Elyse Umlauf-Garneau is a Chicago-based freelance writer and former senior editor with REALTOR® Magazine.
11 Tips for Starting Your Own Business
Real estate business owners share practical tips for starting a company and making it a success.
July 1, 2006
If there’s one thing that most real estate practitioners have in common, it’s an entrepreneurial spirit. You probably got into the business because you enjoyed the freedom of working for yourself — being able to create your own business model, your own hours, and your own niche.
But for some, a successful career as a real estate salesperson is only the beginning. If you aspire to start your own real estate brokerage, whether it’s a highly-specialized boutique or part of a big franchise, you need to start with smart planning, thorough research, and expert follow-through. Follow these tips from practitioners who have branched out on their own.
1. Start an idea file.
It’s never too early to start planning. Once you set your goal to open a real estate company, begin talking to other business owners — not just in real estate — to gather ideas you can use for your business.
Unless they feel that you’re going to become their competition, people are usually happy to share their stories. Ask detailed questions, such as: What has been your biggest challenge? What surprised you most about being a business owner? What advice would you give to someone who is starting her own business?
Before starting her business, Kimyatta Anderson, ABR®, CRS®, kept a folder of ideas, attained designations, and tried to learn from every experience she had and person she met.
As a result, she was brimming with ideas two years ago when she opened her business, Custom Realty Solutions LLC in Indianapolis, which is affiliated with RE/MAX. One effective tip she offers for those who want to keep a new business running smoothly: use checklists to manage clients and transactions from the initial contact to the closing. That way, nothing falls through the cracks.
2. Make sure your idea will fly.
Once you have a targeted idea for your business, your next job is to do the research. You have to make sure that your great idea will thrive in your market. If it doesn’t, you may need to fine-tune your plan. And that’s something you want to do before you start spending money on the business.
The U.S. Small Business Administration says you should be able to answer all of these questions before starting a company:
- Is my idea practical and will it fill a need?
- Who and what is my competition?
- What is my business advantage over existing companies?
- Who are my potential customers and why will they purchase services from me?
- How will I reach potential customers?
- Where will I get the financial resources to start my business?
- How will I compensate myself?
3. Create a business plan that takes everything into account.
After you’ve thoroughly researched each of those questions and decided to move forward, you have to develop a business plan. This is where you closely examine your start-up costs, business model, overhead, and the other fine details of running a business.
Fortunately, there are lots of resources in this department, including sample business plans and free advice on Web sites such as www.bplans.com and www.sba.gov, which is run by the U.S. Small Business Administration.
Here are some of the elements that you will have to consider when writing your business plan:
- Business structure. Consult your accountant to determine what kind of company — a sole proprietorship, general partnership, an LLC, and so forth — best fits your needs. (For more information, read "Safer Structures" from the June 2006 issue of REALTOR® Magazine.)
- Budget. Estimate your earnings and expenses. Break down expenses into categories, such as advertising and marketing and operating expenses. E&O insurance, taxes, rent, tech support, Web and phone service, and janitorial services all go into this category.
- Internal structure. Determine a commission structure and how advertising expenses, referral fees, and other costs will be divvied up among salespeople.
- Recruiting strategy. How will you find and retain top salespeople?
- Money. Start-up costs can be substantial, and income is uncertain. Have funds to carry you through the inevitable lean months. Many business owners, including Lynn Johnson, ABR®, CRS®, advise planning for zero income for at least a year. Johnson, who launched Lynn Johnson Realty Inc. in Fulton, Texas, five years ago, says as a new business owner, you may have to work as hard as you did as a newbie so you can sock away money for a rainy day.
4. Don’t try to do it all on your own.
Whenever necessary, hire outside gurus to get the job done. Focus on the areas of business that you do best, and seek help from the experts in other areas, such as Web design, marketing, graphic design, risk management, and accounting.
“Trying to wear all hats is too overwhelming,” says Anderson.
If you try to do too much on your own, you put yourself and your business at risk. For example, you can come off as unprofessional if your Web site doesn’t look polished, and you could end up in legal trouble if you make tax mistakes.
“You don’t want to come off as a cheap, fly-by-night operation,” Johnson adds.
5. Invest in your image.
There are many areas where you can cut costs when you run a business, but marketing materials shouldn’t be one of them, owners say. Effective marketing materials — including your Web site, mailings, and ads — should project a professional, unified image.
Randall Green, CCIM, broker-owner of Green & Green Realty Associates, Helena, Mont., hired a graphic design firm to create a distinctive logo that helps him stand out in the marketplace.
Green, a commercial specialist, and his wife, a residential specialist, started the company last November. The investment in a good logo has been worth every penny, he says.
“Even if you’re small, brand recognition is key,” he says.
For Laura Fall, CRS®, high-quality marketing materials help her compete with the “big guys” in her market. “They’re constantly doing nice advertising and marketing,” says Fall, principal broker of Fall Properties, LLC, Arlington, Va. “Why would clients choose you over them if you’re not doing something as well or unique.”
Johnson says you can make more of an impact by sending 500 well-designed postcards printed on heavy stock than you would by sending 5,000 flimsy mailers.
6. Recruit the best salespeople for your company.
Focus on the main benefits that you can deliver to your sales force, and communicate those benefits as you seek top talent. As the owner of a small independent company, Fall appealed to real estate practitioners who bristled under the rigidity of large companies.
“People choose real estate because they’re true entrepreneurs and love independence,” says Fall. She recruited two salespeople since her company’s 2003 launch by showing them that they will be able to operate very independently while still benefiting from top-flight technology and marketing services.
She touts the services offered by the company’s marketing consultant and technology specialist, which help the salespeople create a strong brand, maintain their Web sites, and design PowerPoint presentations.
Green focuses on building a good reputation with clients and colleagues and letting peers come to him, while Anderson opts for new licensees. Why? Her goal is to create positive relationships with her salespeople and mentor them so they’ll grow into solid producers.
“It’s almost like an apprenticeship program. It’s a long-term investment,” she comments.
7. Reward hard workers.
Once you’ve recruited a strong sales staff, keep them motivated and happy by rewarding their hard work. Last year Johnson spent $10,000 on holiday gifts for her salespeople.
However, rewards don’t always have to be pricey. And they should come a lot more frequently than once a year. When someone closes a tricky deal or a customer calls with a compliment, that’s reason enough for reward.
The most important thing is that you say thanks in a sincere, creative way, Johnson says. One salesperson represented a client on both a purchase and a sale. Johnson left an ice-cream scooper and cones on his desk with a note that read, “Congratulations on double-dipping with the Jones.”
8. When you need advice, ask for it.
As the owner and the boss, it’s easy to feel isolated. Form alliances with other business owners, attend networking events, and keep in touch with past mentors. When you’re in need of some advice during a tough situation, you’ll be able to pick up the phone and ask.
Lisa Graziano, of Lisa Graziano Real Estate in Denver, maintains a relationship with a former broker, who provides guidance. Graziano is a home-based solo practitioner and her mentor also covers Graziano’s listings when she’s on vacation.
9. Find the best way to reach your niche.
Don’t just guess about the best strategy to reach out to niche customers. Ask them, says Johnson.
Second-home owners comprise a hefty portion of Johnson’s market, so whenever she gets new clients, she asks them how they found her. By asking, she’s discovered that most clients have been referred by local service businesses.
With that knowledge, she’s developed a new strategy for reaching out to her client base. She markets herself to mom-and-pop business in the area, including retailers and restaurants, and has seen a steady stream of clients in return.
10. Thank clients in memorable ways.
It’s always smart to let clients know how much you appreciate them, but especially when you’re just starting out as a new business owner. Find a unique way to reach out to your clients with a memorable thank you. They’ll respond by sending more business your way.
Fall says she made quite an impact on her supporters earlier this year when hosted a spa night. She sprung for manicures and pedicures for 37 of her clients who had supported the company through referral business.
“You have to thank clients and let them know they’re important,” she says.
11. Take sanity breaks.
If you don’t make a point of taking vacations or having a life outside of the office, you never will. To avoid burnout, make sure you set aside time for relaxation and reflection on what you’re doing right.
“You need downtime,” Graziano says. “Do something fun.”
Despite her hectic schedule, Graziano finds time for her favorite hobby: fencing. She’s competitively fenced competitively for seven years and says, “It’s a great outlet after showing homes or fierce negotiating all day.”
Business Planning 101 (REALTOR® Magazine)
Planning is the essence of winning, and a good business plan, well conceived and well executed, can guide your company to great success.
The U.S. government’s official Web portal offers lots of guidance on starting a business, including resources on financial assistance, taxes, regulations, and workplace issues.
Access free checklists, worksheets, and other forms that will help you get your business plan in order. Among them: a business name brainstorming worksheet and a home office checklist.
U.S. Small Business Administration
The agency’s Web site contains a wealth of information on business planning and startups. Get help on finding a niche, protecting your ideas, marketing, and more.