Operating a Successful Real Estate Firm

Self Analysis Questionnaire

2007-04-26T10:12:00.000-07:00

I put this self analysis questionnaire together to allow you to review your real estate operation and determine for yourself whether or not adjustments are needed. Just click on this link and print it www.profitpowersystem.com/download/questionnaire.pdf.

Older Technology Is Costing You More Than You Think

2007-04-24T06:41:00.000-07:00

In changing times, especially when the market slows down, it is always easy to just stay the course, don't change anything and wait for better times ahead. However staying the course could be costing you more than you think. Sure, spending moneyin tight times can be a difficult decision but are you really ahead of the game. Is it possible that existing systems are actually costing more than replacing them?

Number 1 – Remove older technology that does not provide the ‘return’ your firm demands

Maintaining older technology is often a costly proposition. Work-a-rounds to fix deficient technology solutions are fraught with human error, wasted time, redundant activities and expensive maintenance costs. Many times the older technology forces your organization to maintain older hardware. Older hardware that requires ‘rare’ parts and service can greatly increase your costs of maintaining that antiquated solution.

Modern solutions take advantage of the latest technology breakthroughs. Today’s hardware costs are low and maintaining the latest systems is far less demanding than decade old solutions. All of this leads to lower costs and more profit staying in the company.

Finding a solution that is a fully integrated and offers the ‘next generation’ of technology can have a huge positive impact on your real estate firm. Now is a great time to evaluate existing systems, and if appropriate implement the right tool for the job and reap the ‘return’ you expect on all of your investments.

Sure, “the times are a changing” and smart businesses know that they must change with the times to stay competitive and continue to grow and prosper in any market condition. You will discover what many other sophisticated business have already discovered, that is that the old ways usual cost more in the long run than the investment required to update to more profitable methods.

As the summary chart below illustrates (using the ten strategies posted over the past few months), it would take almost 1400 additional transaction sides to be generated to earn an additional $140,000.00 in PROFIT (if we assume a $100.00 per side profit as per the NAR published estimates). These examples are based on a single office with just 25 agents. Even if you divide the results in half, or a quarter the benefits are still fantastic. Play with the assumptions on your own, but no matter how you slice it, newer technology that can modify business operations is a smart investment that has real measurable returns for your technology investment.

So waiting for better times to make a change to newer technology could be costing your firm a lot more than you think.

Lower Costs and Keep Your Agents Happy

2007-04-14T07:09:00.000-07:00

Sales associates are independent contractors that need a host of reports for their own record keeping. Keeping track of their own activity is often left to the 'end' when tax time arrives. As the broker owner you must keep a complete and accurate account of all transactions. This process has a cost! Why not solve you sales associates record keeping challenges and lower your cost of administration at the same time.

Number 2 – Increase revenues by improving sales associate services

Sales associates are independent contractors that need 24/7 access to their data. Technology can improve sales associate services and provide revenue making opportunities.

Solutions that offer an on-line access for your sales associate not only provides your associates with all of their data (right up-to-the-second) but if your company decides to, can increase profits.

Providing accounting and client management solutions for your agents is a snap with the latest technology solutions available today. Your firm already enters all of the data for each and every transaction. Your administrative staff must record the listing, the seller, the buyer, commissions earned and paid, deductions, dates and so much more.

To each and every sales associate in your company this data is vital, even if only at the end of each taxation year. Entering and managing this data has a cost. Why not consider charging a nominal fee to pay for work that your firm has no choice in doing and provide a real service that your sales associates can find immediate benefit from.

Assumptions (multiply by your actual numbers):
1 branch office
25 agents
$10.00 per agent per month service fee ($120.00 per year)
$3,000.00 additional annual revenue
Using NAR $100.00 average profit per side the $3,000.00 would be like adding 30 more sides to your transaction total for this branch office

Changing Compensation Plans

2007-04-07T11:00:00.000-07:00

When it comes to changing compensation plans for sales associates, it is all too often that the broker owner or his branch managers will think that this is a 'kiss of death' leading to a mass exit of their sales force. Although care and planning is the only way to make changes to your compensation plans, it is also something that senior management should review on a regular basis to stay in step with the ever changing market.

Number 3 – Fine tune sales associate compensation plans to make profitability a reality

Even small adjustments to your associate compensation plans can have a positive bottom-line result. Older systems are usually ridged and incapable of tweaking. Newer technology on the other hand is so flexible that even the slightest adjustment is quick and easy with potential upside results.

Compensation plans are not just about commission rates. Off-the-top and off-the-bottom deductions can play an important role in a compensation plan. Accounts receivable balances can have interest and late charges applied. Rolling back compensation plans to reflect a previous year of activity is another great way to make minor adjustments to reflect actual production and reward. Modern solutions fully automates this process to eliminate administrative effort and reduce human error.

Full service brokerage operations are often in a fight with ‘discount’ brokers and your sales associates are the foot soldiers in this war. When one of your sales associates discounts a sales commission, they are not just giving up a part of their commission, but a part of the company’s too! It usually means the company actually lost money on the deal. State-of-the-art technology can provide an automated solution that would see more of the ‘discount’ come from the agent’s portion of the transaction and ensure the company’s profitability on the sale was maintained.

Profit opportunities are everywhere when the right technology is properly used and making small adjustments to your compensation plans is quick and easy when you have the right tool in hand.

Assumptions (multiply by your actual numbers):

1 branch office
25 agents
25 transactions per month (300 sides per year)
$200,000.00 sale price
3% gross commission per side ($1,800,000.00)
2.5% recovery on gross commission income ($45,000.00)
Using NAR $100.00 average profit per side the $45,000.00 would be like adding 450 more sides to your transaction total for this branch office

Analyze Everything For Success

2007-03-30T06:33:00.000-07:00

If there is one thing I hear over and over again is that too many real estate broker owners are NOT running their businesses as a 'business'. What does that really mean?

From what I can tell, too many broker owners entered the world of brokerage with a track record of sales success, not necessarily business success. The skills and talents to sell real estate are considerably different from those required to run a real estate brokerage company. One of the best new skills a broker owner can acquire is the skill of analyzing everything!

Number 4 – Analyze everything – Business Intelligence Reports (BI) can shed light on new opportunities and highlight areas for improvement

Study your own data to obtain a better understanding of what is really happening in your real estate operation. Knowledge is power. Analyzing your ‘up-to-the-second’ data is a proven weapon in your arsenal of tools. Older technology is rarely flexible or accessible. Reports are ‘cast-in-stone’ and often reflect a requirement that has changed over the years.

Newer ‘open’ technology that utilizes ‘state-of-the-art’ Microsoft SQL database solutions that provide unlimited options for dissecting data in just about any manner you can think of.

Want to know the percentage of your listings your competitors have sold (and how it relates to your profitability)? How about a list of outside broker sales associates who have sold your listings (with the ability to thank them for their assistance)? Or perhaps what has each listing is really costing your firm, regardless of whether it sold or not (and who is spending the money)?

New technology that provides an ERP solution is a great approach to increasing effectiveness, providing better standards and improving awareness at a higher level. Whenever the term "ERP" (enterprise resource planning) is talked about today, it usually means how resources are to be expended rather than in the context of planning. It refers to high level enterprise view of the entire business. Or put another way, an overview of a company and all its parts as connected whole, rather than small centers of activity.

· ERP relates to the software infrastructure that holds the entire company together internally, on the one hand, and supports the external business processes the company engages in, on the other.
· ERP applications address a business process.
· ERP applications are modular.
· ERP applications are integrated.
· ERP applications include a company's reach beyond its walls—to its suppliers, customers, and partners.
· The entire ERP suite will address all areas (or the great majority) of a company's business functions.

Take hold of your data like never before and discover hidden treasures that can increase your bottom line or the mine fields that could be costing precious profits.

Save Money and Ensure Your Best Staff Stays

2007-03-22T16:26:00.000-07:00

It's really tough to reduce staff, especially those that have proven themselves to you and your organization. One way to ensure you keep the people you rely on is to let go of the ones that are not. Technology is a proven strategy for replacing tedious and mundane jobs (often performed by your less than stellar staff members) and using that new found profitability to ensure your valued staff members stay with you for years to come.

Number 5 – Reduce costs by increasing administrative productivity

Remove redundant and repetitive tasks from your administrative operations and streamline your administrative team. Automation is a proven method for reducing administrative costs. Older technology rarely has the new features that can really make a huge impact on day to day operations.

For example, direct pay deposit is a fantastic way to reduce bank processing fees, lower processing costs (administrative salaries, check stock and printer supplies) and provide your sales associates with ‘real-time’ payment. This one simple but powerful feature can save your firm thousands of dollars per year.

Another example is automated bank reconciliations. Manually reconciling bank activity is a long and tedious process that requires a highly paid administrator to perform. Most of the major banks can provide a data file that lists all of your company’s check activity (deposits too). Today’s newer technology can import the bank’s data file and can produce a reconciled report in minutes.

Work-a-round processes are inherent with older technology solutions. They are rarely in ‘sync’ with the main system and often create expensive administrative chores maintaining multiple solutions. Multiple non-integrated work-a-round solutions are usually the cause of costly errors. For example, Associate Accounts Receivables require close monitoring and when possible, immediate repayment. Using a non-integrated solution for agent receivables can be a nightmare for administrators and very expensive for the company.

A fully integrated solution that completely eliminates redundant data re-entry and ensures all data is always in ‘sync’ with every other piece of data in the solution. Listings, sellers, sales contracts, buyers, sales associates, escrow deposits, commissions, referrals, agent receivables, general ledger entries, checks, deposits and more are linked in a chain-like relationship that binds your business data into a cohesive business solution.

Assumptions (multiply by your actual numbers):

0.5 full time administrative position retired
$15,000.00 annual cost saved
Using NAR $100.00 average profit per side the $15,000.00 would be like adding 150 more sides to your transaction total for your company

The Small Stuff Can Add Up

2007-03-05T05:16:00.000-08:00

When profits are soaring it's easy to let the small stuff slide. But hey, times are different and profitability at all levels is more money for your your organization. Here is just one example of how technology can help recover those hidden expenses that eat away at your bottom line.

Number 6 – Save time, money and effort on report distribution

Reports are a fact of life in all businesses. They are an important ‘tool’ at all levels of management to track, manage and analyze the firm’s activities. Compiling, printing and distributing the various reports can be an expensive administrative cost to your real estate company with no real return on the investment.

Newer technology can auto-email reports rather than printing them and will greatly reduce the effort and cost when compared to printing. A few simple clicks can complete the process and provide ‘real-time’ reporting with ‘up-to-minute’ data for all levels of management. When the cost of printing is removed, reports can be distributed more often or whenever the need arises.

On-line reporting is another reporting ‘tool’ that provides secure access to operational data whenever the need arises. Technology can greatly increase availability and reduce expensive costs related to this vital aspect of your firm. Saving money is like earning more. It just makes good sense.

Assumptions (multiply by your actual numbers):

1 branch office
25 agents
4 reports – 25 pages each per month
$50.00 cost per report (paper, ink, printer maintenance, administrative staff, distribution, etc.)
$200.00 per month savings ($2,400.00 per year)
Using NAR $100.00 average profit per side the $2,400.00 would be like adding 24 more sides to your transaction total for this branch office

Protect your investment when it comes to leads

2007-03-02T07:59:00.000-08:00

This one is a no-brainer. You spend thousands on your web site, collecting leads and even scrubbing them for your agents. Make sure you get your just rewards at the end of the day!

Number 7 – Ensure your relocation and web leads provide the return you expect

The real estate world is a connected place where leads come from multiple sources. In many cases, these leads require your organization to spend money to enroll in one or more relocation networks or implement sophisticated web sites to attract potential buyers and sellers.

Web based ‘methods’ are a relatively new phenomenon in the real estate world and many real estate organizations have not yet created the infrastructure to ensure their investments are providing the return they expect.

Leads are like irons in a fire. Some provide immediate results making them easy to track. A majority of the leads require a long-term relationship that can take months to mature into a sales transaction. If your firm does not have a integrated technology solution, the longer it takes to convert a lead into a sale, the more likely it is that your real estate organization will not be paid for the ‘lead’ your firm generated in the first place.

A non-integrated technology solution often see real estate firms spending extra resources manually matching leads to transactions (which is costing the firm even more money) and through human error, missing deals where a ‘lead’ matured and the company did not get paid for it.

Assumptions (multiply by your actual numbers):

1 branch office
25 agents
$200,000.00 average sale price
3% gross commission rate per side
25% off-the-top referral fee ($1,500.00)
1 referral fee not paid to company per month
Result - $18,000.00 annual lost
Using NAR $100.00 average profit per side the $18,000.00 would be like adding 180 more sides to your transaction total for this branch office

With leading edge technology leads are recorded, tracked, monitored and when the lead turns into a sale an auto-link feature automates the process of linking the lead to the sale and ensuring that the company is paid on closing regardless of when the initial lead was distributed to your sales associate.

Even if 1% of your leads are not providing the revenues your firm deserves the result is considerable lower profits. Implementing newer technology can provide the assurance that all revenue opportunities from leads are being received.

Increase your per transaction profit TODAY!

2007-02-28T06:50:00.000-08:00

This idea is so simple and easy to justify and can greatly increase your net profit per transaction.

Number 8 – Get paid for doing what you are already doing – administrative tasks

As the real estate broker you are required to maintain secure records of the real estate transaction for a number of years. This administrative task can be a rewarding one by ensuring that your organization receives a reasonable fee for assembling, filing and protecting the real estate transaction documents.

Document archival fees are common practice in many markets and technology such as Profit Power can ensure that the fees are properly collected from the buyer and seller and added to your revenue stream.

With NAR stating that the average company profit in a single real estate transaction is somewhere in the $100.00 range, document archival revenue can add a significant amount of ‘profit’ to the sale transaction.

Assume a $50.00 document archival fee on each side of the sale transaction. Using the NAR profit average of $100.00, an additional $50.00 increase per side is a huge increase in the company’s bottom line.

Assumptions (multiply by your actual numbers):

1 branch office
25 agents
25 transactions per month (300 sides per year)
$50.00 document archival fee per side
Result - $15,000.00 additional revenue added directly to your bottom line
Using NAR $100.00 average profit per side the $15,000.00 would be like adding 150 more sides to your transaction total for this branch office

Once again this is for a single branch office. If your firm has multiple branch offices, the results just get better. Get paid for doing what you are already doing and increase your profitability without increasing your transactions. This is just smart business!

Partner, Partner, Partner and Partner some more

2007-02-26T05:25:00.000-08:00

Here is another simple, easy and profitable idea for your consideration.

Number 9 – Increase revenues and take advantage of strategic partnerships for one-stop-shopping convenience for consumers

Buyers and sellers too, want and demand ‘full’ service. They are more educated, sophisticated and savvier than ever before. They are busy too! In this economic reality that requires both husband and wife to be working to enjoy the rewards of home ownership, they need, want and demand ‘one-stop-shop’ convenience.

This trend is nothing new! But yet it is surprising how few real estate organizations are providing the ‘one-stop-shop’ environment that buyers and sellers not only want but are willing to pay for and leaving this golden opportunity to the sales associate who at best might be of some assistance.

Forget the fact that as real estate service providers your firm should be offering a full menu of options for buyers and sellers and just think about the increased revenues that are available for simply doing what the buyer and seller want your organization to do for them in the first place. If you do not have a strategic alliance with mortgage, title, insurance and other ‘full service’ organizations, then now is the time to jump in and reap the rewards. Strategic business partners are eager to reward organizations for new business you have passed along.

Strategic partners provide a ‘win-win’ scenario for real estate firms, their agents and the real estate consumer. Buyers do not want to be running all over town looking for the best mortgage, title, escrow, insurance, home warranty and other related service companies when they make the decision to purchase. Sellers also require professional services when selling their property.

How much can an organization owned by your company earn from origination fees for these services? Each firm will have their own specific strategic alliances, so the following example is just a ‘guesstimate’, but investigate this on your own and you will see why the leading real estate organizations have strategic business partners to increase their bottom line.

Assumptions (multiply by your actual numbers):

1 branch office
25 agents
25 transactions per month (300 sides per year)
$250.00 mortgage origination fee per side
20% of transactions use your strategic mortgage partner
Result - $15,000.00 additional revenue added directly to your bottom line
Using NAR $100.00 average profit per side the $15,000.00 would be like adding 150 more sides to your transaction total for this branch office

Now take this simple example and apply it to the many other services that are directly related to a real estate transaction:

Title
Insurance
Home Warranty

If your company is already aware of and taking advantage of this ‘one-stop-shopping’ opportunity, then the objective would be to increase the current success rate to a much higher number which is of course can happen when the client is ‘owned’ by the firm and not your agents.

Technology, like Profit Power, can create an automated pipeline that instantly informs your strategic business partners when a new buyer or seller has made the decision to buy or sell. Now your company’s business partners can take immediate action by contacting the client and offering them their professional services earlier in the sales cycle.

Each ‘lead’ can be tracked and monitored for post sale review and analysis to ensure the consumer is being properly served by your strategic partners and that your ‘one-stop-shop’ efforts are being rewarded. Many of today’s leading real estate firms understand the importance of providing the ‘one-stop-shopping experience’ and they are adding tremendous revenues to their bottom line. What a great way to increase profits on each sale when sale transaction numbers are not as robust as in the past.

Your firm will need consider RESPA and you will need to talk to your legal experts to get the correct information before implementing the ‘one-stop-shop’ business partner strategy.

Wecome to my new blog!

2007-02-25T08:37:00.000-08:00

Welcome to my new blog. My hope is that I can share some simple ideas for creating more profitability within your real estate organization. Real estate brokerage is a business and I have been fortunate enough to serve it for the past 25 to 30 years.

Over these many years of working side by side with some of the most successful real estate organizations in the country, I am often surprised by how real estate firms get distracted by day to day stuff and either forget to do the obvious things that can help their organization to be more profitable or just haven't taken the time to think about the easy way to make more money.

So this is my attempt to pass along some simple ideas that can really deliver results. Technology is at the root of many of these ideas, as technology can take a task that would be normally too tedious or time consuming and turn it into a simple daily process. Simple is good. Simple is easy. Simply is sustainable.

My blog will start by providing ten simple ideas that can really add up to increase profits. Some are long term strategies while others can be put into place right now. I would really like to hear from you if you feel that my suggestions are working for you or better still, you already are doing some of the things I am recommending and have some great stories to pass onto others.

You can reach me at ron.hurak@gmail.com if you have any suggestions, ideas, comments or just want to share some thoughts.

Thanks.

Make it happen!

2007-02-24T16:29:00.000-08:00

As Bob Dylan sang out in the 60’s, “the times they are a’changing”

The real estate marketplace has seen eight to ten years of unbelievable growth and prosperity and it was unrealistic to believe that this trend would last forever. The good news is that the transition to a more ‘normal’ marketplace seems to be a ‘soft landing’ rather than the catastrophe that fell upon the real estate industry in 1990. And many market analysts are predicting a bottom to the slide by the middle of 2007.

No one likes to have lower numbers. For some, the response to slower sales is a ‘knee-jerk’ reaction that would cut everything that can be cut and weather the storm. This of course, is not a bad strategy, but it should not be the only one. There are other opportunities for reducing costs, increasing revenue and getting set for the next wave of better times to come.

In the boom times, everyone was too busy to review existing business operations, processes and procedures. Why bother when the cash flows are high and the profits are a ‘given’? However with a marketplace that is less hectic and profitability is the key to continued success, now is the best time to take stock of your organization and make the improvements that the busy times would not allow your organization to do.

Implementing new proven technology solutions is one area that can create tremendous benefits and provide real measurable value to your organization. Older technology that is antiquated can really cost your firm more money than upgrading and will most certainly inhibit future growth when the marketplace, once again, shows signs of rapid growth and prosperity. Will you be ready?

The marketplace is what it is and impossible for anyone to control. You have to work with what you have. This means squeezing every dime of profit from every deal your firm makes. Proven technology solutions allow your company to get more accomplished with less people and apply profit-making strategic plans that can see your bottom-line grow even when the number of transactions is down from that of previous years.

To grow you business during these transition times and ready your firm for the future, here are ten great reasons to upgrade to the next generation technology today and take advantage of the opportunities that proven solutions can bring.

Using the David Letterman count down method, here are ten great reasons for using proven technology solutions to add more profitability for your real estate operation.

Number 10 – Take control of your future - develop a post marketing campaign for future sales

Now that time permits your administrative team to do so, take control of future clients. When sales are busting at the seams, nobody considers the market conditions seven to ten years out, but ‘good’ businesses become ‘great’ businesses by doing those things that their competitors are not doing.

Everyone in the real estate industry knows that the buyer and seller that just closed that deal today will be a prospective client in the next seven to ten years. Marketing 101 clearly states that it is far less expensive to maintain an existing client than to create new ones, so creating a ‘post-marketing’ campaign to earn the loyalty of existing clients just makes good sense!

Leaving this vital task to your sales associates is a weak strategy of false hopes and assumptions. Very few sales associates are disciplined enough to create and maintain a ‘customer loyalty’ program and even if you have some that are motivated to make the extra effort, it is unlikely that the sales associates with your firm today will be with you seven to ten years out.

Sophisticated real estate firms understand the importance of ‘owning’ the buyer or seller at the start of the selling cycle. Many firms are wrestling with the ‘agent-client’ relationship and very much want to modify that relationship to one that is more ‘company-client’ where the sales associate is a minor player in the sales process.

There are many reasons to create this loyal relationship between the company and prospective client, but the overwhelming reason is sound economics, even possible survival of your real estate organization. In an era of all time low profitability on real estate sales, it is imperative that real estate firms find new revenue opportunities without the interference from the sales associate.

Clients want ‘one-stop-shopping’ (see Reason # 9 to be posted soon) and they are willing to pay for the convenience, but to take advantage of this exciting revenue opportunity, the relationship with the client must be started by your real estate firm so that mortgage, title, insurance, home warranty and other ‘services’ offered by your strategic business partners are not re-directed to other service providers by your sales associates.

Here’s an example of how your company can increase profits, albeit more long-term, when clients are ‘company-owned’. Past buyers and sellers that have been involved with your organization can become future ‘leads’ that can be distributed by your firm to new agents and where your company can receive an off-the-top ‘referral fee’ for the lead, just like any referral lead given to an associate. Let’s do some math to illustrate the economics of this strategy.

Assumptions (multiply by your actual numbers):

1 branch office
25 agents
25 transactions per month (300 sides per year)
$200,000.00 sale price
3% gross commission per side
50% of agents will leave your firm within the next 5-10 years
75 past customers will be orphaned each year (out of the 300)
50% of orphaned customers will return to your firm when buying or selling (37.5 clients) through customer loyalty campaign
25% off-the-top lead referral fee paid to your firm because customers are now ‘owned’ by your company ($1,500.00 referral fee commission)
$56,250.00 additional commission revenue earned
$100.00 per client per year customer loyalty campaign cost ($30,000.00)
$26,250.00 net profit received from customer loyalty campaign
Using NAR $100.00 average profit per side the $26,250.00 would be like adding 262.5 more sides to your transaction total for this branch office

This illustrates the significant potential increase in profitability and for just one branch office. How many extra sides would this branch office have to make to generate this kind of additional profit?

The easiest way to ensure that you have total control of the client relationship is to create a post-marketing loyalty campaign that has those precious clients coming back to your company and not the sales associate that has long left your firm.

Implementing modern back office technology such as Profit Power can properly capture the buyer and seller data at the time of the sale including the post-sale address of the seller and automate the customer loyalty campaign activities.

All that is required is a simple operational change that asks your administrators to take a few extra seconds to properly collect some additional contact data and you are well on your way to creating a sound strategy for future prosperity and taking ‘ownership’ of the sales process. More to come!