Industry Perspectives

Trimming the Fat: Tips for Cleaning Up Your Brokerage P&L

By Tori Sokol on August 02, 2017
Tori Sokol

 

HomeSmart President & COO, Ashley Bowers, discusses how brokers can protect their bottom line by reviewing and cleaning up their profits and losses.

See the full RISMedia article below.

By: Ashley Bowers

Brokers and owners are usually so focused on the business of selling real estate that they don’t focus on the business itself. As a business owner, it’s critical to protect your bottom line. By reviewing your profits and losses, you can gain insight on how your business is operating—you can see year-over-year trends, and areas where cost reduction is possible and renegotiating contracts is necessary.

It’s easy to let small incremental costs get out of control. Schedule monthly, quarterly and annual reviews to see where you have room to make investments and where you have challenges.

P&L Housekeeping Tips

1. Go Out to Bid
Small business owners, specifically in a service industry, fall into the cycle of renewing with the same person or company year after year instead of going out to bid. They get comfortable and have a desire to be loyal, and therefore end up resigning with the same contract services, like janitorial or copy suppliers. Every year to every other year, go out to bid in an effort to easily to maximize your dollars. This is an expectation that should be set up-front with suppliers in order to make sure you’re always receiving the best value. A simple tip is to set up a calendar three months before your current contract is up so you have time to go out to bid in advance. This will avoid the need to re-sign due to time constraints.

2. Bulk Buy

Connect with bulk buy partnerships through associations or your franchisor. Buying in bulk is almost always less expensive per unit. Partnering with other like-minded businesses or brokers within your brand can increase the savings for all involved. Many companies will price-match or beat big-box stores if you bring them a larger account. For example, a big-box supplier was willing to beat warehouse prices by utilizing online ordering accounts for a larger group. This savings equates to over $2,000 a year for just one brokerage.

3. Partner Up

Build partnerships with companies that offer “freemiums.” Freemiums give agents a high level of service at a lower cost, and, in turn, the partner company receives exclusive marketing. Have companies offer a free solution with an upgrade that’s optional. This allows for smaller brokers to offer solutions without having to pay for them, or, worse, pay for them and then charge and/or collect from agents. Put the responsibility back on the vendor by making them a strategic partner.

4. Negotiate Flat Fees

Negotiating flat fees is key to expense management. At events, you can cut costs by negotiating flat fees for food and beverage service. By paying a flat fee per person, per day, you can easily eliminate runaway costs; however, the key is to set the price and then have the venue get creative on what can be delivered for your budget. The same can be said for legal and other professional services. Any time services can be billed at hourly rates, you’re at risk for cost creep. Scope the job and pay per project, not per hour. At minimum, negotiate a range for the service with an amount not to be exceeded.

5. Purchase Per User

Purchasing software on a per-user basis has become the norm. The software companies are in need for recurring revenue; however, there is always room for negotiation. Two schools of thought as it relates to this: One is simply to negotiate the per-user price. There’s always an end-of-quarter, end-of-year deal that usually yields 15 percent savings or more. Never accept the face value proposal. The second is to buy in chunks—for instance, a fixed price for up to 25 users and a fixed price for 26 to 50 users. This allows for better budgeting and forecasting as you grow your brokerage. Quick tip: For each increase in amount, the per-user cost should go down.

As a broker, you’re still in the business of business. You have to negotiate on behalf of your agents. The steps to clean up your profits and losses aren’t time-consuming, as long as you think ahead and schedule the time to do the research in advance. A franchisor provides a service to brokers. We have to give our franchisees more than a logo or trademark. We have to give them a business model to help them be successful.

Regardless if you’re an independent broker or part of a franchise brand or a franchisor, do your research to ensure you’re getting the best value for every investment you make.

Ashley Bowers is President and Chief Operating Officer at HomeSmart. She uses diagnostics and leadership interaction in order to build engagement and alignment throughout the organization. For more information about joining HomeSmart as an agent, visit Homesmart.com/join, or visit HomeSmart.com/Franchising for franchising opportunities.

For more information, please visit HomeSmart.com/YesYouCan

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