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When the real estate market began its stabilization trend in 2006, Nancy Hogan didn’t whine or complain. She didn’t let the news reports get to her, and she didn’t consider scaling back operations. Instead, this managing broker at Coldwell Banker Residential Real Estate in Coral Gables looked closely at the business that she’d been immersed in since 1978, and got back to basics.
That started with acknowledging that “a great market shields a lot of bad issues,” says Hogan, who has one office and 148 sales associates. In other words, the multiyear boom had created successful sales associates who weren’t always trained properly. “Licensees were no more than order takers,” says Hogan, whose first charge was evaluating her roster to ensure that the sales staff was properly trained, knowledgeable and able to continue being productive in spite of market conditions.
Waste was also examined, says Hogan, who took a page out of American Airlines’ book by adopting the “olive mentality”—a concept that in the late 1980s saved the airline $40,000 annually with the simple elimination of one olive from each salad served in first class. “I bought everyone on my staff napkins adorned with olives,” says Hogan, “and told them to look for an olive in their own duties.”
One of those olives related to advertising policies, the increase in Internet usage and the downward trend in newspaper readership. Sales associates using newspaper advertising as their primary advertising vehicle, says Hogan, were coached on how to use more affordable (and successful) Internet strategies. In another “olive” moment, the company switched from new printer cartridges to the recycled kind, effectively cutting its printing costs in half.
Hogan says she also stopped buying and handing out company logo license plates as part of the company’s hiring package, “since no one was putting them on their cars anyway.”
Some of Hogan’s olives date back to 1996, the year she took over the company. At the time, for example, the company phone bill was $6,000 a month (compared to the $2,000 she was accustomed to paying at a different brokerage she was managing). After a few calls to the phone company, she learned that there were 38 “dead” phone lines in the office for which she was being billed. “I wound up getting $115,000 back from the phone company and canceling all of those lines,” says Hogan, who sees those early cost-cutting decisions as vital to her brokerage’s continued success in any market.
Sales associate training also plays a key role in that success, says Hogan, who sees too many real estate professionals out in the field, selling homes without having proper sales, ethics and business training. “It’s a huge problem that’s costing brokers a lot of money,” she says. “Time is such a precious commodity, and in this environment you really don’t want anyone on your team who isn’t serious. You want professionals.” Recipe for Unprofitability
Around the state and nation, brokers are grappling with the issue of how to balance overhead with sales to come out in the black. “Margins are being attacked from all sides, and the competition for good sales associates is fierce,” says Chappy Adams, president of Illustrated Properties, with 20 offices and 580 sales associates in Palm Beach, Martin, St. Lucie and Collier counties.
“Expenses continue to march on. In a retracted market, fixed costs (such as staffing, technology and telephone bills) don’t go away.” That’s why Adams says recruiting is vital. “No matter what the market [is], recruiting never stops. Since our business has a bit of turnover, we need to ensure we have good [sales associates] coming through the ranks,” says Adams. “Then, you need to train them—with that training geared toward the appropriate market. For example, now we’re talking about how to get buyers and keep sellers satisfied.”
Adams advises brokers with more than one office to take a good, hard look at their facilities. Can an office be merged or closed? “Sales associates are much more mobile today with the Internet, home offices and cell phones. They don’t have to be in the office as much, so maybe they’re willing to drive a few more miles to come in. We’ve recently closed two offices that were redundant,” he says.
He also says to “check your staffing. If you’re not doing as many transactions as last year, consider trimming the [administrative] staff.”
Adams recently sent a letter to vendors such as the office cleaner and the exterminator to see if they would offer a discounted price. “If you can save 15 percent on those services, it will make a big difference.” Learning to Adapt
At RE/MAX 200 Realty in Orlando, broker-owner Ron Acker says his four offices and 168 sales associates saw a major business shift last year when his managers went from being too busy to properly train new sales associates to having plenty of time to train but less business to conduct.
“We had a lot of agents come into the business that were only experienced with really hot markets,” says Acker, who has owned the company since 1991. “Now we’re in a buyer’s market [Central Florida], where 10,000 [sales associates] have 20,000 listings and are doing a total of 1,500 sales a month.”
Acker says that instead of wallowing in self pity, he and the managers are using this time to make changes to the brokerage. It starts with education, he says, which means training sales associates on how to work efficiently in current market conditions. “We’re teaching them that what worked two years ago probably isn’t going to work today,” says Acker, who focuses the training on reducing client frustrations in a market where fair market values for their homes just isn’t what it was back in 2005.
Sales associates must also have strong go-to-market strategies, says Acker, and incorporate them into their listing presentations. “[Sellers] want to see what the agent is really going to do to sell their homes,” says Acker, who also impresses on sales associates the need to “walk away” sometimes, particularly if a seller’s asking price is out of the ballpark. “If they take an overpriced listing, it can result in a miserable relationship,” says Acker. Those relationships can eat away at profitability in the form of advertising and marketing costs, and time spent “spinning your wheels” trying to get the home sold at an unrealistic price.
Internally, Acker says he examines his brokerage’s business plan every quarter, and updates it accordingly. Using the plan and documentation like a profit and loss sheet, Acker makes hiring and firing decisions, discusses financial goals with his accountant and invests in technology that his staff and sales associates use to run the business.
“The market may be tough and profit levels may be shrinking,” says Acker, who recently added lead-generation technology and a time tracker for personnel to his firm’s technology lineup, “but if you want to be here 10 years from now, you have to keep investing in technology.” Getting on the Ball
Brokers looking to boost their profits in any market should seek out obvious revenue generators, says Patti Brotherton, president of Santa Barbara–based PAB Performance Partners, who points to a database of past clients and customers as a good starting point. “Start getting their e-mail addresses and staying in contact with them on a generic basis,” says Brotherton, whose own office sales are up 9 percent this year over 2006.
One inexpensive way to maximize that database, says Brotherton, is to send out holiday greeting cards from “all the [sales associates] and staff at XYZ brokerage.” Use prompts like “It’s a fabulous time to buy a home” to entice customers and clients to pick up the phone and call sales associates—a move that translates into higher sales for the brokerage itself.
Sales training is equally important, says Brotherton, who advises brokers to train their licensees on how to talk to people, negotiate deals, price homes and use technology to work more efficiently. “If you don’t hold a technology class at your office every month, you’re losing out,” says Brotherton. To make sure the topics covered are in line with what sales associates really need, ask them what they’d like to get out of the class.
“Recently, my agents told me that they wanted a class on how to get responses to their advertisements,” says Brotherton, who enlists her top sales associates to handle the majority of the training, “so we added that to our regular training schedule.” Strategies for Success
Another strategy being tested by brokers includes developing affiliated business relationships (where a broker has an ownership interest in a settlement service provider such as mortgage, lending, title and home inspection services. See “Affiliated Business Relationships,” page 25). Regardless of which strategy (or combination of strategies) is used, says Bob Corcoran, president and founder of Corcoran Consulting and Coaching in Swansea, Ill., one of the first steps should be a competitive analysis of the other brokerages in the market. Look at what they’re offering, the types of homes they’re listing and selling, the types of customers they’re working with, the number of sales associates they have (and the amount for which each property is selling) and the geographic area they cover.
Doing so will put you in the business “driver’s seat,” says Corcoran, who sees brokers’ inability to run their companies like businesses as a big deterrent to profitability. “Most brokers are masterful salespeople who went out and rounded up agents like themselves and opened boutique offices,” says Corcoran. “Instead, they should have gotten to know the competition first and then come up with some strategic differences.”
Hogan says her firm has battened down the hatches and is ready to plow through its sales expectations, regardless of the cyclical nature of the market it’s working in. “I’ve been through worse markets,” she says, “where inventory levels were as high as they are now and interest rates were 18 percent.”
This time around, Hogan says, she not only will stick with her “olive mentality,” but also will stay focused on the individuals and companies that she’s doing business with, particularly when it comes to avoiding problems like mortgage fraud.
“There is no right way to do the wrong thing in this business,” says Hogan. “As brokers, we’re supposed to be leaders, and I don’t think anybody should have a business where they need a sale so badly that they’re willing to lower their integrity and ethics to achieve that goal.” Bridget McCrea is a Clearwater-based freelance writer.