Opening a real estate office is not a simple task. There are countless decisions for a new broker to consider, and often several mistakes will be made. Usually, new offices make the same mistakes, so it’s best to learn from them to avoid making them when starting your own business. Read on for a list of the common mistakes almost every broker will repeat when starting their own real estate business.
No Focus on Recruiting
Starting off, recruiting might seem like a straightforward task when opening a real estate office. Unfortunately, it quickly becomes a low priority amongst a business’s other needs. Recruiting is the key to a company’s success—without a strong team, all of the business’s income relies on you which is likely not why you decided to open a brokerage.
Commonly, new brokers will spend tons of time preparing their office for new agents instead of working on acquiring new agents. Brokers worry their office isn’t ready for new agents; they need new furniture, or upgraded software, or more leads for distribution. Certainly, these issues should be addressed, but they shouldn’t prevent you from growing your business. The more agents you recruit, the more your business will grow, and from there you will be equipped to improve your office space.
Spending Too Much Money on Office Space
When opening a real estate office, brokers have aspirations of becoming the largest office in their city, and they should! However, brokers tend to forget that they shouldn’t begin by leasing enough office space for the largest office in the city. While it’s desirable to avoid moving an office for expansion, you don’t want to be stuck with unnecessary expenses.
Instead, consider leasing the amount of space that will satisfy all current and near-future business needs. This will give your business the flexibility it needs while you work on your new business. With the proper layout, a 2,500 to 3,000 square foot office space can accommodate roughly 100 real estate agents. Down the road, when you reach your goals and require additional space, it is often advantageous to seek a new location in a different area of town and replicate the business there.
Hiring Too Much Staff
Again, several brokers will prepare for their future business instead of their current business. They will miscalculate and hire numerous people for office staff before they have a need for it, such as front desk administrators, appointment setters, in-house IT support, managers, etc.
Actually, a few of these positions may be needed from day one, such as a front desk administrator, but a full staff will not be useful if you have a modest team of agents. Before opening an office, evaluate which staff positions are absolutely necessary and create a plan to bring on added staff as the business reaches certain growth levels. With the proper systems in place, an office with an excellent manager and front desk administrator can fully support 100 real estate agents.
Purchasing Too Much Equipment
It’s natural to compare yourself to the competition when opening a new real estate office. Competitors may have full technology packages and personal equipment for their agents. Don’t react to this and buy an obscene amount of equipment—it’s probably not needed. Nowadays, real estate offices don’t require nearly as much equipment as you might assume. Here are our tips on equipment brokers tend to overspend on.
Often, brokers will try to place a personal printer at each agent’s desk. This gets extremely expensive and personal printers end up needing to be replaced frequently. Instead, lease or purchase a single commercial copier and have all of the computers networked into it.
New offices tend to be filled with personal computers on desks, just idly waiting for agents to be recruited. Of course, you’d prefer new agents to feel right at home in your office, but buying computers for agents you don’t have yet is expensive and unnecessary. Not to mention, the longer the team building process takes, the more outdated those computers become.
Traditionally, real estate offices will have at least one server running. Today, an office doesn’t actually need one at all. Servers act as a remote hard drive and can tend to slow down an office’s network. Now, you can substitute them with cloud-based solutions. Commercial copiers can be connected directly to the office’s network, and, if need be, a network hard drive could be added.
Deciding on a phone system is a bit complicated, but you probably don’t need that $50,000 system. The majority of agents operate from their personal smartphones, so you may not need an incredibly involved system for an office. Shop around and find what will fit the office best, such as a VoIP system. Your office could be set up with a high-tech system for a few thousand dollars—or less!
Not Setting Up the Office
You shouldn’t wait for the office to be fully furnished before recruiting, but you also shouldn’t let the office be empty! If a potential recruit walks into an office and can’t tell if it’s opening or closing down, there’s a major problem. Offices need great visibility and parking, but they also need to feel welcomed when an agent walks in.
If there is no front desk administrator, no conference room furniture, and no office furniture, then it will be extremely challenging attracting agents to work at your office. Brokers often plan on adding a desk in an office once they hire an agent, and adding conference room furniture once they have a few agents, and so on and so forth.
At first, this seems like a sound strategy, However, agents need a compelling first impression of your office in order to join. They won’t be tempted to leave their well-established office if yours doesn’t look ready for business. Even if you have the best offer, they would rather wait until other agents are there first and your business is settled.
Blowing the Entire Budget on Advertising
Advertising is incredibly important in growing a business, but new brokers spend way too much promoting the opening of their office. Before they’ve even built up their team and started making transactions, they’re running out of operating funds and struggling to remain open. Be cautious about ad spend. It’s extremely exciting to open your own business, but advertising your opening will not convince other real estate agents to join you.
Instead, include an advertising budget in your business plan and send promotions focused on recruiting agents. If you aren’t well-versed in advertising, it may be better to hold off until the office is further established, so you can work with your team or hire outside help.
It’s easy to become caught up in the excitement of opening your own office—it is exciting! However, the financial traps you just read are avoidable.
To avoid these pitfalls, take your time in laying out a full plan for setting up your office, getting started, and expanding short-term and long-term. This plan will aid you in keeping your expenses under control. Once your business begins growing, you will be better positioned to enjoy the benefits that come from owning your own brokerage.