Last month we identified several steps that you should take if you’re serious about reinventing your real estate brokerage. In today’s highly competitive consumer-driven environment, there are always areas for improvement and challenges to overcome.
But where do you start? Here are some areas to consider for each step to help you make a lasting change in your business.
1. Identify a business practice you want to change.
For example, perhaps you need to drive traffic to your brand online. Lead generation and community engagement is an essential to your brokerage’s success. Do you have strategies for search engine optimization, video, social media, syndication, pay-per-click advertising and blogging? If you do have a strategy for each of these items, are you committed to those strategies? Do you have staff members dedicated to creating, sharing and maintaining content to feed your online marketing practices?
Look at your brokerage website. Is it easy to use, with an intuitive user interface? Is it responsive to all platforms and friendly to search engines? Does it have a superior IDX search, and can consumers perform community or lifestyle searches? Do you have up-to-date, relevant content readily available for consumers?
Or perhaps you’d like to focus on agent recruiting. Ask yourself these questions:
- Are you recruiting the right type of agents?
- Are top producers attracted to your firm?
- Are younger agents attracted to your firm?
- What is your value proposition?
- Are you competing purely on price (commission splits)?
2. Understand the opportunity cost of not making that change.
Once you’ve identified a practice you want to change, do you understand the opportunity cost if that change isn’t made?
I mentioned three possible challenges to your business practices. Let’s look at how you would calculate an opportunity cost on each.
If you’re focused on driving traffic to your brand online, look at your average sales price. This number will allow you to determine the potential value of each online lead. What is your conversion rate per online lead? If you can determine what this number is (the industry average is about 1 percent), then you can determine how much money you’re making from your lead sources.
Next, look at how many leads are coming in from your different lead sources each month. Let’s say you’re getting 100 leads per month, each lead is worth $2,000 in company dollar (the amount left over after all commission has been paid out), and you have the industry average conversion of 1 percent. This means you are converting 12 leads each year and making $24,000 from your efforts. Let’s say you really should be making $300,000. Your opportunity cost for not addressing this is $276,000 each year.
Or consider the brokerage website. The analysis here is very similar to the online traffic analysis. The bottom line is that you can drive all the traffic you want, but if your real estate website isn’t easy to use with excellent search functionality and relevant content, you’re going to lose those prospective leads. It’s easy to determine how much money you may be leaving on the table because your website is underperforming.
It’s a lot easier to determine opportunity cost when it comes to agent recruiting. What company dollar amount do you make on the average agent? Once you answer this question, you can figure out how many agents short you fall of your goal. That is your opportunity cost.
3. Determine the potential return on investment for making that change.
Now you know what you want to change, and you know how much it’s costing you to stay the course. Now it’s time to figure out the return on investment for addressing the challenge.
If you know it’s going to cost you an extra $5,000 per year to address any of the things described above, you also know what that number represents. Let’s say you are going to spend an extra $5,000 to improve your website. Based on the same company dollar per deal we described above, you would have to generate 2.5 additional deals to break even.
Obviously, you want to do a lot better than break even, so now you need to determine the realistic number of additional deals or agents you believe you can add by making this $5,000 additional investment.
Let’s say you think 10 extra deals is possible; this means $20,000 in additional company dollar for investing an additional $5,000. (This is a simplistic assessment that does not take into account other potential costs for making the investment. Any additional costs should also be considered.)
4. Get your senior leadership on board with the need for that change.
Here is where things sometimes get sticky. Is everyone on board with the need to make a change? Unless everyone is fully engaged, your task becomes much harder. It’s imperative that you get all your senior leadership and managers on the same page. Here’s how:
- Establish why the change is necessary.
- Confirm that everyone understands the opportunity cost associated with not making the change.
- Make sure everyone understands the potential returns to the company and its agents for making the change.
5. Have senior leadership help you get your agents on board.
Once everyone is on the same page, the task of convincing your agents becomes much easier. Your leadership should be able to make the same arguments to your agents as you made to them. However, they can also strongly make the case in terms of agent issues: how much it’s costing them versus how much it’s going to make them.
As we all know, independent contractors don’t like to spend money without a complete justification for doing so. Make sure you can make your case on each and every level.
6. Build the metrics for accountability.
If you’ve taken the trouble to come this far, it’s imperative you get the adoption necessary to make your investment pay off. You do this by creating metrics that ensure everyone is taking advantage of the investment the company has made.
Let’s go back to the website example. You most certainly will have a back-end dashboard that tells you how often managers and agents are logging in. Manage that and set an expectation of how often you want people to log in.
You will also have the ability to see which agents are using which modules. Set thresholds for how often certain things must happen and make sure the managers are doing their part to make sure this is taking place.
Most importantly, track the results, especially additional leads and closings. Celebrate successes and agents or managers doing the things that will result in additional revenue for agents and the company.
Nothing is more frustrating than making an investment in a new tool, technology, or practice and not getting sufficient adoption. With low adoption, there will most likely be little to no return on the investment.
7. JUST DO IT!
Jose Perez is the founder of PCMS Consulting.