Principal KPI’s

This is what Barney has learnt from working with some of the best business owners.

Principal Coaching Made Simple

Mentor – Barney McGrath

  • Set Vision
  • Importance of Margins
  • Setting Growth Targets
  • Stay High Level
  • Judge every decision on getting one step closer to delivery of KPI

Marketing Monday – “You are never too old to learn new tricks – I am living proof of that!”


Kevin: Barney McGrath joins me all this week, Barney’s been a fairly regular guest of ours. We’ve had a couple of chats and, Barney is, of course, from McGrath Consulting, consults with many top offices and performers all around the world in fact. And, the topic for this week is principal coaching made simple. Good day Barney, how you doing?

Barney: Good Kevin, how are you doing?

Kevin: Good mate, I really enjoyed our time recently, you know, when we looked at the various aspects of a real estate business. Principle KPI’s, what do you define them as Barney?

Barney: Look, I’m going to jump up really high initially. One of the problems I see with a lot of the principles I deal with, is they’re unclear about their lifestyle. And I know that sounds like a motherhood statement, but, obviously there are many agents that are very different.

Barney: I’ve got a number of clients at the moment, for example, I’ve got a pair of principles who, active, high GCI riders, who are free of children, and they’re happy to work seven days a week, 80 hours a week, and all they want to do is drive revenue.

Barney: I’ve got other clients who are middle-aged, got a couple kids, who, you know, it’s important for them to get home in the evening. It’s important for them not to have to work on a Sunday. And I’ve got other clients who are in their retirement phase, and are looking at succession planning.

Barney: So, I think one of the thing a lot of people failed to do, and acknowledged early in setting their goals for their company, is understanding their own personal requirements, and, the needs of their family, and their lifestyle places on them. And, it really does sound like, sort of, you know, a bit esoteric for most people. But I think, the first step is to really understand what a great life looks like for yourself, and how many hours you want to work, and what role you want to play in the business.

Barney: So, that, for me, is step number one. And really important. Step number two is, again, staying pretty high, but setting a vision for what the company might look like three years, five years, from now. And, you know, again, being really clear, how many offices do you want to have. What sort of graphic footprint do you want to sit in? Do you want to be in sales, do you want to be residential, do you want to be commercial, do you want to be in property management? What is the definition of a successful business for you? And being really clear about what you want to achieve this year, three years, and five years.

Barney: Because, if you’re not clear about that, every other decision you make, is somewhat reactive, and not necessarily going to get you closer to that ultimate choice. So, two levels, you know, first, who am I, what do I want to achieve in my life? Two is, what is the business going to look like in three years? And then, and only then, do I believe you should start drilling down into the individual KPI’s of the business.

Barney: So, you know, Kevin, as you would know, and everybody principle out there would know, the KPI’s and drivers of your sales business, are very different to that of your PM business-

Kevin: Yes.

Barney: The overall margin of the company as a whole and the shared corporate expense, or the shared management expense, the overheads of the business, they all go into the operational KPI’s of each division. So, being really clear about what you want to achieve, what the company needs to look like, and then what the KPI’s of each division of the company look like, helps you really set the direction of your business and your outcomes.

Kevin: Yeah, and when you talk about the direction you’ve identified some right ones there, you know, the importance of margin, setting those growth targets, and, when you know what they are, you can then judge every decision, and question yourself, and say, “Is this actually getting me a step closer to delivering on that promise to myself?”

Barney: Absolutely, you know, you might turn around and say, let’s say for example, I’ve got a GCI target for my sales business. Let’s just say that’s one of my KPI’s. I might already have a high market share. I might already have a high average sale price. But, the only real thing I can change is my fees. I could be giving away low fees at one and a half, one point four, one point three percent, and what is a real waste of game growth in GCI is going to be to increase my average percentage.

Barney: It could be targeting more high end property, so, it’s really important, I think, that we get very clear about what our goal is for that division. And then drill down into that division and say, “Well, how am I performing against all of the key drivers of that division?”

Kevin: Mm-hmm (affirmative)

Barney: You know, Kevin, I’m sure you’ve seen it. There was a really interesting sort of almost industry wide conversation that happened, I guess about eight years ago. Have you ever heard of the thing, operation ten percent?

Kevin: Yes I have, yes, yep.

Barney: And so what that was basically saying is, if I moved all of my key drivers in sales, each of them ten percent, I would have an 80 percent incremental impact on GCI.

Kevin: Yup.

Barney: And the obvious question is, well, what are those drivers? Well, if you start at the very front end, and say, “What’s my appraisal to list conversion?” So, if it’s at 50 percent, try and move it to 55 percent. What’s my lift to sale conversions? Well, if we’re, you know, selling 85 percent of everything we list, what would it take to increase that to 93 percent. If my average sale price is 800,000, what would it take to move that to 880?

Barney: So, on every single little component, if I were to move everything just ten percent, I could actually improve my business overall 80 percent.

Kevin: Mm-hmm (affirmative) yup.

Barney: And you know as well as I do Kevin, every single business is different, and every single marketplace is different.

Kevin: Yeah, yeah.

Barney: You know, as you know, not that I work for them anymore, but, you know, I worked for John McGrath’s business for a long time, and they started off in the Paddington Laura area, and that’s been their core territory since before it was even McGrath, when it was Wood Heart realty. Who would have thought after, you know, 40 years of driving in that marketplace, they would have a 35-40 percent market share. The truth is, they’ve only got about a 12-15 percent market share, because it is such a crowded space.

Kevin: Yeah, that’s right. Mm-hmm (affirmative)

Barney: So, every company is going to be different, and every marketplace is going to have it’s own levels of restraints.

Kevin: Yeah.

Barney: And you’ve just got to tailor your KPI’s and your business overall to address the outcomes you’re looking for.

Kevin: Good on yeah. Barney McGrath, Barney’s back again tomorrow morning, we’ll take a focus on property management tomorrow morning, thanks Barney, talk to you then.

Barney: Lovely talking to you Kevin.

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