Manage your Brokerage Company through Utilizing Key Performance Indicators

Manage your Brokerage Company through Utilizing Key Performance Indicators

Many brokerage firms have absolutely no idea what their position or ranking is in the local property market when it comes to achieving results. They might know who their competitors are, but they have no awareness of ranking with listings, deals, and market share.

Building a commercial real estate business is a gradual process that is supported by regular actions and routines. Over time the right routines bring in more inquiry, quality clients, and better opportunities. Like all businesses, the goal is to generate a profit and to look at the key components of both external and internal data points to allow your business to continue to grow and more importantly allow your company to manage the ebbs and flow of the business through pro-active decision-making versus reactive. That’s a good reason to look at your Key Performance Indicators (KPI’s).

You should be looking at your business from the standpoint of where it is positioned in the market along with how efficiently your business is running. At the end of the day, we are in a ‘performance based industry’, and on that basis, we should understand how our brokers’ results are improving; that should be the ‘strategic’ part of what we do. The competition will always be there as we pitch, so wouldn’t it be good to understand how your efforts are improving so you can boost your business profile and income?

By setting Key Performance Indicators for your business, you are taking an interest and strategic position in how you are improving; that’s a good thing. So, what are these indicators, and how can you use them? Here are some to think about:

External Metrics

Fees – The fees that you earn is just a number based on the value of the transaction. Understand and track the fees you are generating per property type and size. You can start seeing trends in the type of transactions that will generate the most fees for your business. This can be broken down by property type and size of deals. Also, track seasonality of transactions to see when activity is greatest during the year so you can be better prepared for the ebbs and flows of your pipeline.

Listings – Track days on market for listings based on property type, location, and price. Tracking your sale price vs listing prices provides an indicator that you are valuing assets at the market and not just “buying” listings to have them trade a much lower sale price. Tracking this data allow you to pitch your market knowledge of property values.

Market Share – This metric probably requires the most time and effort as it requires you to track and the number of listings in your market versus your competitors, but also tracking the time on the market of those listings and what the final purchase price can be used to your advantage. These numbers are valuable when you are pitching or presenting for a listing with a client.

Internal Metrics

Desk Costs – This is probably the most common metric used in managing your brokerage company. Each producing agent has a cost associated with their desk and throughout the year tracking this metric allows you to better gauge profitability. But it goes beyond just a desk cost, what you should be tracking is Effective Desk Occupancy (EDO). What this shows is how efficiently your business is operating. The most common phrase is the “80/20” rule which essentially means 80% of your revenue is driven by 20% of your brokers. What this means is your business is essentially operating at low efficiency. The best performing brokerage operations are running at 55-60% EDO.

Opex Ratio – This is a KPI that very few operators track and one that has a significant impact on your margins. This ratio tracks your operating expenses as a percentage of your revenue. Why is this important? Let’s say your average splits paid to brokers is 65% and your Opex Ratio is 29%, what this tells you is that your operating profits are 6%. The industry average Opex Ratio is between 24-27%.

So, do you know how you are ‘positioned’ and are you running your business efficiently? Data and how you use that data helps you get results. With today’s push on data analytics and the ability to now use technology to assist you in better managing your business, its easier than ever to track this information. To track and manage these KPI’s was painstaking in the past, but with today’s brokerage management tools in the market and the increasing competition for market share and quality of talent now is the time to start working “on your business” rather “in your business”.

How Technology Can Enhance a Day in the Life of a CRE Broker

How Technology Can Enhance a Day in the Life of a CRE Broker

The commercial real estate brokerage industry is a challenging but lucrative profession. There are ups and downs but those who are passionate about the job with the strength to face the inevitable tough times will succeed in the long term.

There isn’t a typical workday for a commercial real estate broker and each day will vary depending on the firm, client requirements, level of expertise and the particular sector a broker will focus on. The one thing that is true for all CRE brokerage professionals, no matter the specialization or role is that brokers spend a good portion of the day tracking progress and making sure all components of a transaction are moving along as efficiently as possible.

As with any other high-pressure occupation, commercial real estate pros are required to organize and prioritize their day’s activities to stay on top of increasingly overwhelming to-do lists. Those that have mastered the art of managing their days better are typically rewarded with a higher volume of deals as well as a higher capacity to successfully convert their current pipeline of transactions into closings. It’s a simple notion – a better managed day means a more productive one that ultimately translates into the highest return on effort and an increased income.

Deal tracking has typically been done through a variety of spreadsheets and databases, but unfortunately, this outdated approach is rarely efficient and prone to errors. Overall, the commercial real estate industry has struggled when it comes to adopting technology. But for an industry that is data sensitive and in dire need of better organization when it comes to deal tracking, the good news is there are many new technologies available that can improve the day to day life of a broker.

Deal tracking technology creates efficiency and easier access to information. With the same level (or even less) input, brokers can get a more valuable output on their deals, client relationships, and a better handle on where things currently stand. This also creates deal automation with transaction alerts and notifications as well as the ability to share databases, track deal progress, record and follow up on communications and have access to a host of other critical items that translate into a higher return on the effort invested.

Today’s power brokers are most likely the ones who continue to implement technologies that help grow their businesses. They understand that the efficiency of bringing technology into their day-to-day business lives will result in improved time management, superior organization, better insight into where efforts need to be applied in order to convert deals into closings and the ability to capitalize on new and recurring client opportunities.

Technology will help brokers spend less time working on transactions and more time building stronger relationships with clients. The bottom line is brokers are needed for their industry knowledge and advisory skills, first and foremost, and cannot be slowed down with tasks unrelated to managing and eventually closing a deal. Through the adoption of technology, they can truly be trusted advisors at the table and allow themselves to focus on doing what they do best. It’s critical that today’s commercial real estate professionals incorporate new tools in the marketplace or run the risk of falling behind those who do.

The Eco-System of the Commercial Brokerage Office: Can Technology Eliminate the “Silo” Effect?

The Eco-System of the Commercial Brokerage Office: Can Technology Eliminate the “Silo” Effect?

For years, the commercial real estate brokerage industry has been known for its typically slower adoption of technology and its tendency to function in “silos.” Although this is still somewhat true today, more and more brokerages are implementing collaborative approaches to leverage the skills and strengths of every team member and also utilizing technology to manage their day-to-day processes.  It’s no coincidence that these are the firms that typically stand out from the competition.

If you own or manage a commercial brokerage office than you understand what makes up the so-called “eco-system” of a successful brokerage business:

  1. The Client Relationship
  2. The Transaction
  3. The Closing Process

While these three elements stand out as the most critical components of any brokerage eco-system, unfortunately, these are also the areas that also tend to function within silos. An individualized approach towards overseeing these components is also more likely to make them difficult to manage.

The client relationship is the first and arguably most important long-term element of the eco-system. In many offices, brokers are still using their own customer relationship management (CRM) system or other personal methods for managing these connections which are comprised of everything from prospecting to managing contacts to converting a relationship into a listing or an assignment.

Once an assignment is awarded and negotiations on a deal begin, the second component of the eco-system — the transaction itself—is set in motion.  When a prospect or client is now considered a “transaction in process,” many brokers still tend to manage the many critical and complicated details of deals on spreadsheets or even in their head.

After a deal is finalized, we move into the closing process. Essentially the “homestretch” component of the eco-system, a firm must now work with the broker to make sure all documents are collected, deal vouchers are prepared, and commission splits and co-operating broker payments are finalized. But the work does not stop there as firms must also oversee the many other important matters of the deal closing process such as invoicing, receivables, and other items that are a part of a seemingly endless list of procedures.

Most managers, owners, and even brokers understand these three components are the key drivers of their business, yet their existence within company silos is still prevalent in the commercial real estate industry.  From an administration standpoint, these silos create multiple data entry requirements, prevent a seamless process of managing the overall transaction and simply waste time.

The solution is having a product that allows all three components integrated into one, easy-to-use system that is specifically built for the commercial real estate brokerage office and addresses these core elements without being overly complex to understand. There are technology products in the marketplace that address each component but require integrations and multiple entries or are limited by the fact that the platform does not function as a seamless one-stop-shop offering.

Developing a single, fully integrated technology program that allows brokers to manage the entire transaction process from listing to closing will steer the future success of the commercial real estate brokerage profession, help break down the silo walls and mitigate the hassle associated with the more technical and time-consuming parts of the job.

 

 

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