Before you hire your first admin or lay the groundwork for your first buyer’s agent, indie broker Erica Ramus has a list of the nuts and bolts items you need to check off your to-do list.
Are you receiving Inman’s Broker Edge? Make sure you’re subscribed here.
You’ve spent months — maybe years — planning on opening your own brokerage, and you’re finally ready to make that leap. You start looking at resumes on Indeed and combing job boards for potential staff. You’ve made a list of agents from other brokerages you want to recruit.
Before you do that, stop. There are three things you need to get nailed down before you make that very first hire. Administrative staff and other agents need to come later after you’ve figured out these important steps.
Who are you?
What is your company’s vision and mission? Why are you opening a new brokerage instead of joining or staying with an established company? How will you be different from the rest of the companies in town, and what problems do you solve that others do not?
You have to know who you are intrinsically — what the brokerage looks like and feels like — before you even open the doors. You won’t attract clients or agents if this is not crystal clear.
What is your budget?
I listened to a webinar recently and the speaker told aspiring new brokers that they didn’t need much cash to open their own office. She stated a low, low number that mortified me. I understand she was trying to encourage the people on the call to go out and have the courage to open their own offices and not be afraid if they didn’t have hundreds of thousands of dollars in the bank — but this was bad advice.
Opening any business, from a new restaurant to a retail shop to a real estate office, takes capital. You will have expenses and overhead. You will have the cost of sales and office expenses and staff (eventually). Advising someone to “just do it” even if they have only a few thousand dollars in the bank is irresponsible.
That said, some states have lower overhead than others. In some states, you can run a fully virtual office while others mandate that you must have brick and mortar locations to do business. But even if you can start a one-man brokerage in your home, you will run through money very quickly in a startup.
There are the licensing costs, signage, software, marketing materials and advertising a brand new office, just at the bare minimum. If you do need a physical office, you’ll have rent, utilities and other overhead.
Know your numbers. Itemize every single line item you can imagine and plot out a 12-month budget. What is your average sale and average commission? How many houses do you need to sell just to break even (and breaking even is not the goal)?
Once you start hiring agents, how many houses do you need to sell now (with their split taken into consideration) to be profitable? Make a budget, as boring as it sounds.
Plan for what happens if you don’t hit those numbers in the beginning. Where will you get the money to pay the monthly expenses if the listings and sales don’t materialize in the early days?
What and how are you doing it?
Even more boring are systems and tools. Before you even hire a single agent or admin, know what software you’ll be using for forms and bookkeeping. What will the agents use for digital signing, and do you want to provide companywide CRM products or let them pick their own?
Once they start selling, what is the process of the workflow? What happens when they bring in a listing, when it turns pending or when the file finally closes? Who takes the file from A to B and who is checking for compliance? What is the process for them to get paid and what if a file is not complete?
All of that needs to be in your policy and procedures manual, which, yes, you should write before you open the doors. It’s hard, and many of us started up and then did things backwards. I am still, 15 years later, working on adding to and editing my policy and procedures manual. It’s a living document.
But if you don’t start at least the framework of letting people know what your company is all about, and how you do things, then your people will be wandering in darkness. I had items one and two before I opened my doors, but I am still 15 years later struggling with item three here. Perhaps in my 15th year of running this company, I’ll master this task. If you’re opening up, save yourself some grief and do it now.