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How Savvy Owners are Adopting Best Practices from Other Industries to Transform Their Businesses
Today's competitive market has prompted many brokerage company owners to take a closer look at how they run their businesses. Consequently, many leading firms are evaluating and adopting ideas, practices, and processes from other industries to help them run their companies more effectively.
Across industries, managing the performance of the sales force, or in the case of real estate—the agent force—has always been a major challenge. In residential real estate, the cultural legacy associated with the independent contractor model creates significant challenges. For example, most owners have no visibility into the sales pipeline, little infrastructure to manage agent productivity, and don't "own" a centralized customer database. The result: owners often struggle for control of the business.
How can firm owners get better visibility into their agent sales activity? Is there a simple way to create a centralized customer database for the firm, without resistance from the agents? How can firms institute performance standards and a culture of accountability? How do they gain deeper insight into business operations to make better decisions and drive profitability?
To meet these challenges, owners are turning to company-wide customer relationship management (CRM) solutions. These established technologies can help real estate firms improve profitability, build long-term affinity with customers, and enhance the recruiting and retention of productive agents. Not only do these systems have the ability to transform businesses, but they are now very affordable. Delivered online via a monthly subscription model -- commonly referred to as Software-as-a-Service (Saas) -- there is little investment in hardware, software, IT personnel, or consulting services. As a result, firms can achieve exceptional results quickly with relatively low financial risk.
This white paper will examine the latest real estate industry trends and expose the many advantages of company-wide CRM
Real Estate Trends
It is no secret that consumers rely heavily on the Internet when purchasing a home. Back in 2005, nearly 80 percent of homebuyers were using the web to search for a home and these numbers have increased. The 2008 Swanepoel Real Estate Trends Report explains, "It is universally recognized that technology has become an essential ingredient in the (consumer's) real estate experience."
While technology has primarily been focused on consumer-facing applications, its use to improve company and agent efficiencies is a new and growing trend. Evidence suggests that when agents leverage technology, their sales improve. "Two recent surveys showed that agents who embrace technology earn three to four times more than an average agent," said John M. Peckhamm III, executive director of the Real Estate CyberSpace Society.
Old Standards Hinder Productivity and Margins
Many firms have been slow to enhance their processes. Relying on old procedures directly impacts company margins. "Many traditional brokerage companies remain dysfunctional, burdened with layers of unnecessary costs, still struggle with the independent nature of their agents and stick to old vestiges, systems and ways," stated the Swanepoel report.
Agents are working just as hard, but are producing less. For example, unit sales have been dropping since 2000. The number of transactions per real estate agent has dropped from 13 in 2000 to about 8.5 in 2007, indicating that agents have become less productive and "if it weren't for the increase in housing prices they would have experienced a drop in income."
When agents are not productive, firm profits begin shrinking. "Management is increasingly recognizing that carrying under-trained, under-skilled and under-motivated agents while competing for fewer transactions is greatly impacting their shrinking margin."
A number of challenges stand in the way of regaining profits.
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