After reading a couple of brilliant posts by Ines and JeffX on the future of the real estate business, I started thinking about my experience in setting up an infant brokerage firm. As I came to find out, the task of setting up a real estate business is a very different beast from the real estate business itself. I used to think that if you can figure out how to make yourself successful at the business of real estate, you can then “show the way” to like-minded and like-hearted pros. Good God was I wrong!
I came, I saw, I vomited
The real estate business in its current form is sold to aspirants as a field with low barriers to entry, unlimited income potential and the freedom to “be your own boss”. Once the crack smoke clears, you see that those low barriers allow any knucklehead without a criminal record in, that unlimited income potential transforms into $35k median income and finally you are your own boss only for tax purposes. As a result, you have more churn than an ice cream shop and a business model that resembles that of a dealership, playing a numbers game. The cream (that always rises to the top) have been trying to reform the current setup and the image of our industry that comes as a direct result of it. But what’s the best way to do it?
I have a question to ask all real estate brokers and office managers and I’ll try to be as delicate as I can:
How many of the seat-warmers that hang their license in your wall would you keep if tomorrow they’d all be salaried employees earning $60,000/year?
While you recover from hyperventilating, think about the concept for a second:
- Five grand a month is a lot of money to drop on an excuse machine. If you had to shell that kind of money, you’d have to restrict yourself to hiring talent only.
- The current structure is unsustainable – Good agents either leave to the Land of Higher Splits, setup their own shop or demand commission percentages so high that you’ll go broke. The alternative is training people in perpetuity hoping to find diamond in the rough agents. See above what happens with them. Instead replace the debt collection company like structure with a corporate structure*. Agents can participate in the profitability of the company via performance bonuses but not every dollar is split according to some percentage.
- If agents are salaried, they can focus on providing service vs pushing people into deals because the last light bill was tinted pink.
- Instead of crowds of agents going nowhere fast jumping from one useless marketing method to the other, this structure could give the leader of the organization more control over where the resources will be concentrated. In other words, if Jay Thompson is your broker, you sure as hell are not taking out that newspaper ad.
- If you’re worried that your employees will stop working as hard now that they’re collecting a paycheck, stop. Most every major business in every major field, uses this structure and yet our country has the highest level of productivity in the world. If you hire the right people and put them in the right places, they will take your organization to levels you haven’t even contemplated.
- But there will be so few agents left – you say. Is that such a bad thing after all? – I reply.
*Corporate Structure does NOT mean big brokerage. It simply refers to a employee based organization.
7. Content Producer
This last point is so important, it warranted its own header. Possibly the biggest shift that social media has brought to the real estate business is the transformation of the real estate agent to a content producer. Going forward, the agents that will succeed are going to be the ones that demonstrate their value by producing the most compelling content – Articles, Blog Posts, Video Analysis, Information Websites etc. These skills you can demand when you’re hiring a talented employee – not so much when you offer a desk, internet access and a printer for $300/mo.
What say you?