Forbes had a great article on entrepreneurs debating whether to start a real estate brokerage firm. The article focuses on 8 core systems that are a must review for the real estate potentials:
1. Legal Structure
2. External Threats
3. Marketing Tactics
4. Must-Have Technology
5. Important Performance Metrics
6. Start-Up and Ongoing Expenses
8. Sourcing Supply
As a principle Broker and owner of a real estate brokerage firm, I felt compelled along with Forbes advice to offer a few suggestions for the real estate addicts. Evaluating the impetus of your startup decision should be your first question…why are you starting a real estate brokerage firm to begin with?
Like most businesses your startup will have a greater chance of success by seeking a niche or an under-served market within your industry vertical (real estate in this case). Your focus must go beyond representing just buyers and sellers. Your focus should be one of specialization:
1. Luxury or high end homes
2. Land specialization
3. Commercial specialization
4. New Construction specialization
5. Relocation services.
6. Technology focus that gives your firm a competitive advantage.
My brokerage success (and the reason I started a brokerage firm) was based on two fundamental problems I wanted to solve:
1. Corporate relocation services (employee’s coming into the state) were grossly under-served in my market area.
2. I was losing land and house sales (as a real estate developer) because not all potential customers wanted to live in new communities or subdivisions created by my real estate development business.
Once I got through the various educational courses, state licenses etc.. I started to put real estate brokerage to work:
I attacked the first problem by contacting the relocation companies bringing new employees into the state. I then contacted the human resource departments of expanding and mid to large sized businesses. I made sure to provide exceptional service so my new startup would be the preferred choice for relocation. This ultimately lead to a tremendous amount of inbound referrals. There is no substitute for great service when it’s needed most.
The second problem was solved by being able to offer prospective customers land and houses outside company owned communities and subdivisions. The law allows owners of real estate, developers and builders to sell their own real estate, but a real estate license is required for representing “other peoples” real estate. The real estate license afforded me the ability to show other real estate property of interest to customers. This was critical because I still controlled the sale rather than watch a customer walk out the door. It may not have been a sale for one business but a great sale for my new brokerage company. The benefit for the customer is having one point of contact and a sense of trust.
By solving both of those problems with a real estate brokerage firm it has enable the company to be cash positive within the first 6 months of inception and bring in multiple revenue streams further insulating against a down real estate market. The company is now moving on to other areas of service and actually have cash positive money for sales and marketing rather than long-term debt.
I always joke with my brother (he’s a startup addict too) about how we are industry agnostic and would bake bread if the right opportunity presented itself. The salient point to take away (if you read this far) is “what problem are you solving and how are you going to solve it better?”
You will need to flesh out your value proposition and prove it is more unique than existing competitors. Startups can be more successful than historic statistics show if we as entrepreneurs spend a little more time planning out the real focus and customer benefits.
In the seed stage (no money) try spending less on marketing and advertising and focus on a flagship customer and providing fanatical service. Network within your circle of influence (friends, family, grocery store, social networks, co-workers). This will get you cash positive faster by truly meeting a need and the rest will fall in place.