What the changing business landscape means for real estate
It’s a fact that our business environment is changing significantly, and the real estate sector is no exception.
Pick up any newspaper and you’ll read headlines like, “Basically the minimum wage: What real estate agents really earn”, “King Kong Signs Real Estate Disrupter Purplebricks”, or “Why real estate agents suffer from rock star pay gaps”.
Surprisingly, we’re finding a lot of agencies still operating under old business models because they haven’t thought about how to embrace this change – what to do differently or better – and there is no doubt that there is a squeeze on commission rates for both property management and sales which is impacting the revenue that an agency can generate. This in turn affects profitability.
It can seem daunting trying to work out what to change or update.
What we do know is, through the advances of technology, the general public are accessing popular real estate websites to market their own property through online agencies. Real estate agents tell us they already feel the pressure from new entrants operating in the market that are innovative and seek to challenge the traditional ways of doing business.
More and more we are seeing technology companies, not human relationships, are selling properties and they will continue to grow their market share as they have set themselves up as popular and cheaper alternatives.
Agents need to rethink what they can offer (product range) and how they can re-engage their market.
One area in which real estate agents can make considerable gains is by looking at ways to reduce overhead structures to ensure they can alleviate the profit margin squeeze that they have been experiencing.
To do that, we encourage you to focus on your overhead structure and look at ways agencies can reduce their business costs to increase profit margin. There is so much to do in the review of expenses that we wouldn’t focus on revenue and product mix until you realise margin gain from the change in expenses.
It means a change to the traditional ideology of principles of real estate agencies!
For example, how many people actually buy from the window listings? Is it just a branding exercise?
Having flexibility, greater online presence, less focus on physical office location, consequently reducing occupancy costs is the way forward for today’s real estate agencies. The relocation from prime retail outlets to less expensive office space and collaboration or amalgamation of smaller agencies to reduce overheads percentages is critical.
We also encourage agencies to look at the administration processes within the business and find ways to streamline those tasks more efficiently which will lead to lower labour units.
The reliance on customary personnel such as Personal Assistants, Office Administrators or Trust Accountants can be reduced or replaced by technology hacks or offshoring; a combination of both will result in margin gain.
Technology hacks and offshoring meaningless administrative tasks are presenting themselves as viable ways to free up agents to concentrate on personal relationships.
Nothing is beyond the realms of possibility if you put your mind to it.
Being a good sales rep is not a guaranteed prerequisite to being a successful real estate agency owner.
We believe that, if you realign your focus on business performance, being a real estate agent operating with an updated business model will grow your personal wealth, especially if you love what you do.
If you are an Owner, Principal, Shareholder or Director of an Australian real estate business, you are in a prime position to work with Omnis Real Estate business accountants and advisors.