Above Left to Right: Ken Baris, Scott Beaudry, Josh Harley, Scott MacDonald
As interest rates rise and everyone waits for inflation to recede, brokers across the country are feeling the effects of the shifting marketplace in their bottom lines. The ones who survive—and sometimes thrive—in the midst of a real estate slowdown are those who make smart and quick adjustments to their business operations, forensically reviewing every detail to ensure profitability.
In fact, confident brokers look at what’s happening not as a negative to be overcome, but as a positive, with gains available for those who know how to access them.
“Some people would define this as a scary market, but I would define it as a market of extreme opportunity,” says Ken Baris, CEO of Berkshire Hathaway HomeServices Jordan Baris Realty in Livingston, New Jersey. “We’ve exited a time where everyone has been rolling and almost making money in spite of ourselves. And now, when it gets a little tougher, some people get psyched out, and some get psyched up, and it does require making adjustments.
“When the pandemic started, the concept of a shifting market meant cutting expenses, figuring out what we could cut because we had no idea how long it was going to last, and no idea that we were entering one of, if not the best markets ever. Now with a shifting market, we’re trying to figure out what to do,” adds Baris.
Cost-cutting measures, past, current and potentially future, have become the norm for many brokerages, but the principals emphasize that they’re meant to help agents as much as possible, not just to trim staff for more bottom-line profit.
“We’re going back and looking at everything that we’ve cut and modified since the pandemic, especially in the beginning,” explains Scott Beaudry, broker/owner at Better Homes and Gardens Real Estate Universal in Henderson, Nevada. “We’re also going to our agents and telling them about what we’ve cut and what we’ve done, because it all comes down to taking care of our agents and finding out what they need to advance, not just today, but tomorrow. Sometimes we’re going to bring things back, and sometimes we’ve modified them. We’re not just looking at today, we’re looking at tomorrow, and two years down the road.”
Josh Harley, founder and CEO of McKinney, Texas-based Fathom Realty, admits that it was hard to make cuts, but necessary during turbulent times. He tries to be as sensitive as possible.
“How do you do it in a way without losing value?” he asks. “I think the first thing is to be very thoughtful. Ask yourself how this affects your agents, positively as well as negatively. That’s the first and most important question, because honestly, we are all here to serve our agents. We would not exist if it wasn’t for them, so we want to make sure we’re providing and building a business that attracts and maintains and retains those agents on our team.
“The other question to ask is what are the unintended consequences of those cuts? It’s very easy to just pull the trigger on a cut and then realize that it was incredibly harmful to your agents and your business,” explains Harley. “I spent eight years in the Marine Corps, and we always had contingency plans for our contingency plans. We did that by asking ourselves, what’s the unintended consequence? What if we did it this way? What could go wrong? And once we have that in mind, we can either change the direction we’re going or not do that at all, or shift how we do that. So really think about what the unintended consequences are in every single action you take.”
Harley points out that he and his executive team make sure to communicate with as many agents as possible, trying to find out where their heads are at so they can help them. “And not just our top agents, but some of our lower-producing agents as well,” he says. “Because our jobs need to serve everyone, not just the Top 1%. Listen to your people, ask the right questions, and you’ll do a much better job at not having unintended consequences.”
Scott MacDonald, broker/owner of RE/MAX Gateway in Chantilly, Virginia, says it’s harder for small brokerages when times are tough, which presents opportunities for them to sell and bigger companies to buy.
“People have gotten scared, and they don’t know how long the market’s going to be in the state that it’s in,” he admits. “We picked up two other offices in October, and we let people know that we want to grow, that we want to acquire other companies if anybody’s looking to sell. It’s how you communicate what you want, talking to as many people about that, and then executing it.
“I’m talking to association presidents and CEOs and seeing if they’ve heard of anybody who may be looking to be acquired because they want to be able to provide the level of service to their clients and their agents like we are here,” explains MacDonald. “It’s seeing if anybody may be aging out or maybe coming to the end of their franchise agreement.”
Cutting Costs Correctly
Certain changes brokers have undertaken in the last year or so have helped keep things running smoothly. Beaudry relates that his brokerage brings in industry experts to help guide his team.
“We’re utilizing some of those individuals and their insights and not just looking at what’s happening right now, but taking into account what’s happened in the course of history,” he says. “We need to be more proactive instead of reactive. Getting that message across and setting ourselves up to really work on the business planning of our agents is pivotal.
“We do it in groups and will then break into individualized business planning,” explains Beaudry. “I will take each agent and go over their business plan one on one, and tailor it for them. Everybody’s different, so we do what’s best for each person and take it one step at a time.”
Harley allows that while technology is a crucial aspect of the real estate industry, it’s worth taking into consideration whether you always need as much of it as you have, especially when the market is in the doldrums.
“There’s a certain amount of technology agents have to use, but find the technology they don’t need and cut it out,” says Harley. “Maybe negotiate a deal with technology companies that can provide a discount without you paying the cost for all of your agents.
“The fact is, maybe 5% of agents are actually utilizing all of your technology. Maybe 10% use a little bit of it. Very few use all of it. Use this opportunity to cut costs there and reinvest that money into training your agents, getting them more prepared for a tough market so they can outproduce their peers,” adds Harley, who goes on to say that office space is another logical place to save.
“One of the biggest areas where I see brokerages waste money is excessive office space, when it’s too large for their needs,” he says. “If it wasn’t for their office space, they might be thriving, but they’re barely surviving, and probably won’t survive at all. Instead, they’re selling the company because they won’t drop the office.”
Harley warns agents that cutting their own expenses to save in the short term is counterproductive over time.
“The mistake I see a lot of individual agents make is they cut back all their spending to try and survive through this downturn,” he says. “That’s a huge mistake because they’re going to start losing marketshare. What we as brokers should do is cut costs to be able to pour more money into agent success so they can invest more. You’re training them for their own market, so their marketing dollars will gain them greater marketshare, so when we do come out from the other side of this downturn, they’ll be better positioned to own their market.”
Intelligently reinvesting the money saved by cutting costs elsewhere is equally important for a firm’s current and future viability. It’s not an exact science, but successful brokerages have the right ideas.
“We’re reinvesting in our staff,” says MacDonald. “We’ve hired people to help us better serve our agents. We brought in an accountability coach to meet with agents one on one, and to do training on a regular basis. When other agents hear what our agents are doing, or what we’re doing as a company, it makes it easier to recruit. We’re also putting on a lot of events that are bringing people into our quarterly meetings.”
Beaudry went on to detail how his brokerage juggles budget considerations with ensuring agents have what they need to succeed.
“It’s all part of business planning; we need to be proactive instead of reactive, and work with them individually to really develop, not just put something out there boilerplate like, hey, do this, follow this here, do three calls, five calls a day,” he says. “We’re drilling down into what actually excites them. They need to be excited about their business plan. It can’t just be one that you throw out there and everybody’s doing all the normal stuff. Let’s think of out-of-the-box ideas for this individual so they are excited, and also help them in their budgeting.
“They need to be on budget,” stresses Beaudry. “We’re in an industry where it’s one day good, one day bad. Agents need to be happy and excited about what they do, and they need to see a reward. Building that excitement is key.”
Keeping Team Members Connected
Everyone knows each other in local brokerages, but what about when company growth turns 10 employees into 100 and then into 1,000 or more? How do you keep staffers on the same page and within the same culture?
“We’ve got 10,000 agents across 38 states and 180 markets now,” says Harley. “It’s very difficult to create consistency. What I’ve found is that leadership absolutely matters. Hiring the right leader in the local market who really focuses on putting other people first and dropping the ego, because it’s not about them, it’s about their people and serving their people.
“I can say this is what I want the culture to be like, but it’s really that local leader who has to exemplify that culture to their people,” adds Harley. “It doesn’t happen by accident. It happens by truly serving and loving your people first. And that is the culture that we aspire to. It requires hiring good leadership who truly believes that as well.”
MacDonald favors family-oriented events to help build company culture, with agents getting their families involved in various activities.
“It’s not all about the money, but if you treat people right, the money will follow,” he stresses. “Say you have an agent who does 100 transactions that you’re getting transaction fees off of, but if everybody is miserable around him, it doesn’t work. So we’re building a culture of family. We have a spring fling and now do a fall festival.”
“We took a group of people down to Charlottesville and golfed the day before two days of business planning. Then we had a winery and brewery event afterwards. I got everybody together outside of the office. That’s what we’re pushing more,” adds MacDonald. “And during the holiday season, we did a potluck in all of the offices to get people in and have fun with each other. I think that’s really important. Research what’s working, ask the agents what they like and what they want more of, and do those things. You’ll get your ROI on that.”
