For decades, real estate brokers have been feeling pressure on profits from all sides: business and insurance costs are up, top producers want higher commission splits and new technology and competition in the brokerage space are lowering the average commission on home sales. All of this is thinning profit margins for real estate brokers in addition to competing budget pressures and demands that drive up expenses.
When looking at the bottom line and dwindling profits, I want to share a few ways we’ve been able to drive profitability, increase market share and grow our company’s bottom line. They are: mergers/ acquisitions, creating value/the market differentiator and recruiting. None of this is earth-shattering, but sometimes a little reminder gives us the motivation we need to improve on one or all three of these tactics.
Mergers and Acquisitions
We’ve gone through quite a mergers and acquisitions (M&A) phase. Having been one office since 1934, we decided in 2019 to acquire four offices. During the COVID-19 pandemic, we added six more. We’re now on track to grow to 13 offices in 2021. By going the M&A route, we were able to increase market share, reduce operations costs, and expand into new geographic areas. Ultimately, every decision we make centers on agent growth.
For example, we wanted to hire a top-notch marketing director but couldn’t afford that level of professional. However, one of the companies we merged with was doing incredible marketing on behalf of its agents, so the merger was a win-win for us and our team of relentless sales professionals. Now, we have a marketing department working hand-in-hand with compliance to ensure messaging is culturally clear and consistent. In addition, we added an experienced transaction coordinator. More importantly to us, in every acquisition we’ve done, we’ve made sure that the employees understood their jobs were safe. This is our 86th year in business. My dad, when I was coming into this 20 years ago, reminded me to live our family-oriented culture every day.
Creating Value — Your Market Differentiator
Price is only an issue in the absence of value. Brokerages that continue to offer higher commission splits do so primarily because their agents are driving business to the table and, rightfully so, they want a part of the profit with their broker and not the other way around. As a broker, I commit to world-class tools and systems and drive business to them. I recently recruited three agents whose broker was pushing recruiting on them. I said to them, “How much time is your broker spending helping grow your business?” They looked at each other and said, “None, we’re supposed to go out and get listings, and we’re supposed to go get other [real estate agents].” I said, “That sounds like a unilateral relationship right there.”
As a broker, my full-time job is helping agents make money. It’s what keeps me up at night. If I don’t make them successful, then I bring no value. Many in this industry try to find the secret sauce that is going to take somebody from a $10 million agent to a $20 million agent. For us, the value is quantifiable in the fundamentals and the actions taken to free-up an agent’s time to close deals. We input listings into the MLS. We put up the yard signs—and we pay for them. When leads come in, they go directly to the agent. We offer free marketing, tech and social media tools. It’s all about our mission to provide more to the agent that makes them more successful, earns them more profits and affords them the opportunity to focus on the fundamentals of generating business. I’m making them more money with us than they would with another brokerage.
I’ve heard several smart people say the broker’s primary job needs to be recruiting. Sure, as long as it’s recruiting externally as well as internally. The scale should not be too tipped in one direction or the other. You need to recruit externally by seeking out new talent. I’ve proven to our offices repeatedly that when we bring in another agent, everybody tends to do better. It’s more volume coming in. Everybody does better.
Internally, it’s all about showing your family of agents that you care about them professionally – and personally. Don’t simply have a relationship with a spreadsheet. Ask how you can support their goals and together figure out the best course of action to make that happen. If they’re not happy, then they’ll either leave the industry or your company.
A primary value of affiliation with our franchise is to have ready access to broker peers around the world to share insights, ideas and thoughts on how to enhance overall profitability. Again, these three three tips for enhancing your bottom line aren’t new, but a little reminder is always good.
Matthew Atwood is a sixth generation real estate business owner serving greater Minnesota since 1867. He has lead his real estate team to become the No. 1 CENTURY 21 company in the state of Minnesota and a top 50 company within the CENTURY 21 system nationwide. Outside of real estate, Matthew also serves on numerous boards, executive committees, co-created a semi-professional dinner theatre and is a husband and father to three beautiful children.