What's Your Tech Budget?
Equipment and services are getting more affordable, but it's increasingly challenging to sift through the options. Here's how to figure out what works best for your brokerage.
May 1, 2010
Staying current on the latest technology tools and trends can become a full-time job. Just knowing what to buy and how much to spend on hardware and gadgetry, Web sites, and online marketing is among the greatest challenges for brokers today.
Given the wide variety of brokerage business models, from sole practitioners working from home to large franchise operations, there is no one-size-fits-all solution for real estate. However, there are some important trends that affect almost every broker.
For starters, with more real estate professionals regularly working from a home office, it has become less important to outfit the brokerage with lots of elaborate equipment and more important to have a highly functional Web site and online tools that help sales practitioners become more productive.
A trend that benefits everyone is that tech budgets tend to go much further today than they did a few years ago because pricing for tech tools has become so competitive.
Technology has become much more affordable, says real estate tech expert John Mayfield, broker-owner of Mayfield Real Estate in Farmington, Mo. He recalls spending $12,000 in 2001 for an office phone and voicemail system that had fewer features than a free Google Voice account today.
Ten years ago, technology budgets were all hardware-driven and you could spend thousands every year just trying to keep up with what’s new, he says. Today, there’s been a shift to the marketing side and using Web technology to provide agents with the resources they need.
Create a Realistic Budget
To identify what technology investments are needed and to prioritize those investments, it’s helpful to gather input from your sales associates, says Jonathan Nicholas, technology consultant and president of The Company CEO Inc., based in Chicago.
You want to have the tech tools that will attract the best to your company, but you don’t want to be at the bleeding edge, he says.
Typically, the start-up costs of outfitting a brokerage with core technology will far exceed the annual maintenance and upgrade costs for those tools. There’s that initial capital expense and then ongoing expenses in different categories that can all be considered technology, Nicholas says.
A typical annual technology budget includes Web site upgrades, marketing, and search engine optimization; office equipment and computer systems; lead capture and management tools; the company network and intranet; software services; and technical support.
There’s no stated norms in what a brokerage should be spending on technology, but 3 percent to 6 percent of gross commission income seems to be the range most allow for, Nicholas says.
For small brokers, that money isn’t going as far as for a large company, but no matter what your size, you should be planning what you’ll spend on technology as part of your budget. The good news is that as technologies improve, their costs also come down, he says.
Some of Nicholas’ broker clients provide essential technology as a service to their sales teams. Others charge monthly or annual technology fees as a price of affiliation. He thinks tech spending should be based on a companywide assessment of need, with generous input from sales associates about their requirements and an evaluation of what competitors are doing with technology.
You want to know what basic level of technology your competitors are providing to their agents and clients, and exceed that, he advises. Your investment in technology can be an important tool for setting your company apart from its competitors.
Build in Flexibility
For a new brokerage, the initial outlay is always significant. The biggest challenge has been finding the right software to run the office, and that can be very expensive, notes David Sampson, broker for the recently opened EV Boston Realty Co. in Boston. "I want my agents to be very service oriented, and I have to provide them with all today’s basic tools in a networked environment."
When Jolenta Averill set up her cyber brokerage, Lake & City Homes in Madison, Wis., technology figured prominently in her plans.
"When I look at budgeting for technology, I try to measure it against a realistic expectation of how much it will contribute to the profitability of my business," Averill says. "It’s not so much a budget or percentage I focus on but to what degree a given technology or set of tools will help."
The first year out, she put her dollars in online marketing, Web site development, and establishing her company brand. "We spend a lot of time talking to Web site visitors to understand which technology is important to them, and then educating our agents about how to leverage that technology to create and promote an outstanding experience for consumers."
At Nest Realty in Charlottesville, Va., broker-owner Jonathan Kauffmann calculates his technology budget based on the number of practitioners he has under contract at the start of the year. "We look at our projected income to determine what we have to spend," he says. "Then, we look at every investment in two ways: Will it make our agents more money, and will it save them time and help clients? If we can invest in something that’s going to save our agents as little as two hours each week, that’s a huge benefit to our company."
Most purchases are specifically planned for the year, but there’s some flexibility. "We set aside a certain percentage of each year’s budget for unknown expenses," he says. "We want to make sure that if something new comes out, we have the money to evaluate it and see if it’s something our agents should be using."
Maximizing the company’s Web presence is high priority at Nest. "Our Web site is a foundation of our business and a great tool for our agents and the company," Kauffmann says. "The site paid for itself in our first year by generating the traffic that helped us grow."
Paul Valentino, president of Coldwell Banker Residential Brokerage’s 18 sales offices in the Washington, D.C., and Virginia area, no longer grapples with decisions over how much to spend on technology. His yearly budget is set at the corporate level.
"I was a small broker in the past, and this really takes a lot of burden off me," Valentino says. "NRT [the Parsippany, N.J.–based company, a subsidiary of Realogy Corp., that own brokerages in more than 35 metropolitan areas] decides what we can spend for the hardware at our offices, and then our IT officer sits down with me to decide which computers in which offices need to be replaced."
NRT also sets up all of its brokerage offices with a system that Valentino considers the industry standard: a wireless network, networked computers with printers and scanners, the McAfee security software suite, and branded Web sites with tools to allow the offices to market themselves and their listings.
"The one place where I’ll get directly involved in spending is for our customized Web site," he says. "Even there, I can draw on the company resources for graphic design, search engine optimization, and keywords. These are all benefits of working for a large organization."
Even if you’re not NRT, you may be able to get economies of scale. By harnessing the collective bargaining power of 120 sales associates at Keller Williams–Fox Valley Realty in St. Charles, Ill., Joelle Senter was able to negotiate some good deals that benefit everyone.
"Our agents were being constantly bombarded with pitches from technology vendors," says Senter, managing broker and the regional technology advisor for Keller Williams’ mid-America region. "I thought it was just too much for them to sort through."
After surveying the salespeople about what they wanted and how much they’d be willing to pay, Senter worked on their behalf with vendors to put together a comprehensive technology package. The resulting High Tech High Touch Aggressive Marketing System includes enhanced REALTOR.com services, listings syndication to 2,000 Web sites, a personal Web site with each practitioner’s name as the domain name, video tour services, a blogging platform, and Web-based CMA services so buyers can do preliminary comparisons of listings online before contacting a sales associate.
The cost to each team member: $179 per year.
"We try to run a lean and mean office in terms of what we spend," Senter says. "Our technology budget for the company is less than 3 percent each year. That figure is based on anticipated revenue from the projected number of transactions.
"At the company level, our biggest expense is the T-1 line that provides everyone with access to the Web, and there’s nothing we can do to reduce that cost," Senter says. "We also budget $2,500 for two new computers; we seem to be able to get more for our money every year."
Training Improves ROI
Mayfield says tech training is one area where brokers can do more to reap the rewards of their outlay for technology. "With technology, there’s so much out there. You want to make sure your agents understand what you’re providing and how they can get the most benefit from those tools," he says.
For all the careful planning and budgeting, counseling from you or an expert source can have biggest role in determining the real return on investment for any of today’s latest tools. "Technology for technology’s sake can become a very expensive proposition," Averill says.
Get Tech Savings
The Realtor Benefits® Program has partnered with technology leaders to offer savings on products and services you use every day. Go to REALTOR.org/RealtorBenefits.