Attacking Profitability in a New Way

The complaint is common: Profitability has plummeted. Can brokers reverse the downward trend?

February 1, 1997

The problem is that too many brokers are working the cost side of the profit equation, but how much can you tweak cost? The revenue side is where brokers make money. So my partner and I have tackled profitability by developing value-added services for our salespeople to increase their productivity.

We started with the assumption that salespeople would willingly share their earnings with us if we offered value-added services. Then we identified several services we could provide.

Service One: Prospecting

Perhaps the most controversial aspect of our value-added approach is our prospecting support. Specifically, we guarantee that we'll spend 20 percent of the revenue we earn from salespeople's transactions on prospecting for them. With that revenue, we do all the advertising design and determine where to advertise.

We're also building teams of up to four salespeople to prospect markets together. Sometimes salespeople can become extraordinarily successful, but then their spouse is transferred. All of a sudden, the thousands of dollars you pumped into that neighborhood is down the tubes.

With teams, if a player falls out, we don’t lose the company's advertising consistency in that neighborhood. Also, we have more money in the marketing pot, and we can do higher-quality marketing. We treat teams as one entity for accounting purposes, which means that we use total team production to calculate the commission split for each member.

Service Two: Business Planning

We've learned with our prospecting plan that we have to manage carefully the marketing process with salespeople. So we have quarterly business planning sessions with each salesperson, starting with a hard look at market research regarding the salesperson's territory and then translating that into a production goal and a prospecting plan with a budget for the coming quarter.

Ideally, our 20 percent contribution will be enough to cover prospecting costs. But newer salespeople will have a shortfall, so a goal of the planning meeting is to determine how to close that gap. They often respond by redoubling their prospecting (holding more open houses or making more calls), recruiting team members for better market penetration, or seeking partners to market with.

The Long and the Short of It

Perhaps our biggest challenge has been recruiting salespeople who understand our business model. Some adapt readily; others need time to understand how our approach can work for them.

Another problem is that our goal is to build a company of salespeople with the highest average production in the business, but we find that many recruits are simply not interested in this level of responsibility. This predicament has increased the pressure on us to provide quality in-house education and training and has led us to examine untraditional sources for recruits. For instance, we’re now going after the career-changing market of people who have been very successful managers or engineers but have been laid off. We're also starting to go to local universities to recruit business, marketing, and liberal arts majors.

On the positive side, our value-added services approach has exceeded our projections. Salespeople's production is rising faster than we anticipated. In addition, we’re not only helping salespeople earn income now but also preparing them for significant changes that have already begun to occur in our industry.

Why Do the Marketing for Salespeople?

At Campbell Monger Inc., REALTORS®, we’ve taken control of the marketing for our salespeople because our approach has several advantages:

  • Consistency. Repeated advertising and mailings are more effective over time. But consistency is difficult for salespeople, who must divide their time among many tasks. Assistants can help, but then salespeople must invest time supervising those assistants. Also, the payoff is rarely immediate, so some salespeople find it difficult to justify spending hard-earned dollars without an identifiable payback. When we commit to prospecting an area, we’re in for the long haul, and we can coordinate salespeople's marketing into the company's marketing message.
  • Cost-effectiveness. We spend less than our competitors, since several salespeople from a competitor's office often take ads in the same publication. They compete with one another as well as us. We also save by granting our salespeople protected marketing territories. Salespeople can sell or list a home anywhere, but we avoid spending prospecting dollars on different salespeople in the same area.

Rod Monger is senior partner at Campbell Monger Inc., REALTORS®, a 12-salesperson company in Dallas, and is responsible for marketing, technology, and operations.

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