Coldwell Banker Danforth is the only Coldwell Banker franchise using the 100% model. Find out the challenges, how the company is boosting profits and how the flex office model is working for their real estate professionals. Sam DeBord, VP of strategic growth offer insight into the early struggle to get agents to understand the model and the opportunities the firm is finding with expansion and technology.
Today we're speaking with Sam Debord. He's the Vice President of Strategic Growth for Coldwell Banker Danforth in Seattle, Washington. They're the only Coldwell Banker brokerage in the country whose doing 100% commission transaction free model
You're the only 100% company in the Coldwell Banker family, so tell me a little bit about how that came to be.
Sure. We're a franchise that was started about 25 years ago, and frankly, because of market conditions and the way things were going in the industry, when we went to 100% commission model it was more out of necessity than anything else.
There are a lot of traditional brokerages with similar commission splits, and at the time that our company decided to make the change, we just really needed a differentiator. We wanted something that would make us stand out in agents' minds, and this is obviously the financial part of the brokerage. Agent relationship is obviously a big part of that, so that was probably four years into the franchise and the existence when we switched over to the 100% plan. It was successful in the beginning, but it took a lot of work within the industry in terms of messaging and understanding with agents. Over time it's really grown to be one of our biggest identifiers in the real estate community. Folks sort of seek us out for this opportunity to work on this kind of a model.
So what are some ways this model is helping you become more profitable as a brokerage?
I think that's something all brokerages are focusing on, and I think that this sort of a model forces a brokerage to say, "What's really essential? What do agents really need?"
...I always focused on what's the long term picture, not necessarily what today's headline is, but the direction things are going, and we know most brokerages are operating on 3%, maybe less, profit margins. When you move to 100% model, you basically accepted the fact that my business needs to be more efficient. My business needs to be focused 100% on agent needs and doing things that we can do at scale which is really a priority for a business like ours. You can't operate a model like this without a fairly large operation because we don't make a ton of money per agent. That's really the way the model's set up, so it really makes the company focus on efficiencies.
What are some of the lessons that you've learned through the whole process?
We learned that there are a lot of different agent personalities. Frankly, there are some folks who really do love to come to the office and chitchat or spend their day behind closed doors, in closed offices, and that's okay. There's a lot of business out there for all kinds of different brokerage models. So we'll find folks who their focus is being at a higher cost, brick and mortar sort of office. But there's a large, large portion of the agent population, and as we see a growing portion of the agent population that's really more focused on the cost and efficiency and technology as they basically work in a mobile environment most of the time. They're working from a home office. They're out in the field. They're meeting folks at properties.
For us, we do have flex offices. We have space that these folks can use. They can meet clients. They can come to classes. But most of them actually prefer not to be in the office. We have folks ask us, "If I join your company, do I have to come to company meetings?" That's a little bit different mindset than you might have heard in the past so we really feel that's the trend. That's the direction we see most of the folks in the industry going, and we focus more and more of our business on giving them the tools and the opportunities, and the great quality brand to present themselves with, and keeping all of that at a low cost.
Tell me a little bit about the flex office model and how that works to your advantage.
Sure. Yes. We partnered with Coldwell Banker Coastal Alliance in Long Beach, Seal Beach and Lakewood, California in bringing the 100% plan and then bringing more of a focus on that flex office sort of mindset. The idea is there's brick and mortar available for agents when they want to meet a client. We certainly want to provide management support, education, etc, and we do a really good job on that, we think. We provide a great value platform that way, but the physical office space is not for folks to come in and sit behind closed doors all day long.
It's really there for day to day activities that they need the space for, certainly classes and client meetings, but also keeping it lean, keeping the costs down because we pass actual savings on to the agent. You may have an office set up, it's more of a bullpen style where you got conference rooms. You've got desks with computers and phones and copy machines for folks to use, but you don't have 50 people sitting in the office everyday. Most of our folks are out in the field 95% of the time. For example, my office in North Seattle, we have over 200 agents at our office, but on an average day if you walk in, you're only going to see a half a dozen folks there because they're just in and out. That's just really the lifestyle they lead, especially in larger cities where they're not looking to add commute time and sitting in the car to their schedule. They're really trying to be as efficient as possible and the time they spend in physical spaces
What advice do you have for brokers who are considering going to a flex office model?
It's something to consider, but you're going to have to grow the company. I mean, that's really what we're seeing, and I think as we look the general industry environment right now, we're seeing a lot of consolidation. We're seeing a lot of mergers, and the industry as a whole is kind of saying, "We're not sure if our traditional mom and pop style of business can hold up against all the new industry entrants."
All of the Wall Street money, all the disruptors coming in with new business models and really testing the real estate industry for where the fat is, where the profits are, where they can eek out a more efficient business. For someone who's looking into doing business the way we do with 100% commission model, you really got to look at, "Can I obviously cut the fat in areas that are probably not providing the kind of benefits that agents really need in this environment?"
But also, "How can I grow this business," because you obviously want to operate a company like this at scale so you can bring in quite a few agents, and each one of those numbers as your head count goes up, you're increasing your margins slightly. But it's not a traditional 70/30, 80/20 where you're making a lot of money off new agents, and you can get away with the 12 person office. It's really about thinking about it as it's more of a long term scaled operation at a large scale.
I know that you talked a little bit about the technology that you're using to achieve a Cloud brokerage. Why don't you share a little bit of insight into what that means?
That's a good way to frame it because we do hear a lot about Cloud brokerages, sort of a buzz word in the industry right now. But really a lot of our more traditional brokerages operate the same sort of a system. We have agents who operate multiple counties away from where our physical offices are. They just use all of our digital tools. Everything we do is online. Everything they do is mobile. While it's a fun term to say Cloud brokerage, a lot of companies like ours basically operate that model as well.
Some of our folks use transaction management platforms which are obviously digital. We have a transaction processing center at our headquarters that all the contracts go through, all the checks go through, all of the paperwork. They're obviously using digital signatures. They're using online contracts. There's very little that they have to do that they can't do on their mobile phone at this point. For them it really makes sense that they're almost buying a digital platform when they come in to a new brokerage that's the sort of a model. They're looking at a set of tools that'll support their business. They're looking for a brand that will allow them that quality of representation to consumers, and then obviously the cost model, what works best for them. For us we really feel like we are a Cloud brokerage for the folks who want to view and use the company that way.
Why don't you just tell me a few of the big brokerage trends that you see impacting the business, and what your company's future plans are to embrace those trends or meet the challenges head on?
I think what a lot of folks' focus is in the industry right now, it's how can we continue to provide great full service representation and compete with companies that obviously have venture capital that are running what someone might call it, discount model, and to really create those efficiencies for agents. Because agents are so much more empowered now, not just with the changes in commission splits that we're seeing, but with more information.
They understand what the other brokerage models are out there. No longer is it, "I know what I get on my split, but I don't know what the other offices in town are offering." So I think that the big thing is really knowing that you can present a value proposition whether that's pricing, service, brand, technology, and be able to do that in a transparent way so agents have that visibility. They understand what your value proposition is versus another new industry entrant out there, and provide really the value package that allows them to go to consumers and say, "What I provide is full service. It's premium, and it's worth your time, and then you want to work with me."
I think that we're all on the same page in terms of most brokerages. We still want to help folks obviously find their home, to help folks sell their home, and to do it with high level professional representation. That's really the focus. There are a lot of different ways to do that. There are a lot of different business models, but we all still understand the value of that full service professional representation. I think we'll continue to see these trends of compression and splits, compression and commissions in some areas, and we all want to figure out how to build the best business model to continue to serve consumers the best way within those environments.
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