The real world of real estate - Brokers only!

I am just kidding about the "broker only" part, but after 35 years in the industry, in a variety of roles (including owner), I am not yet convicned that we have taken the steps necessary to function in the real world of real estate. Many still hope for the return of the market we saw in the last decade, and it is not coming back - at least not in that form. Much has been written about the dramatic change in our industry and how we as brokers need to reinvent ourselves; but I question the level of intensity that we are applying to this change. The core of when and how we do business has changed and the effect on brokers, sales associates, franchisors and even NAR are unmistakable. Recent news and various publications show a full recovery is years and not months away. So how do we quickly adapt to this new world in which we find ourselves? In doing a little research I found the 2006 Servicing Meeting presentation I did for my Business Consultants while serving as COO for Coldwell Banker Real estate LLC. I found a number quotes I used to frame that discussion – all from well-known industry leaders. Three stood out: • David Charron – “there is a dysfunction in the market” • Joel Singer – “consumers are driving change; brokers are not going to win” • Alan Dalton – “(we) used to prospect from customers, now customers prospect for (us). Service is not a differentiation, skill is” All three statements are true today – significant evidence that we have so far failed to fully correct course. I will attempt to address the main issues facing each of those four “stakeholders” briefly thru the next few blogs. Let’s start with brokers. Brokers have reacted to the market making organizational changes including reduced staffing, renegotiated leases, closing or consolidating offices, etc. Expense management is an important part of adapting, but it is not the only part, and brokers have operated on thin margins for many years which made the downturn even more destructive for many. Commission plans for sales associates that no longer reflect the market, overhead out of proportion to what was truly needed, and antiquated ideas on marketing and customer service permeated our industry and the carnage among companies is evidence of those facts. So now what do we do? Very simply, we start from scratch and we become proactive. We craft, communicate and execute a new vision for the real world of real estate. Too often our strategic plans are developed from our year end instead of from the future; in other words we begin our planning from where we are and work towards the future, instead of having a clear vision for our future and build steps backwards to today. Being free from the shackles of our historical ways of running our businesses empowers us to create a business model that is profitable and sustainable. So how do we begin? While market and competitive situations do vary and there are many alternative strategies to be considered, there are four steps that cannot be avoided: • Establish your margins. No “ordinary” business would begin without an established profit margin that is independent of owner compensation and includes reserves. Stop viewing your profit as what is left over after expenses and consider it as what is expected before expenses. • Build your overhead, both fixed and variable costs, in such a fashion that the margins are achieved. • Develop a culture – not a vision or a mission statement, but a culture that captures the imagination of your entire organization, and one that focuses on exceeding the needs of the consumer, prizes innovation and embraces a philosophy of more revenue thru more business. Too often we are trapped in the “more money per transaction” myth, and that model has not worked well for either brokers or sales associates. • Select those that embrace your culture, your system and your values. We historically recruit numbers instead of selecting people who can produce numbers. By select I mean recruit aggressively and select only those in whom you are willing to invest your valuable resources. Only when those four steps are achieved can you begin the process of developing a strategic plan for your real estate business. Next week – Sales Associates!