As a small independent real estate brokerage, we need to run a tight ship to compete in the aggressive markets we are in. Here are my top five tips to ensure I run at the lowest possible overhead, allowing my company to be bold in our agents’ offerings.
Analyze monthly P and L’s
I know that many business owners are just reviewing their P & L at tax time — or worse, never. If you are a producing brokerage, you have so much money in and money out; are you sure you know all that is leaving your account? Keep an eye on these sneaky charges that add up.
Most business owners would be shocked to know the fees they are paying for their banking services. These fees can be negotiated, or you can switch to a lower-cost bank. I saved $115 a month by increasing my account from the free account to the monthly cost account, something I would not have known if I was not paying attention.
Are you getting a good deal on your telecom? I used to pay almost a thousand dollars a month on our phone system. We switched to a VOIP service, using apps instead of desk phones, saving us a whopping 85 percent.
We all have them. You sign up for them and forget you ever did. Most people will find a handful of things they are paying for and not using.
Fewer offices, better locations
I believe that the days of neighborhood offices are a thing of the past. If you are lucky enough to have multiple offices, you should be reviewing them to ensure you actually need that office.
I am in the small market of Pittsburgh; due to being centrally located, our office can probably cover a 25-mile radius or more. Remember, your agents don’t come to the office much anyway, so why pay for extra space you don’t need?
The amount of money we spend on vendors is something to look at deeply. For example, I was paying my CPA over twenty thousand dollars per year. I saved over fifty percent and got better service by switching to a new CPA. Attorneys are vital to our business as well, and you can put them on retainer and potentially save some money. It is always good to ask about their hourly charge and shop around to ensure that cost isn’t too far out of the norm.
Leaseback office space
Subleasing can be a great way to reduce your monthly liabilities. If you have an extra office or two available, you can lower your expenses by offering that space to an agent at a discount over what they would pay for their own private office elsewhere. You could also rent that space to your affiliate lender, title company or insurance salesperson.
I love my staff, and good employees make you look like a rock star daily. You still have to look at your staffing and ensure you are getting the best value for your money. Our firm has approximately 50 agents, yet we only have two employees, outside of my partner and I being on the payroll.
With the ability to hire subcontractors online for a fraction of the price, start thinking about your staff and how you can save money. Another staff hack for us was to use our agents versus hiring out. I was going to hire a trainer to start handling some of our training. Instead of paying one person a large salary, we let our top producing agents handle the training, and pay them by the hour.
In conclusion, if you sit down and comb through your expenses, think outside the box, and make a few changes to lower your overhead, you will become more profitable in the long run. The two changes we made in 2021, switching our telecom and CPAs, saved us $2000 to $3000 per month. Changes like that can add tens of thousands of dollars to your bottom line per year.
Ian Hoover is broker of record and co-owner at Deacon Hoover Real Estate Advisor. Follow him on Facebook and LinkedIn.