Brokers Breaking Ground

What’s it like to launch a new brokerage in a sea of real estate megabrands? Two Chicago brokers share their first-year tale.

June 1, 2001

“I wasn’t as prepared as I thought,” says Sean Conlon of his first year as the co-owner of Sussex & Reilly, a new residential real estate firm in Chicago.

“We were prepared in terms of having a good business plan,” says Conlon’s partner, Frank Parkinson, “but we weren’t prepared for the amount of work it would take to implement it. We both worked harder in the past year than in any other year of our lives.”

Last summer Conlon began keeping a monthly diary online at www.realtormag.realtor.org to chronicle a year in the life of a new company. The year is nearly up, and it’s time to take a look at how he and Sussex & Reilly have come through the birthing process.

Conlon, who recently turned 32, arrived from his native Ireland 11 years ago. He worked briefly as a janitor before he switched to selling real estate on the city’s trendy North Side. Chicago was gearing up for its biggest residential building boom in 50 years, and Conlon, who joined Koenig & Strey in 1993, quickly established himself as an industry whiz kid.

Over the next seven years, he sold more than $500 million worth of real estate, much of it new construction. He was the city’s top-selling real estate salesperson in 1998 and 1999.

Like many salespeople, however, he dreamed of opening his own brokerage. In January 2000, Conlon, Parkinson, and a third partner, Tim O’Neill, joined forces to open Sussex & Reilly (the maiden names of Parkinson’s and Conlon’s mothers, respectively). The three had known one another for years both as friends and as competitors. Parkinson and O’Neill, both attorneys, formerly owned Bottom Line Realty and Investments, a now dissolved brokerage.

Sussex & Reilly hit the ground running with a strategy that combined turnkey service with competitive commissions. The partners made a point of launching their company on the technological vanguard: They issued laptops and Palm Pilots to all their salespeople and developed a Web site that provides virtual tours of all listings and allows customers to schedule appointments and showings online. The company’s first-year sales volume was about $350 million.

Conlon and Parkinson--O’Neill abruptly left the firm in February--recently sat down with REALTOR® Magazine for a look at their exhilarating year.

How would you characterize the past year?

CONLON: It was a year of extremes. What made it complicated was that we weren’t starting a small company. We started with almost $40 million in listings that I brought with me from Koenig & Strey. We had to construct from scratch a company that could handle that amount of business. It was tough.

PARKINSON: What we didn’t realize is how much work is involved in keeping 50 people more or less happy and moving in the same direction. The day-to-day management of a group that grew very quickly--from about 10 people to more than 50 in 12 months--was much harder than I anticipated.

What was hard about it?

CONLON: Realizing that you couldn’t do it totally on charm. I’m a sales guy and used to pleasing people. But managing isn’t necessarily about pleasing people. It’s about executing a business plan.

PARKINSON: You realize very quickly that you can’t be everyone’s friend and that there are some salespeople you’ll never be able to please, because doing so would mean making 30 other people unhappy. For instance, our compensation policy calls for a monthly draw plus quarterly and annual bonuses to even out any imbalances. That works fine for most salespeople. But there are times when someone closes a big deal and wants the commission immediately. And I have to say there’s nothing I can do about it. The system is the system.

How do you rate yourselves as managers?

CONLON: On a scale of one to 10, I’d give myself a five. I think I motivate people well, but the whole business of delegating responsibility is hard for me. I’m used to taking care of my own problems. But the company is too big for me to handle every problem.

PARKINSON: I think we’ve done a decent job, and the proof is the results. In real estate sales, people are always moving from office to office. But in the past year, only one salesperson has left us.

Your ad budget for the first year was about $750,000. Did you get your money’s worth?

CONLON: With the Chicago Tribune, yes. But other publications didn’t seem to generate much business. We’ll be more selective in the coming year, but I don’t think the overall amount will change. To compete in the same league with companies like Coldwell [Banker] and Koenig, you have to have a sizable ad budget.

How did the market affect your game plan?

CONLON: Our original plan called for a bigger Internet presence. It was a shock when that market imploded.

PARKINSON: The competitive landscape was very different a year ago. There were a lot of dot-coms raising millions of dollars to compete with established real estate companies on a national level. Initially, we were going to be one of them. We invested a lot of money in technology to make that possible. Then the bubble burst, and we realized we needed to focus on being a traditional real estate company.

Do you now have more technology than you need?

PARKINSON: No. Tech is still very important. You have to have a vibrant Web site. You have to give customers the opportunity to do certain things online such as virtual tours of listings. People may not buy a house online, but they certainly use the Net to narrow their choices.

The other major shake-up, obviously, was Tim O’Neill’s departure. How did that affect the business?

CONLON: It was a shock. We weren’t having big fights, but there were obviously differences about the direction of the business. I also think the pace got to him. You can’t build a company this big in 12 months without going a thousand miles an hour. I was used to that. I don’t think Tim was.

Your strategy from the beginning involved discounting commissions. Was that effective?

CONLON: It distinguished us from other companies, which is important when you’re starting out. We had something to advertise that no one else had. It also brought us a lot of buyers, which we needed. My business in the past was mainly with developers.

What are your plans for the next year?

CONLON: We just signed an agreement to open a new office in Michigan, and we’re looking at sites for an office--our fourth--in the northern suburbs. In a way, this is our make-or-break year. Last year we had the business I brought with me from Koenig. This year we’re on our own.

You have at times spoken about the possibility of merging or being acquired. How likely is that?

CONLON: From the beginning, we thought of this company as having the potential to be the next Coldwell Banker. If a company came along that had the resources and infrastructure in place to help us expand, I’d certainly be open to talking. But whether or not that happens, it doesn’t affect our model or where we want to be eventually. We’ll get there.

Sean, do you miss being the top salesperson in Chicago?

CONLON: I had my 15 minutes, and I enjoyed them immensely. But I can’t do that and also run a successful company. There’s not enough time in the day or oxygen in the room. Don’t get me wrong. This hasn’t been an easy transition. I loved the attention and excitement that go with being a top producer. But the question at the end of the day is, Do you want to stay where you are or go to the next level? And being pathologically competitive, I want to go to the next level.

Dear Diary

Bridget Jones isn’t the only one keeping a diary. Since August 2000, Sean Conlon has been recording highlights of his year with Sussex & Reilly. The diary has been an exclusive feature at www.realtormag.realtor.org. Here are excerpts that capture the high highs and low lows of starting a brokerage.

August 2000

Last month was our half-year anniversary, and we’re right on schedule. We did $200 million with one office and 20 salespeople and hope to do another $200 million by the end of the year.

September 2000

We’ve installed a centralized scheduling system. When customers call to request a showing, they get connected to one of our operators, who then checks the computer to see which salesperson has an opening. The operator sets up an appointment and sends an e-mail to the salesperson via Palm Pilot. We’ve spent more than $500,000 on technology. Programs like this make me feel it’s money well spent.

October 2000

I fired a salesperson this month, a first for me. He was a nice guy but disorganized and prone to making money-losing mistakes. He cost us the better part of two commissions because of bad advice he gave customers. We walked around the block, and I told him, “You’re going to resign today, which will allow you to save face and find a job somewhere else. You can tell people it didn’t work out, I’ll write you a nice letter, and we’ll leave it at that.” And we did.

Meanwhile, we’re up to our ears in plans for our first branch office--in Lincoln Park, a somewhat more expensive neighborhood a mile or two south of our main office. Our business so far has been about 60 percent sellers and slanted heavily toward new construction. Our new office will have a heavy buyer focus, with high-speed Internet access so that buyers can take virtual tours.

November 2000

Maybe it’s the election, maybe the stock market, but the market has slowed. The days of buying a condo for $300,000 and then flipping it for $400,000 six months later are over. I now tell sellers, “Look, if you want to carry it for four months, we can get you the price you’re talking about; otherwise, this is where you need to be.”

Another thing I’ve been stressing to my salespeople is the importance of staying in touch with clients. It’s easy to call when you’re coming off a week with a lot of showings and offers. It’s a lot harder when there isn’t much to report. But I do it every Monday--sit down and call 40–50 people to tell them what’s going on with their listing.

December 2000

We finally opened our branch office after a series of frustrating delays caused mainly by the city permit process but also by problems with the carpenters and the phone company. I blame myself for the permit problems. You have to shepherd an application through every step of the way. Even then you can get sent back to the end of the line for having a comma out of place.

January 2001

Even with the slowdown, we still had about $350 million in sales for the year. If we perform the same way this year, I see no reason why we couldn’t think about franchising. There’s certainly room in the market for a niche player--small, urban, and upscale.

February 2001

I split with a builder this month, a very painful experience. He built what I thought was the wrong floor plan, priced it too high, and then made our life miserable when it didn’t sell immediately.

I was spending so much time trying to make him happy that it was affecting the rest of the business. Don’t take a listing you don’t believe in.

The Lincoln Park office is off to a slow start. I wasn’t able to give it my full attention last fall, and the salespeople who moved their desks down there seem to feel a little cut off. Offices are funny places. No two are alike, even when they’re all part of the same company. Each has its own personality and its own culture. It’s clear that I need to energize the place by spending more time there.

March 2001

One of my partners, Tim O’Neill, quit the company for reasons I’m still in the dark about. We weren’t having big blowup fights, but obviously something wasn’t right. He said he wanted to spend more time with his family. I have to respect that.

They say change is good, but what I’m mainly finding is that it’s exhausting. I start work at 8:30 a.m., generally skip lunch, go home for an hour at 5:30 to run, and then either go back to the office or work at home until 11:30. At times I feel overwhelmed.

Just to make things more interesting, we’ve been approached by a couple of companies wanting to either merge with or acquire us.

April 2001

We decided to hire a manager for the main office to take some of the day-to-day pressure off my remaining partner, Frank Parkinson. We’re busy, but the market stops and starts. The interest-rate cut definitely helped, but there’s a lot of inventory on the market.

We’re in talks to open a branch in Michigan, an area along Lake Michigan where a lot of Chicagoans have second homes. Our price range in Chicago is $400,000–$700,000, so we’re dealing with people who can afford a second home.

May 2001

We’re off and running in Michigan. We signed an agreement with Megan Van Vilerbergen, a salesperson I’ve known for years, to create a division focusing on estates and special properties, including vacation homes. She’ll work part of the week in Chicago and the rest in Michigan, probably in Saugatuck, a town about two hours from here.

To launch the division, I’m getting into the development game. I bought an old school building in New Buffalo, Mich., another town in the area, and plan to convert it into lofts and vacation homes.

Robert Sharoff is an architectural writer for The New York Times, Washington Post, Chicago Tribune, and Chicago Magazine. With photographer William Zbaren, he has produced books highlighting the architecture of Detroit and St. Louis. He is a former senior editor with REALTOR® Magazine.

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