September 18, 2023We’re going to talk about bank failures and their impact on the market. Specifically, we’re going to focus on Silicon Valley Bank and how its recent troubles have affected real estate agents, brokers, and the industry as a whole.
Video Contents:
- 00:00- Introduction
- 01:24 – What Happened To SVB
- 09:35 – Our Experience With Bank Failures
- 19:23 – Impact On The Stock Market & Debt
- 32:13 – Who Is Affected Most?
- 38:20 – Outsourcing To Save Money
Episode breakdown: running a real estate business through scary headlines
Nick McLean, Suneet Agarwal and Preston Guyton recorded this episode the weekend Silicon Valley Bank failed. Most of the conversation is about what a bank failure means for people who run real estate businesses. They focus less on the bank itself and more on how a team leader should handle the mood it creates, protect payroll and keep building while others pull back.
Keep the news from setting your mood
Suneet opens by saying he doesn’t watch the news on purpose, because it pulls you down a rabbit hole. Nick goes further. When he got into real estate in 2008, he watched his broker-owner follow the news every day, and he saw that broker’s attitude, sales and performance get steadily worse.
I made a decision not to check the news for the next five years. So from 2008 to 2013 I didn’t look at the news one time.
Nick McLean
His business was growing, so he felt good, and when people asked how the market was he told them it was better than ever. Other agents in town were telling those same people it was bad. Nick’s point for leaders who run sales organizations is that salespeople need to stay calm and keep emotional control. A leader who absorbs every headline passes that stress straight to the team.
The hosts also point out that agents who did well through 2007 to 2010 adapted to the market in front of them. Short sales were the big opportunity then, and the agents who focused on their own market made money while others waited.
Talk about your business, not the economy
The hosts agree that agents don’t need to explain to clients why a bank failed, and the average consumer isn’t going to bring it up. They see agents make a common mistake here. They try to explain the macroeconomics and then spin it into a reason to buy real estate, and it comes across as fake.
I have no idea how the market is, but I can tell you what I’m doing.
Nick McLean
That was his answer during the years he ignored the news, and he says he could describe his own experience with complete clarity. For a team leader, the practical version is to coach agents to answer market questions with what the team is seeing in its own listings and buyers, and to leave national commentary alone.
Build payroll runway and trim around the edges
The part of the story that hit the hosts hardest was the small business owner who couldn’t make payroll because his money was stuck in the bank. As owners with staff, they say the payroll is the pressure that keeps them up at night. They treat the episode as a wake-up call to keep a margin of safety in the bank, enough to cover two, three or four payrolls, or six months of runway. One host makes the case that having that cushion lets an owner take risks on opportunities a competitor can’t.
The hosts don’t all respond the same way. One went through his P&L that morning looking for expenses to cut so he could put away as much cash as possible over the next six to twelve months, even after a record month. Preston says he already has a war chest and is going hard at the market. They land in the same place on marketing. Nobody is cutting it. The cuts are software that doesn’t earn its keep and other small items, not the spend that brings in business.
Use a slower market to hire better talent
Preston is building out a new site for his business and sees a hiring opportunity. Tech roles that would have cost far more twelve months earlier are now within reach, and he expects talent to keep getting more available as the tech sector tightens. The hosts also describe how much of their production work now runs through overseas virtual assistants they find through sources like Upwork, in places such as the Philippines, India and Mexico.
One host describes a team of VAs that turns a podcast episode into a blog post, edited video and thumbnails within about four hours of receiving it. In the U.S., he says, it would take until the next week and cost far more, before payroll paperwork and taxes. Another host hired his VA directly after a year, paid the agency to buy out the contract and gave her a raise, which he calls a win for both sides.
Key takeaways for team leaders
- Limit how much news you consume. Your mood becomes your team’s mood.
- Coach agents to answer market questions with what they’re seeing in their own business, not national headlines.
- Keep several payrolls of cash in reserve so a shock doesn’t force bad decisions.
- When you cut, cut unused software and small expenses. Keep the marketing that brings in business.
- A slow market is a good time to hire talent and to move production work to trained virtual assistants.
