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Choosing the right brokerage is one of the most important – and exciting – choices we can make as part of the real estate industry. Most of us have bought a product on the verge of obsolescence, such as an internal combustion car, incandescent light, CD or newspaper. You know there is a newer product being adopted by consumers. Still, you are either comfortable with the utility of the older product, or you are getting a superior value or savings by using an outdated model. The same thing happens in the brokerage business.
Many agents discover their brokerage by word of mouth, brand marketing, and perhaps, online reviews. But there is a better way!
What is startling is that after conducting thousands of interviews with real estate agents, I have not found one that asked to discuss my brokerage business plan or financial stability. What is the company’s profitability? How many producing agents do you have? I have never had an agent ask for any proof that a brokerage knew how to run a business.
What is real value in the brokerage business? Most experienced agents would say a superior financial model, companypaid support for their business and more opportunities that create revenue. Most newer agents would say initial and monthly cost, training, reputation and available opportunity when asked.
The unacknowledged truth of the brokerage business is that the financial stability of the company leads to value adds for the agent. Have you noticed that most companies spend very free on systems, services and events when the market is hot? When the market is cooling, like it is now, companies cut staff, services and event spending. But the agents and associate brokers do not get a corresponding commission reduction for reduced services or systems.
Take a serious look at your brokerage model and ask yourself five very important questions:
● Is the brokerage running at a loss? The market is cooling and any company running at a current deficit is headed for potential trouble. Does the company have a plan to support you and your business in a down market?
● Are you getting the service and support you need? Access to support and staff is one of the largest determining factors in agent retention. Whether you are a seasoned agent or fresh out of school, the brokerage staff is your key to growing and thriving.
Sowing the right seeds now will reap untold benefits in the future, and partnering with the right brokerage is the critical first step
● Does your company offer value-add items and programs? Be sure to list out paid and free. There is usually a baked-in price for a system, and it is perfectly fine to pay for something that has a good return on investment. Critical items are: Client Relationship Management systems, marketing, training, leads (referral, relocation, bank or corporate asset, paid, portal affiliation), social media and website hosting, networking / mastermind events and divisions such as luxury, commercial, military network, ranch and land, etc.
● What is your exposure to risk? Legal compliance and risk are ingrained in real estate operations. As your real estate business grows, the potential legal risks increase. Does the company have a superior compliance program, low deductible Errors & Omissions (E&O) coverage and on-staff legal counsel?
● What are the company’s plans for increasing market share, profitability and agent count? How can you build a bigger business if your brokerage is not growing with you? Be mindful of the impact that the loss of one, or a few agents, would have on your firm. Are seasoned power agents moving to the company, and if so, are they getting special financial treatment that the average agent does not get? Paying incentives to acquire agents is not sustainable. Net growth determines future profitability.
At the very top of the market, many startups or thin-margin companies rapidly appear to partake in the easy money. That ship has sailed. With price points being reduced by up to 30%, the thin margin ventures are struggling. Ask your brokerage again: how are they positioned to support you today? Is your current brokerage, or a prospective brokerage, built for this market?
Down markets are opportunity creators, so in addition to asking the right questions, you need to change your mindset to see the possibilities. Sowing the right seeds now will reap untold benefits in the future, and partnering with the right brokerage is the critical first step.
