Seasons change, people change and nothing ever stays the same forever. However, there is one thing that always seems to remain consistent - Ignoring the changes is a sure fire prescription for failure in any business … real estate is no exception.
This year especially brings some hard decisions for real estate brokerage firms. As managers and brokers it’s not too late to start looking at the production your agents generated in the past year and determine the right mix for the upcoming year. Long-term stable financial growth depends on productive agents, proper training and an appealing compensation mix that allows for solid recruiting and retention. But, how do you measure and balance all those factors to insure your success in a down or correcting market?
To succeed you must have the ability to balance the various factors that determine profitability within your firm. Doing so will get you and your agents a step closer to achieving the success you want, even during the current changing business climate – especially the one we’re in at the moment.
Here’s a broker’s point to ponder: As agents change and progress in their career development by closing more transactions and handling more referral and repeat business, the brokerage may need to reengineer its own style … or lose the agent and the business. Take a minute and think through the following questions:
Believe it or not, commission is not the number one concern of high producing agents. In fact, the biggest concern for most agents is how the brokerage firm will help advance their career. Or maybe in today’s market – how are you going to ensure that I come through this business cycle prepared to take advantage of the turnaround? As a brokerage firm you should address these issues before delving into the financial aspects of 2009.
Being flexible allows you the option to recruit and retain the agents that best fit your environment. Notice that no conclusion is being made about the most profitable agent. Profit and environment are two different, and at times two competing factors, in a brokerage firm. Brand new real estate agents on a low commission split are the most profitable to a company, but if the company environment is not setup to train and mentor these agents they will produce little if anything for the bottom line. However, if your environment is setup for the experienced, self-sufficient agent they may not generate as much brokerage profitability on a per transaction basis but will be more profitable due to less overhead required.
You have to understand the hybrid mix of agents, their unique business styles and what each one needs to contribute in specific production to keep the brokerage healthy. And that is what a flexible business plan is all about.
Once you have determined the style of management you possess and resources that your firm has, then you can evaluate the size and shape of your office. Step one is to establish a baseline for the current office. This baseline would be a current snap shot of the existing agents and commission structures offered. Then look at the revenue generated and the fees charged to the agents and any direct expenses paid on their behalf by the company. Apply some production assumptions to each of these agents or groups of agents and then factor in the brokerage expenses such as salaries, overhead, marketing, training and recruiting costs.
Once you have this information you are then able to logically and economically size your office. And you can be sure that it is going to involve changes in personnel. It is often the hardest part of a broker’s job to inform someone that they should probably find a new line of work. But as a business owner you need to review your agents with a keen eye towards current fit and profitability. In this very tight market you owe it to yourself and others around you to remove the dead weight. The halcyon days of the feeding frenzy are past and we are tumbling in its wake. During the boom times you may have hired any person with the idea that as red-hot as the market was anyone could bring in business. As we sit here today that obviously wasn’t the case and agents that are not a good fit for your environment need to be terminated or relegated to being referral agents. This is not to say that the agent in question is not a good agent, it’s simply the fact that the agent may not flourish in the environment that you offer at your firm.
Regardless of the avenue you choose to modify your business the first place to begin is with a clear understanding of your current situation. To make any change as significant as resizing you absolutely must have a plan. This plan is not just for you but more importantly it’s for your team to have a clear understanding of why the changes are taking place and the impact these changes will have on their business.
An easy to use tool to assist in this process is CreateAPlan. It is a web-based business planning tool with the capability to examine multiple commission and fee structures as well as provide recruiting guideposts. It’s early in the year and not too late to grab control of the situation and get on track for a profitable 2009. You can learn more about how CreateAPlan can assist you with the process by visiting www.CreateAPlan.com
