What I'm about to share is not only enlightening, but somewhat frightening. During the course of my recent travels I had the opportunity to sit down with a 120 agent company and review their residential brokerage's financials. What I found was somewhat alarming and out of character for a brokerage of that size - or so I thought.
After learning from the owner that there were some cashflow issues; I laughed off the seriousness and responded, "Well, that's why they call you a "Broke-r!" Little did I realize the full extent of the situation. It is not unusual to find overhead fat that can be trimmed, owner perks run through the corporation or a fetish toward technology spending. However what I found was an overall lack of good financial oversight. Of course I realize that agents turned broker/owner can struggle with the transition from selling to managing an asset, but this was a seemingly ever-growing, upward moving and shaking enterprise. From all outside appearances - she was laughing all the way to the bank. In reality - the owner was running from the bank.
So where was the problem? Knowing the numbers! Oh believe me, the owner knew what commissions (revenue) were coming in; knew what the monthly overhead was had even gone as far as developing a ranking of the company agents by company dollar contribution. Sadly, this was still not enough. The major areas of neglect were as follows:
- Failure to implement an exhaustive financial management system such as a real estate office specific accounting program. Programs like Lone Wolf can pay for themselves many times over.
- Over-extending by not keeping an eye on average agent contribution, overhead cost per agent and cash-on-hand. Three important dashboard indicators that should be on your own executive dashboard.
- Assuming that recruiting can solve all ills! I know that recruiting gurus are cringing while reading this, but the truth is that if you're bleeding profusely no amount of recruiting is ever going to get you out of the hole. Remember the old saying, "stop digging!" What is your state of mind and attitude when your in debt up to your eyeballs? How about the desperation that potential recruits pick up on, and the "deals" you're willing to cut to get them on board. Quality goes out the window as your desperation increases.
