales and outside sales in real estate. And I guess the reason I do is I kind of put those things in boxes because they’re independent skills. What you do on the phone versus in person is radically different. And so for example that first year I talked about my team where we sold 98 homes and we had 20 people, and 18 of them sold 18 houses. The thing I figured out is you can talk yourself out of an appointment, trying to be a subject matter expert on the phone. You should not try to be the subject matter expert on the phone. You can only do that face-to-face, after you’ve built rapport with somebody and they trust you.

Chris Watters:
So the whole goal from an inside sales perspective is to essentially qualify the lead and then have a carrot to get them to want to meet you face to face. And so, these are basic scripts and different value propositions you can offer the consumer. Like I have houses that are not freely on the market, that you won’t find on the internet anywhere. You can come into my office, I’ll go through and share with you this private list I keep for VIP clients. When’s a good time for us to meet? Mornings or afternoons? So inside sales is a skill, a legit skill. It’s a different skill than meeting somebody face to face. What gives you confidence with outside sales is the marketing collaborate-

Frank Klesitz:
So, hold on. Let me get it clear. So inside sales is appointment setting, and outside sales is face-to-face consultations.

Chris Watters:
Yes, yes.

Frank Klesitz:
Got it. Okay. Go on, sorry.

Chris Watters:
Yep. Yeah, I mean the final one is subject matter expertise, which is how to be a good agent. Deal with contracts and all this stuff we think that we need to know but actually you don’t even need to be a subject matter expert to be successful.

Frank Klesitz:
So how do you deliver that training? Let’s say you onboard your four agents, five agents that look at you starry-eyed, 50/50 split, here are my leads. And they probably have years of bad habits, right? How do you get them productive quickly so they’re not wasting all your lead generation dollars and they’re selling houses to pay your bills?

Chris Watters:
So literally the most effective thing I ever did was getting people on the phone next to me doing these call jam sessions. So I literally get them on the phone right away and get them prospecting and give them feedback live. And I’m kind of like a trainer at the gym sitting next to him. When I’m sitting next to them, they’re going to make a lot more calls than if they’re by themselves. And I can also give them live feedback. So one of the most powerful things you can do without putting together some fancy training program is in the beginning, just get people taking action.

Chris Watters:
Forget going through some training guides. You don’t need any of that. You just need to get people on the phone. It’s kind of like you go to the gym, a guy at the gym doing 10 reps versus a guy doing 100 reps, well, the guy doing 100 reps is going to get a lot stronger. So you need to get your agents to join reps, i.e. making calls and getting people on the phone. And then you need to get them face-to-face with clients and then go with them to help them build confidence around how to convert people into the cards.

Frank Klesitz:
So you have to be a great agent before you start recruiting because it’s by shadowing.

Chris Watters:
Exactly. So that was one of the big things I screwed up was I was not a great agent when I brought on team members. And so my team’s failure wasn’t a failure on them, it was a failure on me as a team leader to be able to lead them to success. And so in the beginning, it was messy. I didn’t have this regimented training program. I just got everybody on coaching calls and gave them leads and then just tracked, in a CRM, how many calls they were making, emails sent, all the little metrics on the backend, and then following up with them. And in doing those call jam sessions, there was things like advanced, then I’d put together a 30-day ramp up program and things were more regimented. But you don’t have to have that regimented training manual ready to go out the gate.

Frank Klesitz:
How does someone hold it all together when they’re in production, they have to go sell houses, they have to go recruit agents, they have to manage vendor relationships to get the money to pay for the marketing, and they have to have agents following them or shadowing them to be able to build the team when you’re bootstrapping it? At the same time while you’re living below your means, not enjoying any of the income that you’re making for yourself.

Chris Watters:
The correct answer is you pretty much sacrifice everything in your life. So working out, family time, your significant other, you give all that stuff up because it requires a significant amount of work to be able to do all those things. I read, a couple of years ago, a book Gary Keller wrote, called The One Thing. And he talked about how the only people that find balance in life are the ones that live very mediocre lives. And so, I think you have to… What I did, indirectly, and I didn’t realize at the time, is you have to be willing to commit for a duration of time. To be incredibly unbalanced in your life and be just obsessively focused on trying to make something successful. Almost sadistic, you’re focused on making something successful. And you can’t get the tracking. And man, it’s tough. Real estate is tough. There’s so many people trying to sell us stuff and get us distracted and in their program, or whatever. But you got to be crazy focused.

Frank Klesitz:
God, that’s insightful. Good answer, Chris. This is good stuff. Hey, Chris, move your camera down a little bit so we can see you. You’re on your phone, right?

Chris Watters:
I’m trying to find my boarding pass.

Frank Klesitz:
I guess, I’m trying to think of the next logical question I’m going to ask. I love the take away of VAs. Let’s talk about lead sources. So you got to give these agents leads. I guess, let me just ask a different question. There are agents out there that build teams where they are coaching and training their agents to go generate their own leads. You took a very different route to build a team. You spent the money on lead generation, you raised money to help offset that cost, you hired an ISA to set the appointments, and you were kind of the marketing direction, if you will. Whereas other people who want to start teams, they’re like , “No, no, no, no, no, I’m going to get my agents to cold call. I’m going to get my agents to do their own lead followup.” And there’s less financial risks but it’s a different type of model. Can you share with us the pros and cons of both ways of going about this [inaudible 00:40:00]? The marketing route, an ISA route, to support the agents and basically set appointments for them? Where other people [crosstalk 00:40:06]. So tell me the pros and cons.

Chris Watters:
Yeah. It’s going to be a lot less profitable if they’re taking on the risk of the agents during the lead. So I think that’s a good model in the beginning, if you don’t want to go and raise money through, what I call, our Random Master Program. That’s one way to go about doing this. Getting the agents, teaching them how to gain generic leads. And by the way, we also have the agents going and doing their own activities to drive lead gens. So open-houses, calling their sphere. The lead that converts the fastest and have the highest conversion rate are the old school things, like doing open-houses and calling your spheres. So you’ve got to have multiple oil wells to help your agents have success.

Chris Watters:
Another mistake I made in that first year was I only gave my agents internet leads. And internet leads take six to 12 months to close, the conversion rate’s very low, and the agent’s going to make very, very little money. So you’re going to the team [inaudible 00:41:07] and make as much money as fast as possible. So here’s the thing I figured out is I needed to hold them accountable to doing open-houses every weekend, especially in the beginning of their career, doing these call jam sessions with them when they call their sphere, and get them to take massive action. And then also supplement them with internet leads. So those multiple oil wells is what helps [crosstalk 00:41:28].

Frank Klesitz:
Open-houses. Let me get it straight. Open-houses.

Chris Watters:
Yep, yep.

Frank Klesitz:
And they’re doing the open-houses not at the wrong list. Could they do open-houses on other listings?

Chris Watters:
What’s interesting is that first year or so, I hardly had any listings. And in fact, there was one point I didn’t have any listings. And so I was just cold calling other agents, asking them to get my agents to deal with the houses that they’re listing.

Frank Klesitz:
And they agreed that, even if they were at other brokerages?

Chris Watters:
Yeah.

Frank Klesitz:
Okay. That’s a huge insight. Then, you brought them together to overcome the fear of calling their sphere. And you call them call jam sessions. Because no one’s just going to call their sphere when they’re all alone, on their own time, Chris. It’s just not human behavior, is it?

Chris Watters:
Yeah. I mean, it’s, again… I did this survey of all the agents on my team and group, like a year ago. And literally, there’s like 93% of our entire company said the one thing they wish they could give up and get rid of is prospecting on the phone. Most people become agents because they’ve got a good personality, they’re outgoing, they like to meet face-to-face. And so it’s just incredibly painful for them. There’s a reason why Fortune 500 companies out there have separate roles. One for inside sales and one for outside sales. Because they’re different personalities.

Chris Watters:
People that like to be on the phone all day are typically not very good face-to-face with people. So I would recognize that, and as I said earlier, as soon as your revenue supports it, start building an inside sales team to help you on conversion. And then, man, that’s all another subject. Inside sales and how you set it up, [inaudible 00:43:20], because they are drastically different. There’s another small nuance, like there’s a big difference between the inside sales rep that works inbound leads, and one that works outbound, doing outbound prospecting.

Frank Klesitz:
We won’t go into that.

Chris Watters:
Yeah.

Frank Klesitz:
I want to ask [crosstalk 00:43:39]. That’s a whole other thing. I know. Netting $1,000,000 with a real estate team, what are the correct financial ratios, net profit margins, maybe considerations with commissions and what the average price point is in a market? Maybe transaction fees or ancillary income. Just knowing what you know now, if you had to guide somebody, how do I actually net 1,000,000 bucks, the real estate team? Can you share with me the accounting or financial ratio structure of how you think about the money of what percent goes to what?

Chris Watters:
Sure. So I’m going to give you the unit economics from a percentage perspective, assuming you’re not in production.

Frank Klesitz:
And by the way, I don’t want you to miss your flight. When’s your flight? 30 minutes?

Chris Watters:
It leaves at 11:20.

Frank Klesitz:
Okay. Go ahead.

Chris Watters:
So the way the numbers shake out is if you assume you, as a team leader, completely out of production, the way the money gets allocated is 35% of gross revenue should go to your COGS, Cost Of Goods Sold, or the money you pay out to your agents and splits. So the way you drive those COGS down, because that means you’re taking 65% of gross revenue, right? And if your buyer agent is on a 50/50 split, well that doesn’t work. So the way you drive the COGS down is by the inside sales value prop to the agent, where you can reduce the [crosstalk 00:45:11], you reduce it below 50/50.

Frank Klesitz:
To what?

Chris Watters:
So on the listing side, our split is 85/15. 15% to the agent, 85% to me. And then I cover the cost of everything. Literally, all my listing agent does is they show up on an appointment… And by the way, my listing agents are the highest paid people in my team. They all make 200 to 250,000. They stay with me for years and years and years and never leave.

Frank Klesitz:
Because you’re taking all the risk on the listing lead generation and the appointment setting.

Chris Watters:
And I have [crosstalk 00:45:45].

Frank Klesitz:
And all the admin. Yeah.

Chris Watters:
The target tier, everything, right? So they have no expenses, they wake up, look at their calendar, go on an appointment, give our marketing presentation, and then get them signed up, and then turn it into the team to execute.

Frank Klesitz:
God, not a lot of people do that, Chris, do they? When they build a team.

Chris Watters:
Right. No, they don’t. So back to percentages, ideally your average payout, when you average listings on my side, is 35% goes to your agents. So maybe 50% of the buy side, and 15% on the list side, that’s what you want to build towards. It’s not going to be like that in the beginning. In the beginning-

Frank Klesitz:
So it’s like a all-in blended 35%?

Chris Watters:
Yeah. A blended 35% split goes out to the agent. And then on operating expenses, ideally you’re at about 20% of your gross revenue goes up X. So up X is your technology fees, your rent, and your salaries of your W2 employees. And then the other category is lead generation. And ideally, lead gen is at about 10%.

Frank Klesitz:
So if my numbers are correct, 65% on expenses? Yeah.

Chris Watters:
Yes, but one thing I’ll tell you is that that’s what you can get up to [crosstalk 00:47:04]-

Frank Klesitz:
What’s more reality, man? You can’t break… You say you break 45% to the bottom line?

Chris Watters:
35.

Frank Klesitz:
35%’s the target? That’s high, man. That’s really good.

Chris Watters:
So when things are humming for us and we’re not testing or whatever, we’ll hit 35%. It doesn’t happen often because, for example, my lead gen budget one year may go from 10% to 20% because I launched some advertising campaign to test, right?

Frank Klesitz:
Yeah.

Chris Watters:
And maybe it works or it doesn’t work. Or I launch some piece of software or I hire somebody and that employee doesn’t work out. So in that perfect world I shared with you, they are 20% OPEX, [crosstalk 00:47:43]-

Frank Klesitz:
Do you take a salary? Do you pay yourself in a salary before in that 20%? Or is that bottom line all yours, including salary and distributions and everything else?

Chris Watters:
I take a salary, but it’s really small. I think it’s like 30,000 a year.

Frank Klesitz:
Got it.

Chris Watters:
And then the rest are distributions paid out to me.

Frank Klesitz:
Okay. Do you find those margins hold true in most markets like Austin?

Chris Watters:
So in markets where your average sales price is north of like three to 350, it’s very, very doable. In markets where your average sales price is 150 to 225, it’s harder to hit those margins because your gross revenue per transaction is so much less.

Frank Klesitz:
Got it. Any other thoughts for someone scaling up a team in other sources of revenue beyond just a commission they should be thinking about? And then we’ll start wrapping up.

Chris Watters:
Yeah. I think something that’s kind of a hot topic right now is partnering with mortgage companies and private companies in a joint venture capacity where you guys own a equity stake in a shell entity, if you will. And the thing is, though, you shouldn’t do that, and so you control a lot of transactions. When you get to like four to 500 transactions a year, that’s when you should start considering doing these joint ventures. And those are really lucrative opportunities where you get shareholder distributions through a joint venture. And essentially your team is kind of the marketing engine and then your partner is somebody that’s already in the industry, and they’re the operator of the business.

Frank Klesitz:
And then you both form an LLC and it all goes through that for a joint venture.

Chris Watters:
Yep. That’s right, yeah. In the book, when I talk about the brand ambassador program, the thing I discovered is I started documenting everybody we were slinging business and recurring business to, and I came up with 26 different local businesses, that were non-competing, that I was referring business to throughout a year.

Chris Watters:
I think another important note to make is I remember walking into this roofing company’s office and I met with the owner of the roofing company. And this was in the very beginning, when I hadn’t signed anybody up yet. And his name is David Phillips, this is back in 2010, I still remember. And I still know him to this day. But I asked David, I said, “Hey, how do you generate leads for your roofing company?” And he said, “Well, you spend money on direct mail to [inaudible 00:50:10], we spend a lot of money on PVC.” I’m like, “Really? You spend money on PVC too?” And he’s like, “Yeah, man. I’ll spend 1,000 to 1,500 bucks to acquire a customer. And I was like, “Whoa, you spend 1,000 to $1,500 to acquire a customer?” I’m like, “Well, if I refer someone to you, if I refer a roofing job to you, is that worth 1,000 to 1,500?” And he was like, “Yeah, absolutely.”

Chris Watters:
So I wasn’t sending out roofing jobs every month, but we were sending him one every three months. Every couple of months, we were sending one. And so, over the course of the year, if you send him four roof jobs, that’s 40 to 50,000 in gross revenue for his business. And so for him to chip in 500 bucks a month to be on your marketing collateral, that’s an amazing ROI for him. And it tells people you don’t have to work 100 leads to go get one roof job closed.

Frank Klesitz:
We don’t have time to go deeper, like Chris is saying. And Chris, we’re going to go ahead and wrap this up because you got to get to your flight. But go ahead and mute out, Chris, because your background noise. Mute yourself out. Even hard for me to hear myself. There you go. All right.

Frank Klesitz:
So go check out Chris’s book, The Million Dollar Real Estate Team. Again, I think the detail you’re looking for in some of the questions that some of you were having will be detailed in all of that. I tried to ask some of the pointed questions to give you some of the mental models and the structure of how you scale up a team quickly.

Frank Klesitz:
I think what you’ll have to see with Chris is he took a model where he took all the risk on the lead generation and the appointment setting for the agents. Which is a very unique model in this space, and Chris is a brilliant marketer. And when you do that, it gives you a very systems-based business that really, you don’t have to worry about high levels of turnover to your agents.

Frank Klesitz:
Chris said that his agents never leave because they’re out to prospect. You could build a team where they have to prospect but you’re going to deal with constant recruiting and turnover for the most part, would you agree, Chris?

Chris Watters:
Yeah. Yes.

Frank Klesitz:
Yeah, yeah. So if you like Chris’s model, you can check it out. Chris, we’re going to wrap this up here. I don’t want you to miss your flight. [crosstalk 00:52:18].

Chris Watters:
I enjoyed doing this. I’m sorry you guys have had to deal with my background noise.

Frank Klesitz:
No, no worries at all.

Chris Watters:
I don’t know if you told everybody, Frank? We’ve been at the Inman Real Estate Conference, here in Las Vegas for the past week, and so I’ve got a flight home to go to a play of my daughter. My daughter’s got an event at her school this afternoon. So I have to leave out early.

Frank Klesitz:
No, perfectly fine, man. You can peace out of here. I’m going to wrap it up, man. Chris, thank you so much.

Chris Watters:
All right. Hey, if anybody needs anything, probably the best way to reach out to me is via email. I deleted all the social media apps on my cellphone because it was a distraction.

Frank Klesitz:
Good for you.

Chris Watters:
So ping me just on email. It’s chriswatters@wattersinternational.com. And then you can also go to the page I mentioned if you want to get a copy of the free book. And I think my info, also, is in the book. I have all my [inaudible 00:53:15].

Frank Klesitz:
Awesome. Chris, thank you so much.

Chris Watters:
Yeah. Thanks for having me on, Frank.

Frank Klesitz:
Peace, dude. Be safe. So that was Chris. That was really cool. I was able to hop on and show those details. I hope you enjoyed this episode of Keeping it Real. You can go to keepingitreal.com, you can watch all the previous interviews that we’ve done. Like I said, we have good write ups there. We’ll make sure this one does get actually transcribed. So if you’re listening to it and go like, “Ah, this is hard to hear because it’s the airport,” you can read and get all the good, golden nuggets that way. All right?

Frank Klesitz:
So go subscribe on Keeping it Real. We’re up on Apple Podcast or iTunes, and you can go to the Real Geeks Facebook page, you can go to keepingitreal.com, and you can get notified of new episodes. And I’m Frank, one of your hosts. I’m sometimes one of your co-hosts when Greg Harrelson can make it. We’re going to put on good shows for you. We appreciate you watching, and we’re going to wrap it up right there.