From REAL Trends, the trusted source for real estate industry trends, this is REAL Trending episode 92, we're analyzing some important trends affecting brokerage companies and their agents. I'm Steve Murray, senior advisor to Real Trends, and today we're discussing the focus for broker leaders in 2021 strength in valuations and beware the Black Swan. What do these trends mean and how can brokerage firms best deal with them?
Get Closer to Your People
Okay, the focus for broker leaders for 2021 back in March, when the pandemic first hit our advice to brokers then, not knowing how deep the market reduction would be and for how long, and what any recovery would look like.
Our recommendations were, number one, if you think you're close to your people, get closer, and find ways to do it, and boy did most broker leaders get on that in a hurry and did a superlative job of using new technologies, and new ways to stay in touch with their people, both their agents and their staff.
Watch Your Spending
The second thing we advised was pull your general ledger apart, look at all the money you spend, figure out what you really don't have to spend that money on and stop spending it, and preserve cash. So how was our recommendations for broker leaders change now going forward into 2021? Well, it doesn't change at all.
In fact, for all times to come, if leaders of brokerage companies will focus on those two traits, those two practices, those two behaviors: how am I going to maintain communications and build culture with my staff and with my agents, regardless of how soon you can resume in-person meetings on a regular basis, what have you learned about what you're capable of doing, even if you're not in person? Stay close to your people, find ways to build culture with them, find new and unique ideas as to how you can build relationships with your agents, and your staff.
Look at that profit and loss statement. And by the way, most brokers, they're going to finish the best year in history in terms of profitability. Particularly if you add in brokerage, mortgage title, escrow, incredible, big strong year in 2020. But you should make no assumptions that that will return in 2021, given that while experts say we're going to sell more homes in 2021 than we did in 2020, and that would be truly a wonderful thing, there are a number of headwinds that suggest it may not be that abundant.
So look at that general ledger focus on your costs and your expenses review them frequently, so you don't let your spending discipline get away from you. Stay close to your people, watch your spending going into 2021.
Valuations Are Strong
Strengthened valuations is our second topic. We have seen since June here at Real Trends Consulting a surge in valuation work. Now not all of these are based on people selling. They are based on trusts or insurance, or just knowing what their firm is worth, or using our diagnostic tools that come with the valuation. There are numerous reasons why people have valuations done; sometimes it's buying out a minority partners or partners, sometimes it's bringing new partners in.
The fact is there are dozens of good reasons to have evaluation done on your firm to find out what it's worth now, and get guidance on how to make it more valuable in the future. The second part of the strength evaluations is frankly, we have not seen valuation numbers, the prices and terms for brokerage companies this strong in 15 years, and we've commented about this elsewhere, but for those who like listening to these podcasts, it was worth repeating, very active marketplace.
Beware of the Black Swan
My last thought is what I refer to as, "Beware the Black Swan." We're all sitting here thinking every one of us, "Okay, we're going to get by the pandemic. We're going to get the vaccines. We're going to have society and business and things return to what we used to call normal." Really?
Do we really know that's going to happen, or are we praying it's going to happen or expecting it's going to happen, when we don't know for sure when that will be, how soon that will be, how broad base that will be. So the other thing we said last year is preserve cash, take a protective posture, if there's good acquisitions for growth, that's fine, make sure you know how you're going to pay for them, but we don't know what 2021 is going to bring.
We know, for instance, just recently news out of the UK is the coronavirus, COVID has mutated. It's now more contagious, even though it's not more deadly, but it's more contagious. And according to experts this is a normal thing to happen, how's that going to impact our economy, housing sales, jobs? We don't know.
We expect vaccines to work and we really do believe they're going to work, and we pray they're going to work, but we actually don't yet know how effective they're going to be, for how long. We don't know. And we won't know for months and months ahead.
We don't know what the stock market's going to do with a new party in the White House. We simply don't know yet. And people can talk about history and what's happened in the past, and we can talk about the flood of money in the stock market. We don't know. So beware of the Black Swan, be prepared for the unexpected in 2021. And I think you'll be better off for it.
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Learn more about industry trends and successful tactics for brokerage firms, agents, and teams, as well as listen to past Real Trending on Apple podcasts, Spotify, Google Play, and others visit www.realtrends.com/channels. This has been Steve Murray, until next time.
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