Whether one agrees with 11 months, or 18, is not relevant to the challenge that lies before the American real estate broker. The fact is that the end is in sight. The real question is what firms will enter the coming horse race, and place well for the lineup at the beginning of the next ‘up’ real estate market?
The answer is simple. The opportunities of the next up market will belong to brokerages who, well before the onset of the new market, create and implement business plans that overcome three hurdles, and focus the firm’s efforts and resources in four critical areas.
The purpose of this article is to provide brokers and brokerage executives with guidelines they can use in creating their own unique approach to the new American real estate market.
It is important to recognize that the challenge of 2009 will be as much a mental health exercise as an economic or business experience.
From the outset, recognize these two things:
1) The up market will return (although not at 2005 levels); and
2) When the market returns, it will be a significantly different business environment than existed at the onset of the current down market cycle.
These predictions are specifically aimed at those executives who believe that by just hunkering down, their survival will guarantee their success in the next up market. That simply is not true.
The Three Hurdles
The Psychology of Down It is likely that the economic aspects of the marketplace will transition faster than the mind-set of the American real estate consumer. There is really no way to measure the mid and long term impact that the “psychology of down,” -- the emotional impact of negative mass media, the burden of distressed properties and the stress of sliding property values -- will have on the consumer. It is sufficient to say that these forces will negatively impact consumer confidence. A firm’s recovery strategies and business plan must address this issue head on.
Time to Buy Another factor in play here is the fact that earlier industry initiatives to convince consumers to reenter the market through “time to buy campaigns” may have negatively impacted the industry’s credibility in the eyes of the consumer. Combating this effect may be as simple as partnering with an entity that has a higher level of credibility.
Finding the Right Horse A firm’s business plan will be its thoroughbred as they enter this Triple Crown. This is not just one sprint. One must establish training and performance goals, study each unique track, and run well throughout the season. The winning plan will set forth the strategic and tactical objectives and initiatives that the firm will employ at each turn throughout the season. Without a unique plan a firm can be nothing more than a spectator.
The last real estate boom lasted from 1992 to 2005. During this thirteen-year period the majority of firms did little to differentiate themselves from their competition. The majority of the industry maintained an agent-centric business model and focused on Civic and Boomer generation customers to the exclusion of X and Y generation buyers and sellers. Success in the new market will require a new approach to these issues.
The Four Critical Areas
To enter this race, firms must implement a business plan that addresses four specific operational areas: competition, consumer centricity, consumer messaging and generativity.
Competition The first element of the plan must incorporate a new competitive analysis. This is a matter of identifying what firms are currently competing with your firm, what strategies and tactics they are using and how successfully they are implementing their apparent strategies. They may be big or small, local or regional, old or new. A competitive analysis, that incorporates whatever information may be available, should be undertaken immediately. That analysis should be updated at least monthly, using whatever new information comes into the broker’s possession.
With respect to competing firms, determine who is dropping out and who is not likely to survive the next 11 months. Watch firms that have entered into shotgun mergers, as they will, without extenuating circumstances, probably not be serious competitors in the long run.
Monitor MLS sales pending, closings, listings and other activities as well agent registrations. Try to verify rumors and information gained on the street. Set up a system of office drive-buys to monitor obvious activities. Figure out who is left, what they have done to hunker down, who is exhausted and who may lack the emotional energy to cover the distance.
A bit of paranoia goes a long way here. Who may be gunning for you and what firms may be in a position to ambush your market share?
Avoid, if at all possible, participating in shotgun mergers and consolidations. While combining dysfunctional firms to effect savings may be an appropriate short-term solution, the real test will be how compatible the personalities are when it comes time to get back into the race. Personalities that are compatible in a “hunker down” environment may be crippling when they lack the character or personal strength required to run for the roses.
Consumer Centricity The second element of the business plan should set forth, in great detail, how the firm will transition from its traditional “agent centric” culture to a “consumer centric” style and business philosophy. The business plan must recognize that the real estate consumer of 2009 will be a far different individual than their predecessors in 2005. Firms must center their service experience and value proposition on this new consumer. While this may be one of the most difficult challenges to accomplish, the fact remains that the elements of consumer centricity are easily identified, and easily implemented, if the firm’s management and agent team are willing to effect the change. Get started now.
Consumer Messaging The third element of the business plan must address issues surrounding the firm’s consumer messaging program. This function would have previously been referred to as a marketing plan. However, in 2009 and moving forward, consumer messaging will extend far beyond print and electronic media to incorporate new Internet based promotions such as social medias and search engine optimization. Addressing this operational area will also require a confrontation between what might be your old nag and your new horse, as you determine the face you wish to present to the new consumer in the new marketplace. Remember agent centricity is out and consumer centricity is in.
Generativity The fourth area of plan concentration will be in the area of generations, or generativity. Generativity is the term that is being applied to a whole menu of activities directed at making the firm relevant to all four generations currently in the real estate marketplace. Generativity applies to both internal efforts (four generations of agents and managers) and external efforts (four generations of buyers and sellers).
Firms without a specific generativity plan are discovering that good generational adaptation is simply not happening. This will be a fatal flaw in the new marketplace.
With these four factors in mind, every firm can begin the discussion and planning process. Identify who is going to go the distance in your firm. Put four teams together and begin to create a business plan document that captures each area within the “future direction” of your firm.
Don’t pull the reins too hard. Match your posture to your horse. Look for the opportunities and prepare to recover lost revenues. Keep in mind that the “feelers” in your business plan will identify, monitor and engage the new market opportunities far in advance of your competitors, whose view may be obscured by despair and self-pity.
Your magic moment is just ahead. Follow your plan for a new season, and reach for the purse.
