Some brokers reject the value of the year-end business planning process. Others believe that last summer’s augmented golf outing did the trick. Both of these groups need to think again.
Firms attempting the glide path into 2006 will find themselves fighting a significantly different headwind than existed even six months ago.
Analysts are reporting the increasing probability that the 2006 market will be flat, at best, with the strong likelihood of declining revenues and decreased profitability. What are the ramifications for your brokerage? What steps should you take to best weather this environment?
Key retreat outcomes include setting the firm's annual goals, identifying objectives and recording outcome measurements for the coming year.
Given the expected change in environment, every brokerage should address the following 14 questions:
1. What are the budget ramifications of declining revenue? Brokerages must put the brakes on spending. Make the tough decisions about spending priorities. Every line item is up for review.
2. How should we compensate executives and managers? Most firms have already made the switch from sales-based compensation to core service participation-based formulas. Now cost saving ideas must be included in the calculation.
3. How are we going to deal with our agent panel in a downturn market? Demands for increased brokerage support will have to lead to compromises on both sides. Beware the traditionalists within the firm who seek to protect agents from the realities of the new market. This is a “together” activity.
4. What will we do to remove most of the “them and us” attitudes of the past five years? Develop a broad based understanding that in a down market firms and agents will rise and fall together. Working together to harness synergies and common interests will become a hallmark of firms that will succeed.
5. How are we going to transition from “hot” market formats, developed over the past ten years, to the “back to the basics” approach of the slower and more methodical “normal market” cycle?
6. How will we prepare our staff for this environment? Most brokerages are flying with a crew that has never been in a storm. Training will have to be complete and immediate. This expense must be shared in one way or another between the agent panel and the company.
7. Is our broker/owner willing and able to go through this experience? After all, as a group, they are much older than the last time this market transition was required in the late 1980s.
8. Are our recruiting and retention policies adequate? “Me” centered attitudes that were troubling in a hot market environment will become nightmares in a downside situation. The criteria of tolerance will have to shift to a “fairness to all” approach.
9. Are we ready with our brand, customer experience and value propositions delivered through a highly trained agent panel? At the end of the up market cycle consumers were solidly in control of the process. A downside market may solidify that position. For those who would suggest that a tougher market increases the need for professional assistance, one can only point out that while the concept may be correct the resources may be inadequate.
10. How will we cross train a sufficient number of agents in the fine art of down market services?
11. How will we deal with consumers who must sell their homes in a downside market? This group may not have the equity to fund a conventional “commission based” fee arrangement. Unless they can access a “flat fee” or similar program, some will be forced to use the FSBO experience. They will find Zillow.com waiting to serve their needs.
12. How will we complete our commitment to meet the customer on their grounds of first choice, e.g. the Internet? Four eye opening statistics highlight the need to make this transition: 1) More than 75 percent of real estate consumers are now on the Internet. 2) More consumers are finding their homes on the Internet than through an agent. 3) The information gap between agents and the Internet has narrowed to seven percentage points. 4) More than 33 percent of listings fail to provide consumers with sufficient information or photographs. It is time to get the firm’s Web site up to speed and deliver what the consumer is demanding.
13. How will we adjust our marketing program for a downside market? During the past several years, firms have wasted millions of dollars in unnecessary and ineffective print media advertising. Now is the time to complete the transition to a 90/10 Internet-centric marketing program.
14. Will we finally complete our perfect virtual lead management program? By the end of 2006, over one third of new leads will come over the Internet. Given current practices, it is not likely that the firm’s agents will be responding to those e-mails within a competitive time frame. This may be the last chance to learn to play in this space.
Invest the time in this process. You can start 2006 moving in the right direction with the right objectives and with the right priorities. Considering future returns and risk management, this may well be the most valuable investment you can make
