Think indie shops can’t compete with big-box brokerages? Think again! Broker Ian Hoover breaks down the numbers on why, thanks to new technology, indie brokerages have the edge over franchises.

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The real estate brokerage business has changed dramatically in the past few decades. In the past, large brands had a considerable advantage over smaller indie brokers. That’s not necessarily the case today. 

The big brands either had their own technology or access to the best technology. The recent explosion of third-party companies offering affordable technology suites to smaller companies makes you think hard about signing a 10-year contract to pay two to 6 percent of gross commissions

We, as broker-owners, have a simple list of things we provide our agents: 

  • Fair compensation 
  • Support 
  • Training 
  • A location to conduct business (getting rarer) 
  • Marketing 
  • Technology 

To this list, I always add culture and fun as well, and it’s the cornerstone of any good indie brokerage. 

Four years ago, I was really tempted to add a national brand to my brokerage. For the small price of 6 percent of our commissions, I would receive a recognizable brand name, marketing and technology.

Fast forward to today, we anticipate sales totaling $100 million in 2022. This level of sales will earn our indie brokerage $3 million of gross commissions. At this production level, the cost for a brand name, including marketing and technology, would be $180,000 for approximately 45 agents. 

Let’s also keep in mind that if you choose a franchise, you will be stuck with whatever technology they deem to be the best. In my experience, roughly 30 percent of all agents will end up paying out of pocket for their own technology because they don’t like the company-provided option. 

Savings that count

Our current setup is back-office software for accounting that costs $2,400 annually. This provides a complete marketing suite for our brokerage and each of our agents, a CRM, a full IDX website for each agent, custom blog writing, automatic social media posting and much more for $30,000 per year. We spend an additional $10,000 to $15,000 per year to provide our agents with company-generated leads, which result in a higher commission split on those closings. 

We must ask ourselves, is over six figures a year worth a brand name? While plenty of budget options out there would cut my expenses in half, I have splurged on our technology to ensure we have the absolute best.

Are you worried about training resources? At my firm, we did a smart thing, from day one we offered a few training sessions a month, both in-person, and online options through Google Meet were available. In addition, we record those sessions and have available just about every training we have done since we opened in 2017.

Suppose you are still worried about not having enough training resources. In that case, there are numerous online classes you can purchase for your firm from national coaching companies, individual top-producing agents and other sources. 

The money we would have spent being involved with a franchise allows us to spend another $25,000 per year on culture. Examples include: throwing happy hours, taking the entire team to sporting events and throwing a really fun holiday party for our agents and their significant others. 

Thanks to the rise of technology, and these amazing companies that exist to support us, we are confident that what we offer rivals any big brand in our marketplace. When a new brokerage is forming, they must make the difficult decision to franchise or not to franchise, the easiest way to get off the ground is to buy a franchise, but it will cost you over time.

In our example, a 10-year contract would have cost us well over $1 million. We provide top-notch support, training and culture to make an excellent place for our agents to build and grow their businesses, and that is the indie difference.

Ian Hoover is broker of record and co-owner at Deacon Hoover Real Estate Advisor. Follow him on Facebook and LinkedIn.

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