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Should You Form a Team?
Many practitioners benefit from forming a sales team, while others realize cost savings with an advertising cooperative.
June 1, 2004
With skyrocketing marketing costs, some real estate professionals are wondering whether it's smarter to form a team. If so, there are many questions to consider.
Teams come in many forms. It's not uncommon to see two practitioners form a team, or for one dominant practitioner to head a team of assistants, buyer's representatives, closing representatives, etc.
Although more difficult to manage, multiple practitioners also can form a team, which is what Jim Curry and several of his associates would like to do in Florida.
"The dominant way to form teams with multiple practitioners is with a team leader, but we want to form a team where the practitioners are equal,” Curry says.
Curry explains that in his community, a few of the major brokers also own a lot of land in the county, making it challenging to compete. "We want to team up without being allied to the largest firm with the largest broker," he says.
One way to compete is to pool resources, but that begs the question of whether it's wise to advertise the team or the individual members.
"Instead of branding ourselves and the team, we are gearing toward branding the team," says Curry. "I have done a billboard, but it is expensive to pay for by myself, and we want to do a lot of Internet advertising [as a team]."
Curry says the practitioners who want to team up are about equal in their production, but Curry admits he's assigned higher goals to himself than the others. That raises the question of how to distribute commissions if the team players aren't producing equally.
"I had thought about hiring a buyer's representative and pay him or her 50 percent of my commission, and 50 percent goes to the team,” Curry says. “Whoever gets the listing or the buyer for the contract … he or she would get the 50 percent and the rest would go in the pot to pay expenses related to the business. We can control expenses to 25 percent or less, and we would split the remainder among senior members of the team."
But the people bringing in business also use the lion's share of resources. Curry says that could be solved with frequent budget reviews.
What happens to the money that's generated at a profit? "We could buy land together that we couldn't do apart," says Curry.
What do you do if there isn't enough profit? "Reevaluate," says Curry. "Each senior partner has to contribute equally; that's where the split is on a quarterly basis. You don't touch the pot for three months, clear the table, and ante up again every three months. At the end of three months, if there is $10,000 left over, we take $3,000 for investment and the other $7,000 is split among the members. We have to have an agreement of what is going to be spent where." Curry says the group would leave expenses such as automobiles and insurance out of the formula.
That would make the team more of a cooperative than a business entity.
"We were thinking down the road about partnership, but we have to come up with a way to structure it,” Curry says.
Florida attorney Hank Sorensen suggests that one potential benefit of forming a team is the ability to pool resources for premium advertisements that would be difficult for any one practitioner to shoulder alone.
One consideration practitioners should review is what to do when third-party advertisers, such as mortgage companies, want to pay for part of an ad, Sorensen says. Another consideration is whether the team’s broker will consider their commissions in the aggregate or individually when preparing the practitioners’ commission schedules.
"I wouldn't recommend forming a team with a reduction in advertising costs being a main focus, although it would certainly operate as a benefit,” Sorensen says. “I have seen [teams] work best in scenarios where the practitioners complement one another's strengths and weaknesses."
(c) Copyright 2004 Realty Times. Reprinted with permission.
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