PROView - November 2008 - (Page 10) Brokerage Design Ask not what your brokerage can do for you … by Jeremy Conaway, Founder and President of RECON Intelligence Services Over the past few months this column has focused on how the traditional brokerage business configuration will have to change in order to meet the challenges of the new real estate marketplace. That focus has been directed to competitiveness, consumer centricity, the consumer facing message and generativity. This month’s column will consider the specifics of competitiveness, or perhaps more appropriately, the “new competitiveness.” For most of the past twenty years, a real estate brokerage’s competitiveness was largely measured on the basis of its market share. In every market, those firms that sold the most units or produced the largest dollar volume of sales were considered to be the most competitive. This calculation was used regardless of how profitable the firm was or what level of return on investment it generated for its owners and investors. In the new real estate market of 2009/2010 the single most important brokerage performance requirement will be profitability. Among the many lessons that the industry has learned over the past ten years is that market share, GCI, agent count, and production dollar volume, while valid operational performance benchmarks, have little or nothing to do with profitability. The post WWII brokerage platform was designed to provide a base from which a ‘larger than life’ individual, the broker, could play out their skill sets and enhance their personal estate: a personal listing or two, a few personal sales, a little property management, an occasional wise purchase and perhaps some scattered development. All contributed to building the broker’s personal wealth and financial stability. The firm’s income also served to cover a myriad of “business” expenses. Given these parameters, in many cases the firm was simply not expected to generate a large profit. 10 PINELLAS REALTOR® ORGANIZATION For most of the past twenty years the traditional brokerage business platform has been used to support an “agent centric” business philosophy that viewed the agent as the center of the real estate transaction. The pursuit of this objective saw commission splits regularly exceed the levels required for healthy brokerages, sometimes soaring as high as 80 or 90 percent. These comments are not offered to suggest that the traditional brokerage business configuration was inadequate or inefficient. In fact quite the opposite was true. Beginning with its origins in the late 1940’s the traditional configuration served its owners, its agents, and the real estate industry successfully through the 1990’s. Perhaps the ultimate evidence of these matters is how few of our readers will recall ever hearing brokers brag about their firm’s profitability. Rightly so, given the fact that recent studies suggest that the average profitability of the top 500 firms in the country was something less than five percent. This number, in the eyes of a Wall Street analyst, might give rise to an allegation that over the past several years the real estate industry has been a non-profit enterprise. What has happened to cause this traditional approach to change? Simply put, all of the rules of business in today’s real estate industry have changed. That cult of superheroes, that comprised the American brokerage community, is largely gone. They have divested, retired, passed their interests along to their kids or simply lost ground in the recent down market. They have not been replaced. Few of today’s executives, managers or agents have either the funds or propensity to own a brokerage firm. Many suggest that only a fool would make such an investment. This situation means that the ownership of brokerage firms, in the future, will be in the hands not of industry insiders, but rather outside investors. We would do well to learn something about this individual or entity. November 2008 In the new real estate market of 2009/2010 the single most important brokerage performance requirement will be profitability.
Table of Contents Feed for the Digital Edition of PROView - November 2008 PROView - November 2008 Contents Chairman’s Notes Feature Story PROActive Brokerage Design Marketplace Analysis Home Sales Report MLS Update MLS Mind Your Manners 2009 REALTOR® Dues New REALTOR® and Affiliate Members Calendar of Events & Programs PROView - November 2008 PROView - November 2008 - PROView - November 2008 (Page Cover1) PROView - November 2008 - PROView - November 2008 (Page Cover2) PROView - November 2008 - Contents (Page 1) PROView - November 2008 - Chairman’s Notes (Page 2) PROView - November 2008 - Chairman’s Notes (Page 3) PROView - November 2008 - Feature Story (Page 4) PROView - November 2008 - Feature Story (Page 5) PROView - November 2008 - Feature Story (Page 6) PROView - November 2008 - Feature Story (Page 7) PROView - November 2008 - PROActive (Page 8) PROView - November 2008 - PROActive (Page 9) PROView - November 2008 - Brokerage Design (Page 10) PROView - November 2008 - Brokerage Design (Page 11) PROView - November 2008 - Marketplace Analysis (Page 12) PROView - November 2008 - Home Sales Report (Page 13) PROView - November 2008 - MLS Update (Page 14) PROView - November 2008 - MLS Mind Your Manners (Page 15) PROView - November 2008 - 2009 REALTOR® Dues (Page 16) PROView - November 2008 - New REALTOR® and Affiliate Members (Page 17) PROView - November 2008 - New REALTOR® and Affiliate Members (Page 18) PROView - November 2008 - Calendar of Events & Programs (Page 19) PROView - November 2008 - Calendar of Events & Programs (Page 20) PROView - November 2008 - Calendar of Events & Programs (Page 21) PROView - November 2008 - Calendar of Events & Programs (Page Cover3) PROView - November 2008 - Calendar of Events & Programs (Page Cover4)
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