My jaded friend...

I have a good friend/client named Tom (not his real name) who sold his real estate brokerage a few years ago to focus on other areas of real estate.

His main reason for selling? He was jaded and saw no way to make money in the brokerage space. He feels the traditional model is destined for collapse because the downward pressure on profits (i.e. lower commissions and higher splits) is, in his words, "unsustainable."

In fairness, Tom's medium-sized real estate brokerage competed against a couple of very large regional players who were very aggressive recruiters offering high splits. Those companies, in addition to the discount and virtual brokers chipping away at agents, caused him to throw up his hands in frustration. He couldn't see how he would ever make any money when dealing with agents that, in his opinion, cared mostly about how high a split they could make.

To make matters worse, his partner was also one of the top-producing agents in his company and couldn't get into the 21st century. Tom was constantly battling an old-school mentality, where culture and brand loyalty were put aside in favor of an agent-centric approach. A focus at odds to his own philosophy of building a strong company brand for his real estate brokerage.

He sold his business and is now much happier, albeit, still pretty jaded about the whole state of our industry.

Having helped him in a variety of areas of his business for several years, I was certainly sympathetic and saw him try just about everything:

• Better brokerage website... partner thought it was too expensive;
• Better lead response... agents didn't want us touching "their" leads;
• Better marketing... nobody wants to pay for it.

In my opinion, he really did try. But he either couldn't get buy-in from agents or was constantly fighting with his partner (who thought he was just throwing away money.) I know plenty of brokers similarly frustrated by their situations, but keep moving because they don't know what else they would do for a living.

So what do I tell all these folks?

• You better love this industry AND agents. Otherwise, it's not worth the aggravation, and you probably should do what my friend did and sell;
• You need to have the courage to make the changes necessary to reinvent your business despite kicking and screaming from agents or partners;
• You need to be a leader who can convince your agents and partners of what the future is, and how to proactively address today's issues; and,
• You MUST figure out ways to create revenue over and above the low margin real estate brokerage commission. If you don't have other revenue streams then, as Tom says, your business model is "unsustainable."

Do you want to be running an unsustainable business model? Are you ready to take action?

To view the original article, visit PCMS Consulting blog.