4 minute read – Real estate management series
One of the many interesting things about working in the real estate industry, is the response agents have to difficult times.
Like any industry, when a tough market hits, the economy takes a dive or, as we’ve just seen, an unprecedented global pandemic occurs, most agents react in one of two ways: they stay put and work harder, or they quit.
Unlike other industries, there is a third group of agents who seem to have a completely different response. They don’t quit. Instead, they wonder if now is the right time to start their own agency.
This is not really a trend seen in many other industries, but if you look across real estate forums right now, the question seems to be popping up a lot – should I go out on my own?
Why start your own agency during a challenging economy?
It might seem completely counter-intuitive on the surface, starting your agency in some of the worst economic conditions in recent history. But when you dive in, it becomes clear how it might feel like the right option for some agents.
Most sales agents earn their income from a combination of a base wage and commission. During tougher times, as listings become more scarce and sales more difficult to complete, commission decreases and some agents worry as their income declines.
No matter how hard they work, no matter how many hours, how long they spend hitting the pavement, sometime the conditions just can’t be overcome.
So rather than give up, they start to wonder if a bigger change might give them better opportunities. Perhaps moving to a new agency…. Or starting their own agency!
5 factors to consider before starting your own agency
If you are one of those agents – or you have one who works for you – who is contemplating starting your own agency, it is very important you consider what owning and running an agency really means.
These five factors will help start your analysis so you can determine the right answer for you.
1. How much do you know about running a business?
Being an agent is one thing – even being an exceptional agent – but running a business is something completely different.
“An agency is a business just like any other,” one EAC member commented.
“As the owner, you are responsible for staffing your business, managing those staff, managing their performance, your are accountable for finance – and making sure you have enough of it, plus your own job as a sales person or property manager.”
“If you like selling, you are good at it and that’s what you want to do all the time, owning a business may not be something you actually enjoy.”
Enjoyment aside, running a successful business – and a compliant agency – takes a lot of work and knowledge. If you are truly considering opening your own agency, ask yourself, ‘how much do I actually know about running a business and what do I need to learn?’.
2. Will it solve all your problems?
A second very important consideration is whether or not owning the business will actually solve the problem you are having.
If you are thinking about it because your income has declined, and you feel you have a better chance at improving your finances by running your own show, make sure you consider all the costs.
“Starting a business isn’t cheap,” said another member. “Agents starting an agency need to think about the costs of their physical office and their staff, as well as software, insurances and hardware. Real estate also has additional costs like property advertising platforms, data to inform appraisals and regular training required to operate in the industry.”
“As a new business owner, be prepared to outlay money and ensure you plan to earn it back over a realistic period of time.”
3. What do you know about marketing? Or computers?
When asking member agents to recall their biggest challenges at start-up, the answer was a little surprising, with more than expected, recalling their issues with technology.
“If you don’t have someone come and set up your office network, shared storage, even the wifi printers – and you don’t have someone to come and fix them when they stop working, you can spend an incredible amount of time clicking and pressing and just getting frustrated,” one member commented.
As an agency owner, you will likely not start with a complete staff, meaning you will wear multiple hats.
Without admin, you may be required to enter your own listings, create your own brochures, run your own campaigns.
Without marketing, you will be required to build awareness of your own brand.
Without an IT consultant, you might have to learn a lot more about printers than you ever wanted to know!
4. Do you want to manage people?
Unless you are going out on your own – all on your own – then you will need to hire a team and manage them.
This means helping to manage and guide their careers, setting KPIs and having the tough conversations when you need to, listening to their problems – often personal and professional… essentially all the things your manager should be doing for you.
If managing people is not on your list of career dreams, and you’d rather focus on your own sales, you have two options.
First, you can remain employed in someone else’s business.
Second, you can look at one of the many groups that offer a fully managed back office, under one brand, but within which, you essentially operate on a day-to-day, as your own small business.
There are positives to running your own business
While all of the above may seem like factors that could talk almost anyone out of building and running their own business, there are also a lot of positives:
- You can set your own vision for the business and drive it in the direction you feel is best
- You can select your own team and surround yourself with people you feel are right for your vision
- You can create something that becomes an asset you can sell in the future, when you decide to leave real estate
Regardless of your decision, ensure you make it for the right reasons, not as a reaction the current conditions, because these conditions, like everything, will change.