I suppose it was inevitable…I heard it twice last week from two different people: “I’m doing this (strategy) to get us ready/to position us for when the market comes back”. Let me say this slowly…
Its. Not. Coming. Back.
Over the past few years, we’ve seen scores (perhaps the majority) of real estate brokerage owners hanging in there, slashing expenses, clinging to the end of their financial and emotional lifelines, hoping beyond hope for the market to return.
What. We’ve. Got. Is. What. We’re. Going. To. Have.
I’ve been hearing many of the same comments the past year, and it goes something like this: “We’ve cut our expenses to the bone and there’s really nothing else we can cut. At this point, our greatest opportunities lie in growing our revenue and hoping the market improves.”
Find. A. Way. To. Make. It. In. This. Market. Or. Be. Gone.
That’s the real challenge that’s been confronting us all, and yet its amazing the amount of pain that we’re willing to bear! Yet, until the pain of not changing actually becomes greater than the pain of remaining the same, we cling all the more tightly to the status quo. Thus, for many, the strategy of “hang on, and hope for a better day” remains the business plan. Companies that “lost a little money last year” have been doing so for a few years now, and will do so again this year, because for the majority of them the pain hasn’t reached threshold. But it will. Ultimately, the cash reserves dwindle, the bank credit dwindles, the ownership resolve dwindles, and a sale is first silently contemplated, then finally pursued long after the value is gone. It’s tough, it’s sad, and it’s real.
There. Must. Be. NO. Sacred. Cows.
There are many companies earning a profit in this market, primarily because they did the best job of recognizing, accepting, and adapting to the changing landscape. Incremental changes, while more comfortable, ultimately have proven insufficient. Yet, like the golfer who after one lesson is convinced his swing has changed dramatically, incremental change often feels massive, yet rarely is. So, the majority of brokerage owners have undertaken obvious cost cutting, yet continue to cling to their sacred cows, in the belief that they’ve “done all they can”. Let me point out some of the commonly-held sacred cows that continue to stand in the way of brokerage profitability:
- Agents on non-qualifying plans. This remains the single largest hole in most real estate companies’ financial buckets. We continue to pay our agents a greater share than their production qualifies them for. The primary cause of this situation is fear-based management. There is an exceptionally high correlation between fear-based management and company insolvency. Either have the guts to place and keep your agents on plans that are equitable for both of you, or change your plans. Exceptions are policies poorly executed.
- Retention of mediocre staff. We’re ALL doing more with less these days, and brokerages are no different. Almost everyone has eliminated line and/or staff positions, but that’s not what we’re talking about here… You can’t afford to have a single manager or staff person who isn’t great – not pretty good, not okay, not nice, not loyal…but truly great. In challenging times like these, your leadership will be the #1 determinant of whether you prosper or wither. You already know who’s great, and who isn’t among your team. Quit allowing the ones who aren’t to continue – they’re holding you back.
- Keeping non-performing branches open. There’s only one reason to have an office location anywhere – to generate a profit. These days I’m hearing a wide variety of reasons why companies are keeping non-profitable branches open, with the #1 reason being the fear (see #1 above) that others will perceive closing as a failure. Particularly challenging are small branch offices in outlying areas. Instead of spending time and energy trying to keep these small shops open, consider a change in strategy, focussing on fewer, larger locations.
- Underperforming ancillary services. There are five companies that I am personally familiar with whose emphasis on providing a full range of services has kept them “in the game”, including property management, mortgage, title, and escrow services. Owners are not powerless over whether their services are utilized by their agents. Unless you already have capture rates exceeding 30% for mortgage and 60% for title/excrow, there is huge upside.
- Lack of lead management. This is probably #2 to non-conforming compensation plans in terms of revenue potential. The simple truth is that most companies have absolutely no idea what happens to the inquiries that are coming in, this despite overwhelming evidence that consumers will work with the FIRST agent that responds! Why aren’t we willing to lovingly LEAD our agents to a culture of responsiveness?…you guessed it (see “fear-based leadership above).
- Lack of a strong internal coaching program. There is no substitute – none – for increasing the productivity of our sales associates and retaining their loyalty than a strong, ongoing, internally-based coaching program. Yet,how much money is being spent by leadership abdicating the responsibility for developing its people to outside vendors? Hear me on this…I am NOT opposing the practice of outside coaching – I am a strong advocate. I AM opposing the abdication of the overall responsibility for development of your people, or for investing great sums into programs that cannot demonstrate a measuable impact in productivity and/or profitability. If you are outsourcing your training/coaching functions, by all means you should be able to demonstrate a definitive and positive return. If you aren’t coaching your people – if you aren’t regularly sharing your time, your values, your knowledge, your caring, your expertise, your wisdom with them, you’re missing an opportunity. And they’re missing you.
These are but a few of the common “sacred cows” that we continue to see standing in the field. Are they standing in yours?
Topple them.
Lead.
Comments(4)