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4 survival strategies for brokerages

By January 13, 2015 One Comment

This one is specifically for owners of larger brokerages: You are in the middle of a war zone battling giant portals and local brokerages for the eyes and hearts of your marketplace members.

Often the heat is too intense to think strategically, so instead you carefully peruse business plans handed down from your franchise headquarters, or you glean any bit of information you come across on the Internet or in business books for an edge.

Your agents are demanding that you provide a means for producing many more Internet leads than they now get. You know this is vital, as nearly 100 percent of buyers and sellers are on the Internet, and most interview one (occasionally two) agents before committing. You must have a strong draw on the Internet and be the first brokerage that buyers or sellers.

And you know what this entails.

Home sellers want an automated valuation model (AVM) on your website, and they want to know that your agents offer the best marketing for their home.

Homebuyers want to find their perfect home, and they want to know that the neighborhood it’s in is really nice.

If you are waiting on “Zulia,” your franchise, the National Association of Realtors, News Corp or some grand advice in an article to fix your problems in 2015, please stop.

You have four strategy choices to deliver what your market desires via the Internet, and your strategy choice first depends on how long you are staying in real estate.

Strategy 1: If you are staying in the industry for fewer than five years, then let Zillow, or your franchise create limited innovations, and then compete with the other brokers for a shot at the buyer and seller leads. You’ll continue your local service offerings as usual, with the addition of any easily implemented incremental improvements you come across. At the end of five years, you’ ll be out — and glad that you are. By that point, the major innovators within the industry will have made it unrecognizable, and it won’t be possible for you to compete in that setting anymore.

If you are staying in the industry for longer than five years, you have three additional strategies you can mix and match. While you are implementing these three new strategies, you will continue with Strategy 1 until you replace it with your innovations. The next three strategies are listed in order from easiest to hardest to implement.

Strategy 2: Immediately form an action committee of the largest, most committed broker-owners you can find operating under your franchise and offer a detailed strategic plan to your franchise president within 60 days. Take the initiative and don’t wait on your franchise. Don’t even involve them until your group has set in stone which innovations must be implemented. And once you present this detailed document, do not let them off the hook. Get it implemented this year.

If you are not part of a franchise, do the same with several large independent brokerage owners in markets where you don’t directly compete. Remember, you aren’t discussing commission amounts or anything regarding antitrust rules; you’re striking up a strategic alliance to create and offset the cost of innovation. Hey, even Microsoft and Apple worked together on projects from time to time.

Your goal within a franchise environment is to get them to take you very seriously and to use their money (which is really your money) to cover the innovations and programming costs. Your goal as an independent brokerage is the same, but here you’ll all need to share the costs.

Strategy 3: Acknowledge your dire need for innovation based on market desires and piece together third-party companies’ innovations into a new website, perhaps even offering a whole new service in your market. You’re creating a bit of a Frankenstein’s monster when you try to piece together several other companies’ independent innovations, but with a little cosmetic surgery (a well-designed user interface), it might just work.

Each piece you pull into this project is based on both helping buyers find their perfect home and neighborhood and allowing sellers to discover what creates value in their neighborhood (including a better AVM than Zillow’s).

Strategy 4: This one is hardcore. Here you (and your “partners,” if you go that route) design from the ground up what you know the market desires but cannot receive through anybody else (franchises, portals, or third-party companies. You are becoming a true innovation entrepreneur, and this is expensive and harrowing. A limited innovation in a quality AVM or creating a new means of home search will set you back no less than $500,000 each in programming and technical advising fees — and that’s assuming you outsource everything to the lowest competent bidder and that almost nothing goes wrong. This almost never happens. Always have the wherewithal to survive at three times your anticipated timeline and five times the budgeted cost (yes, really).

Strategy 1 is your least risky strategy — not because it takes less effort and money, but because you know that you are out of the industry in five years. If you accidentally stay in past five years, this strategy offers your greatest risk of extinction, as the most innovative competitors will surely engulf what fragments of your business still exist by then. If you stick around past your allotted time, the least risky strategy becomes your most risky strategy.

Strategy 3 is the next least risky strategy because you ride others’ efforts and innovations. However, in the long term, you will never move ahead within your market, as every broker can exactly match your every move. With this strategy, you can only differentiate yourself short-term. You will have to perpetually keep adding the incremental innovations to stay temporarily ahead of your competitors.

Strategy 4 is the most perilous financially, and the third most risky strategically, because it’s really your money (and, more importantly, your brain and creativity) that is on the line. At the same time, you could have a major breakthrough in innovation and differentiate yourself within the marketplace for the long-term. Plus, putting everything on the line means you will be on the edge of where the market is moving. You’ll be much stronger even if things do not work out perfectly. This is the strategy for true long-term strategists.

Strategy 2 is the most risky because it’s the least likely to ever get completed. And if it never gets implemented, your default position is that of Strategy 1 — dead in five years. Your short-term money is not on the line, but your entire future is riding on a franchise (one that has chosen not to innovate for its entire existence) to make a huge move. That’s why you and all the other brokerages are now taking the initiative. But even if your franchise buckles with indecisiveness and further inaction, you now have a concrete plan, and perhaps you and your new-found partners can use it to enact Strategy 4 as independent companies.

Of course, if your franchise does implement your plan, all the other franchisees get to use your innovations. And certainly your franchise and company will be well ahead of the other franchises you compete against.

I’m sorry I couldn’t offer you a happy list of the easy steps to success, all arranged with cute alliterations for ease of memory, and the promise of no guilt for inaction. But you are not competing in that world.

Creed Smith is living the creation and implementation of innovation via,, and (coming soon).

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