Robert Freedman is the former director of multimedia communications at NAR.
Change or Go Under: Survival Tips for Tough Times
A challenging real estate market requires brokers to do business in new ways.
February 1, 2009
With real estate markets struggling and Wall Street woes making it hard for even well-run companies to get, or keep, the credit they rely on to operate, it's surely the toughest business climate real estate brokerages have faced for quite some time.
Profit margins, thin even during the boom years, are disappearing as brokerages struggle to meet their costs. In a newsletter to its clients as 2008 was winding down, real estate operations consulting company CompensationMaster in Charlotte, N.C., shared what it thinks are the five do-or-die changes real estate brokerages must make in 2009.
Let go of entitlements.
If you're giving your sales associates splits that aren't justified by their current sales volume, stop. It's a mistake to give some salespeople a higher commission because they've been with the company a long time or because they used to be top performers. Their current production must justify their split. As much you would sometimes like to, you can't run a business by giving more to people because you like them.
Get rid of brick-and-mortar locations.
You still need storefronts, but do you need all of them? Walk through the offices in each of your branches. How many people are there? Almost every company can get by with significantly less space than it has. And since space is probably your biggest expense after commissions, this is a perfect place to look for savings. It often makes sense to close branches and create drop-in centers with flexible desks that sales associates can use only when they need them.
Sales representatives are looking for companies that provide an opportunity to earn a living. If you can cut costs by reducing the amount you spend on goods and services the sales force doesn't value, you can turn those savings into increased commissions. That in turn will make you much more competitive in attracting the top salespeople in your market. At the same time, don't cut too close to the bone and give the impression that your company is floundering. Top producers are looking for stability, just like everyone else. Make your business the one in your market that delivers services salespeople want, and this slowdown will turn into the best opportunity to recruit that you have ever seen.
Consolidate administrative staff and optimize technology.
Creating support centers lets you centralize your administrative staff and deploy technology to provide better service to your sales force and clients. For example, some companies provide high-tech touch screen–based PCs in their storefronts. Clients can touch the screen, push a button, or make a call to reach a call center that immediately contacts the appropriate salesperson via cell phone or PDA. Salespeople love this, and it costs less than you'd expect.
Stop driving from the top; listen to your sales force.
You need to figure out who you are in this new environment. Ask your salespeople what they want and listen to what they are telling you. Then take action, even if it's painful.
Adapted from "Change Is Necessary," CompensationMaster newsletter article, October 2008.