If you’re looking for tips on starting a commercial real estate brokerage company, understanding the foundations of prospecting, strategy, and client relationships is essential. My own journey in building a brokerage taught me the importance of these fundamentals. In 2012, after more than a decade in corporate real estate and finance, I co-founded my first brokerage firm. Reflecting on those early days, I recognize the value of practical advice for overcoming initial challenges. With this in mind, here are some essential tips on starting a commercial real estate brokerage company for anyone looking to launch their own venture in the CRE field.

1. Transacting Deals vs. Successful Prospecting in Commercial Real Estate

I have met many brokers think that because they have been successful selling or leasing properties that they should open their own brokerage firm, how hard can it be?  Right.  Well,  once you begin the new venture, reality sets in the business of running and managing a brokerage requires a different set of skills than successful prospecting in commercial real estate. (i.e., compliance, employment policies, employment and independent contractor agreements, insurance needs and analysis, research and technology tools, operations, accounting, file management, risk management) and a host of responsibilities in addition to trying to lease or sell a property (which, by the way, you still have to do for income/revenue). Also, realize that all of these activities will time take away from you personally being able to sell/lease properties.

2. How Operating Margins and Commission Splits Impact Successful Prospecting in Commercial Real Estate

Most brokers who start their own brokerage start with them being the primary revenue driver of the business and quickly realize that previously I would net say 60-65% of every commission dollar I made and then the cost of my personal business.  Well, to start the cost of running a brokerage and real operating margins are different than your net commission dollars.  What I learned quickly is that eventhough I was not paying the “house”, I was now the “House” and after paying all expenses and my time I had could. Not rely soley on my own revenue my profits (aka “Net”) was closer to 55%, so I had to recruit and scale which allowed me to than start to realize the operating margins that was true profits outside of my own income.

3. Successful Prospecting in Commercial Real Estate: The Role of Processes and Automation

The fundamentals of running a brokerage are not any different than any other business.  You and your broker should not spend time recreating the wheel each time you have an assignment. Create a standardized process for analyzing or underwriting, converting to a presentation for the client, then converting that output to marketing materials. One of the key lessons in successful prospecting in commercial real estate is establishing efficient systems to manage client leads, transactions, and financials. From there, have a system and process for managing the transaction, pipeline, financials, etc. Without this standardization, your team will be spending too much time on non-selling activities on each assignment.

4. Re-Invest for Growth: Successful Prospecting in Commercial Real Estate

Invest wherever needed — hardware, software, insurance, online resources, training, etc. Make sure you also invest in the right office space for your clientele (something with which they will identify and relate). One of the best investments I made was in learning the art of successful prospecting in commercial real estate, which helped me build the client base needed to grow my brokerage. Also, don’t scrimp on legal. It is critically important that you speak with the right attorneys to set up your entities correctly for tax and liability purposes. Unlike working at a company as a broker, keep in mind that commissions/revenue no longer equal profit. Make your investments count because they simultaneously help create revenue while eating away at profit. All successful brokerages that have tenure allocate dollars to reinvest as our competition and clients are doing the same.

5. Clearly Define Your Differentiator in Successful Prospecting for Commercial Real Estate

Whether you are focusing on a niche asset, specific market segment or any other key differentiator, you should be able to articulate specific reasons how you’re different from your competition as a brokerage company. If you can’t, you probably shouldn’t start your own business.  You don’t want to fall into the trap of being the same with just a different name and logo!

Being a successful real estate broker requires an entrepreneurial spirit — and so does owning and running a brokerage firm. Just remember that one set of skills doesn’t necessarily translate to the other.

If you’re making the move to start your own brokerage company, I wish you the best of luck. While it was not a bed of roses, I would not change my journey as it has been rewarding and allowed me to be where and who I am today.