RISMEDIA, May 8, 2009-Sticking to a budget and getting rid of extraneous costs has never been more crucial to real estate agents than it is today. While the economy continues to force real estate professionals to cut costs, it is imperative that they look for ways to do so without sacrificing their business models. In this month’s Power Broker Rountable, read how industry leaders are staying profitable while cutting costs at the same time.
Virginia Cook, Special Liaison for Large Firm Relations, NAR
-Rei Mesa, President and COO, Prudential Florida Realty
-Stephen Meyers, CEO, Houlihan Lawrence Real Estate, Mt. Kisco, New York
Virginia Cook: In this challenging economic environment, budgeting has taken on new meaning. The trick, of course, is to shrink expenses seamlessly-in ways that boost consumer traffic as well as your bottom line. This is the reason NAR provides online field guides and business toolkits, and up-to-date industry research and continuing education programs that focus on increasing profitability. Steve, is there a secret to retaining your high profile while substantially cutting costs?
Steve Meyers: If there’s a secret, I guess it’s a pretty simple one: zero in on the excess. We’re the largest independent in our area, and we’re fortunate to have a history of brand loyalty. But with transaction numbers down by 55% from peak time-and as much as 80% in the high-end market-there was no question we had to rein in expenses. We consolidated offices-from 31 to 25-and we cut down pretty drastically on print advertising. But then we focused on the things that don’t add value in terms of customer visibility, like office supplies, phone, janitorial and other contract services, where there is a lot of fat that can be trimmed.
Rei Mesa: In our company, we didn’t look at it as cutting expenses so much as rightsizing the company to fit the market. That meant allocating dollars and resources differently-such as shifting marketing dollars from print to online, which is where consumers are looking anyway. In doing so, we reduced our marketing spend by 30% a year over the last three years and, if anything, the added online visibility has bumped up customer traffic.
VC: How did you handle the office closings, and what has that meant to your business?
RM: We went from 65 offices in 2006 to a lean, mean 43, but again, we looked at it not as closings, but as consolidating dollars and resources-and in fact, we lost no revenue or agents in the process of consolidation. More important, I think, is that we sat down with our landlords and renegotiated our contracts. Instead of paying a flat fee, we worked out variable rent expenses based on production. In a sense, our landlords became our partners. Because our rent payments were based on a percentage of sales, they began referring business to us-and they still do today.
SM: We did some of the same kinds of things with our Web partners. When you give people a vested interest in your success, interesting things begin to happen. Your vendors themselves begin to come up with ideas. And I think what’s important is that through it all, you never skimp on service. The flight to quality never goes away, so we do everything possible to retain our quality image. We’ve also increased our social networking and blogging, which expands our sphere of influence.
RM: In a way, consolidating offices over the last couple of years has been a boon to customer service. For one thing, the newer people we’ve hired, like in our title business, are independent contractors. They have a performance-based incentive to generate business and to serve customers efficiently. And while we were trimming 20% in salaries, we also began to cross-train staff.
SM: The main thing is that apart from closing offices, your budget cuts can be invisible to the public. Everything is open to re-evaluation and, as Rei suggested, the focus should be on strengthening your core capabilities and increasing your value to the customer.
The Power Broker Roundtable is brought to you by the National Association of REALTORS® and Virginia Cook, NAR’s Special Liaison for Large Firm Relations. Watch for this column each month, where we address broker issues, concerns and milestones.