Who's the boss?

The giant leap forward for many mortgage brokers is the decision to abandon the notion of doing it all by themselves in favour of setting up their own business venture. MPA caught up with Scope Lending's Will Davies and his business coach Andrew Roberts for some first hand knowledge of how to get started

Every week Will Davies and business coach Andrew Roberts sit down at Scope Lending's Bondi headquarters to strategise, review and plan for the coming weeks, months and years. Its something they have been doing for the past three and a half years - in that time Davies has gone from the proverbial one broker, a fax machine and PA to a business owner managing a team of twenty:

Why should brokers consider setting up their own business?

Will Davies: You always have a choice. You can keep on going by yourself and just become a bigger and better broker over time with the ability to earn between $200,000 and $400,000 a year.  All this is appealing and is good money, but it does restrict the value of your business should you decide to sell it.

But when you sell it, it will all be based on you and your relationships. You will get a reasonably low multiple and you won't learn any of the skills of a business owner - essentially you will be doing the same thing seven or eight years later that you were doing when you started, just more of it.

This may be the right option for some brokers...those that have a love of being in front of a customer and enjoying see clients 15 times a week.

But if you are the person who wants to push it a bit, and set up a business and learn, this is your best option to grow. The disadvantage is you will forfeit a lot of cash you would have got otherwise, but by building a business, it has a much greater sale value than if you go on your own - a much better multiple.

Andrew Roberts: And when you have got your business to a certain level, there is the opportunity to take long holidays plus the flexibility of still getting paid while you are on leave. Another benefit is leverage, meaning the business is not dependent solely on you.

Davies: The ideal situation is to get to the stage where you don't have any clients of your own, you are managing the team and eventually you are not even managing the team but looking at new business opportunities and setting the strategic direction of the business.

So how did you get the ball rolling?

Davies: The first thing I did, working with Andrew, was to put together a plan of what we were going to do together over the course of the year. Much of that planning involved getting the systems right. You have to get the structures in your business down so that when you do get a broker onboard these structures are in place and the broker had a semblance that there is a system they are following.

One of the first things I did was I wrote a mortgage broker manual which documented from start to finish how to be a mortgage broker, what to say, what to do, a step-by-step process so that when a new broker comes they can pretty quickly get up to scratch with what they are doing.

Over time this has developed and I have now recorded a whole series of videos of myself and other brokers acting out scenarios, so new brokers can watch and learn.

I also put together the start of an induction system. The first broker I employed didn't even get an induction. I told him to grab a seat, told him where the fax was and the phone and said 'good luck'. Now we have a process in place where there is a full week induction which goes through all the different things they need to know.

Roberts: Probably the biggest thing I would emphasis when setting out is shifting the mindset: 'I am no longer a broker; I am now becoming a business owner'. At the early stages I talked to Will about getting clarity of what the business would look like five years out, three years out and one year out. Then we put a plan in place.

Then it was about challenging the thought process and really working on the idea that "I am now running a business" because all of a sudden you have to learn how to recruit, how to induct, how to train, how to keep the team motivated and how to grow.

In my sessions with Will I help him get clarity on what he wants and where he is going. The first couple of years were all about education, helping him understand how a business is supposed to run properly and making sure he is doing the things required to run it successfully.

That is where my skills come in - knowing what systems to put in place, knowing where to start and how much time to spend on it and detailing that out in the plan.

The most important thing is being held accountable to the plan once it's in place. When Will comes in every week, we update the plan, look at it and see what needs to be done next week to move towards his goals. We take it a step further and prioritise what is most important to what is least important and put those things into his diary

When do you actually begin operating?

Davies: I think the idea is to have your plan, put the systems in place but don't wait until they are in place to get going - you don't want to use the time spent setting things up as a procrastination agent. You need to get your basic systems going, get your first guy going, learn and make sure are consistently adjusting and improving the systems and creating new ones where you need them and then getting more brokers on as the system gets better and better.

What about paying commissions?

Davies: The other key system you need to get in place is of course your commissions' structure - you need to have your head completely around this issue.

What we have tried to do - as much as possible - is keep our commission payments very standardised so that everyone knows where they stand. If you have different rates for everyone, it makes it very tough and people may feel that things are unfair.

When I started I think my commission payment scheme was too generous.

How important is recruiting in terms of the initial set up?

Davies: It is vital. Just as you would normally market for leads (as a broker), as a business owner you need to market for brokers. When I am in recruiting mode I will try four or five different strategies at once to get more leads - these include offering incentives for those who refer people into the business, handing out special cards, and using and actively pursuing networks

I employed my first broker via word of mouth. I met him through my football club - he is still there and is the top broker in the office. I was very lucky with that.

To get top brokers interested you really need a professional presentation that demonstrates all the benefits of your business so they have a really good idea of what they will be learning.

We have a really extensive interview process - we would rather say 'no' through that process than say 'yes' to anyone and it not work out. Its extremely time consuming to have a broker on your team that is not working - My advice is to spend a little more time and effort upfront getting the right team in place

Roberts: If you can find a client, they are worth a certain dollar value, but if you can find a broker, the broker will have 'X' amount of clients - John McGrath (founder of McGrath real estate and Oxygen Home Loans) took a similar approach to building his businesses.

Davies: Yes. If I find a great client, I am going to sell him a certain amount of business, but if I find a great broker I am effectively adding $100,000 a year to my business in profits, which is the equivalent of getting a $30m loan. You have to treat each broker you employ as a $30m loan.

How does your interview process work?

Davies: After I get the initial inquiry, I will meet with them and run them through the business. Quite often I will do that in a group situation if there are quite a number of people so its better leverage of my time. I give them a really good idea of the business, via a PowerPoint slide show and at the end I say, 'if you are keen give me a call'.

If they are interested, we do a second interview and ask them lots of questions about themselves - their ambitions, past performance - and then either then or at a later stage we give them a series of quizzes. One is aimed at assessing how good they are with people, while another is a bit of a brain teaser. The quizzes are conducted by different team members. In total three different members will interview them before a decision is made.

If we are all in favour and it works out then we send them to an external consultant who does a personality profile to see if they are right for the role. I have had people coming in wanting to be a broker and leaving wanting to be a personal trainer.
I would rather have that happening then training someone for four months and then having them tell me they want to do something else.

Roberts: I would say a key thing is the right people. It's absolutely vital if you want to grow your business. If you just manage that, everything else takes care of itself. As your business grows, you should spend a lot of your time making sure you are getting great people onboard

What about things like training and accreditation?

Davies: New brokers have to get all the industry accreditations. That is part of the induction process and is another system that I have created. I give them a sheet of paper which says: "You have to call this person, do this etc" and they do it all themselves.

We also send them to do their Certificate IV as well make sure they meet the MFAA requirements that they get police checks and credit checks.

The whole process takes about two months. In that time we get them to start fostering their databases, try to get them to pick up some leads and get momentum going on the marketing side.

To speed things up, if I see someone in January, and they are thinking of starting in April I say to them 'why don't you do these things between January and April so when you join you are hitting the ground running?'

Some one can, if they really apply themselves, do there Certificate IV within a week so it need not be a really lengthy process.

Do brokers get paid while being trained?

Davies: It depends from person to person. We offer a 'commission in advance' system where we will give some commission but they have to pay it back. Some brokers want or need that, others don't.

You have the structures and systems in place, you have marketed and recruited the brokers, now what?

Davies: Then it's just managing the people that come in and setting up new layers of management so that you don't have to personally manage each member of the team - you can't recruit and grow the business if you are too busy managing.

In terms of layered management, we now have two sales managers - they are also brokers - who are each responsible for certain team members. So everyone reports to someone. Out of a team of 20, I have got four people reporting to me.

What about self-education?

Davies: One of things that Andrew is very strong on is always be learning, I agree with that. I read a business book a month on all different topics including leadership, marketing, management and coaching. The only thing that will set you apart is in the information you have...you just have to keep on learning.

I also go to a lot of different conferences as well and each time I go, I pick up five to ten key things that I can take back to business.

But its one thing to pick up ideas and say 'that's great for my business' what you need to do is write it down, put in your plan and implement it. It's great to know about an idea, but that's only 10% of it, the 90% is doing it.

I see growing the business as collecting information from different sources, taking those that are applicable and adding them to your business and bit by bit, incrementally it grows bigger and better.

What mistakes have you made in growing the business?

Davies: The biggest mistakes is having the wrong commission structure upfront, I recommend people look at that, make sure you leave enough in it for yourself.

There are brokers out there paying other loan writers that work out of their offices 80% of the commission, it's just a completely unviable model. They only reason those businesses are surviving is because the broker-owner themselves is writing the loans...and paying for everything. That's not really a viable business.

I have also learned that you need to be consultative if you are going to make changes to the businesses, be they major or minor. You have to ensure you consult with the key people in your team rather than just stepping in and making the changes - otherwise you get huge resistance.

If you consult and work through the process with people they become a lot more trusting

Roberts: I think trialling a lot of people (rather than offering them the job upfront) is a lesson we have learnt. Will has had some hunches about a broker he has signed on in the past and he has ended up letting them go.

Davies: I have had three brokers that have not worked out and who left within two months. In each of these cases I was not comfortable from the start but in my desire to grow and add numbers to the team I took them in anyway. I spent a huge amount of time on them and they did not work out. It was never going to...it was just me being silly and wanting to grow too fast.

Eight steps to a great action plan

Broker coach Andrew Roberts says there are eight steps to putting together an Action Plan, which shows you where you and your business are heading over the next 3 years:

Step 1:  Give yourself a good day away from your home and work environment.

Step 2:   Begin with the end in mind. Write down how you want your business and life to look like in three years time? How big will your trail book be? How many PAs will you employ? Where will your office be based? How much will you be settling each month?  How many investment properties will you own etc?

Step 3:   Do the same process for two years and then 12 months

Step 4:   Get extremely detailed with your 12 month goals. Get clear on every activity that you need to work on to achieve your goals in the next 12 months. Include your personal goals.

Step 5:   Analyse everything that could stop you from achieving your goals

Step 6:   Break your goals back to nine months, six months, and three month goals

Step 7:   Take your three month goals and break it down into even smaller goals. Ensure you list every activity you need to take to achieve your goals.

Step 8:   Summarise the activity into a weekly checklist so every week for the next quarter is planned. 

Finally:   Work the plan. Remember, stick to your plan and you will reach your goals. Avoid taking on anything that isn't in your plan. Too many people don't get the results they are after because they firstly don't plan and if they do plan, they don't stick to it!  Get clarity, plan thoroughly and work to the plan with good time management and train, train, train!

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Mental and practical changes

According to facilitator and business coach, Pollyanna Lenkic, besides changing their mindset, brokers need to demonstrate leadership qualities, invest in personal development and find a mentor, "someone you really admire and hang out with them"

Lenkic, who has worked with the likes of the Women in Mortgage Broking Network (WIMBN) and other mortgage businesses, says brokers looking to extend their entrepreneurial flair into running their own business, should ask mentors about how they made the transition, in addition to getting industry specific coaching and finding experts in their area.

She also says brokers-turned-business owners should look at the practical changes they can make to daily processes, by asking themselves the question: "What are thing that are bogging me down day to day?"

Lenkic advices keeping a 'what bugs me log' and from this considering what activities can be outsourced, what can be solved by employing someone in-house, or if possible, just by making changes to your own way of doing business.

"This will help you streamline your role and find out what slows you down," she says.

As an example, if you are being bogged down by paper and filing, just create a system where you throw away the filing tray and put everything into a draw straight away - it can be as simple as that.

"Clearing away the things that bug you, is not just a time thing, but an emotional one she says.

Lenkic gives the following tips to budding entrepreneurs:
* Make sure you have a plan that provides you with clarity, direction and the action steps you need to take - planning, goal setting and vision are very important.
* Have a purpose statement - Why do you do what you do? What compels you? This is something you can connect to if you are having a bad day.
* Align your personal purpose with you business purpose - a strong sense of purpose is very powerful
* Identify your excuses - what stop you achieving what you want, focus on eliminating these after you have identified them
* Time management - create a balance between home and work. Remember there is no utopia - everything you say 'yes' to means you are saying 'no' to something else
* Create four of five ideas boxes and put all your ideas in them. This gets rid of all the paper, and when you open the boxes later you have a Pandora's box of ideas
* Emails can be a big way to waste time. Set aside time in the morning and late afternoon to read them, but don't wait all day for them to come in.