The brokerage business is very different from operating a team. At the end of the day, it takes more than just a license to start and run a successful brokerage. Before you jump in, here’s what you need to prepare for.

In recent years, the real estate industry has seen an increase in successful real estate teams within brokerages. In fact, 76 percent of real estate leaders say real estate teams have a greater impact on total sales volume today than they did five years ago. 

When composed of talented and productive agents, teams can pull in millions of dollars’ worth of sales and profit. Once a team begins to consistently meet goals and pull in a high sales volume, the next logical step is to open a brokerage, right? Not always.

Although some teams have structured themselves to operate similarly to a brokerage, the two are very different. Many successful teams struggle to operate efficiently as a brokerage because team leaders often underestimate the responsibility that comes with managing and developing a brokerage along with individual agents.

Having a solid and consistent recruiting plan, setting realistic profit goals and strong leadership are all necessary to run and maintain a successful brokerage. As the new year approaches and leaders start rethinking their current structure, here are my top considerations for those thinking about making a change.

1. Failing to prepare is preparing to fail — seriously!

While this may be a cliché, maintaining a successful brokerage requires far more than just closing deals and generating leads

From office expenses and marketing materials to employee costs and more, many new brokers are unaware of the financial commitment required to run a brokerage on their own. To get ahead of this, my advice is to do your research. 

Determine what your expenses will look like for the first six months to one year of business. Consider how much profit your team is bringing in now, and how much you would like new agents to bring in during that time frame. 

Determine whether you’ll have an office space or work remotely, how you will market your brokerage alongside your agents, and if you will need any financing. The bottom line: you need to ask yourself honestly — can I afford this?

2. Be prepared to spend your time recruiting and retaining

Recruiting is the lifeblood of any real estate brokerage company. Most agents and team leaders who make the switch to a brokerage don’t realize this, and many underestimate the amount of time, commitment and follow-up required to be a successful recruiter

Then, if you are successful at attracting new talent, you need to help develop that talent and make sure you are constantly showing leadership to ensure they remain committed to your company. 

It is a cycle that never stops if you want to build a successful brokerage, and it leaves little time for your own sales business. Broker-owners who focus more on their sales than building their brokerage typically end up owning mediocre businesses.

3. Profit takes a new meaning

If you’re at a point in your career where opening a brokerage seems like a feasible idea, it’s likely that you’re already running a successful team. If you base your expectations for success on what you have experienced as a team leader, you may be setting yourself up for disappointment when it comes to managing an entire brokerage. 

What most people don’t realize is that it’s a lot harder to make a profit as a brokerage than it is as a team due to the increased operating costs and overhead expenses. 

Consider this: for the profit that a team of five agents would receive on $30 million in sales revenue, a brokerage would need substantially more agents to achieve the same profit — and that’s only if those agents are productive. 

Although as a broker-owner, you’re no longer personally responsible for paying brokerage fees, there are many other expenses that will quickly dip into your earnings, making it more challenging to maintain the same profit margins that you earned as a team.

The key is to set realistic goals. See how your first quarter goes, and adjust your expectations from there as needed. Keep analyzing and refining until you’re back in a place where you’re easily meeting and exceeding your sales goals.

4. What is your ‘why’? It should be about more than money

Although real estate teams have team leaders, as independent contractors, most top-selling agents are self-motivated and capable of managing their workload. Opening a brokerage can lead to many opportunities for you to mentor up-and-coming agents.  

Typically, newer agents will seek out strong leaders within a brokerage setting for the additional guidance they can offer. Even for an experienced team leader, mentoring and helping develop skills among a crop of new agents can be a challenge. Be prepared for this. 

The brokerage business is much different than operating a team. At the end of the day, it takes more than just a license to start and run a successful brokerage. When done thoughtfully and with a plan, the leap from being an independent agent or team leader to a brokerage owner can be very rewarding.

Based in Toronto, Christopher Alexander is the executive vice president and regional director, Ontario-Atlantic region, at RE/MAX INTEGRA. Follow him on LinkedIn or Facebook.

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