What Will You Be in Tomorrow’s Real Estate Landscape?
What does the future look like for your brokerage? While there are many routes to success, there are also uncertainties and new challenges to our business. How are you future-proofing your brokerage and making sure you have a strategy to grow your business and create a valuable asset? This is not an easy question to answer, but I’m sharing what you should address if you hope to grow your business and create an asset that can help you achieve a lucrative exit strategy.
Consolidation is coming.
Everyone is talking about consolidation. At RISMedia’s 2019 Real Estate CEO Exchange, Realogy’s Ryan Schneider said, “Consolidation in our business is inevitable.” He warned the audience that the journey may not be smooth or painless.
Schneider is not wrong. Consolidation is inevitable, and brokerage owners need to be prepared for that. Are you going to be the brokerage that’s growing and acquiring companies, or are you planning your exit strategy, whether that be today or five years from now?
Now is the time to choose.
Many brokers fall into one of two categories: too small to be big, or too big to be small. It’s up to you to decide what you’d like to achieve.
As a large brokerage, your everyday focus should be on growing organically. If you’re not recruiting, you’re not surviving—but what you need for rapid growth are mergers and acquisitions. It’s crucial you think about how your business can scale, your value proposition and profitability. You need to be able to grow and provide value to agents and consumers while keeping your costs low.
Technology plays a huge role in real estate today. It’s critical to have the right tech stack to run your business and provide to your agents. Partner with a company that can provide you a fully integrated tech stack that grows as you do. With a large brokerage, there are tremendous wealth opportunities through more transactions and affiliated business relationships, and as a large brokerage that’s profitable, your multiple is worth more when you look to sell.
On the other hand, if you’re a small brokerage, you can operate a successful boutique business that runs smoothly. However, when the time comes to sell, you won’t have the agent count or transactions to sell at as high a value. Typically, in a small brokerage, you have one or two agents doing the majority of the business. Therefore, profitability is nonexistent, making it impossible to sell. Profitability is key to maximizing your investment.
Many times, small brokerages offer their agents countless tools and services that benefit the agent, but they don’t scale as the brokerage grows—or, the company is so small that they can’t afford tools or offer agents any value. This also makes it difficult for the brokerage to be profitable. Focus on your P&L to get the most out of the time and money you spent on your brokerage.
With consolidation on the rise, it’s time to determine which way to take your business. Too small to be big, or too big to be small? Don’t get caught in the middle. If you’re looking for guidance, I encourage you to reach out to me for a free, confidential consultation.
Bryan Brooks is the senior vice president of Franchise Sales for HomeSmart International, responsible for spearheading the company’s domestic and international franchise growth initiatives including mergers, acquisitions, roll-ins and conversion opportunities. You can contact Bryan directly at BBrooks@hsmove.com. For more information about HomeSmart International, please visit HomeSmart.com/Franchising.
