Lessons from a Start-up Commercial Real Estate Brokerage

I once witnessed a new mid-range brokerage in a capital city try to ‘start-up’ in the midst of the global financial crisis.  It is a story worth sharing.  There are some lessons worth remembering for new people entering the industry.  So here is the story.

The brokerage was trying to break into the established CBD and suburban commercial property market as an ‘independent’, and in doing so compete with established real estate franchise names and larger corporate real estate groups.  The industry was already catered for comprehensively by some very experienced people and brokerages.  So why did the industry ‘need’ another independent brokerage?

As part of commencing business they needed to find good people to join the brokerage, and tried to ‘lure’ them in by offering big salary bases to be ‘topped up’ by commissions.  This of course meant that the overheads for the start-up business were very high from the outset; without a reasonable property management portfolio to bring in some cash, problems could and did soon develop.

It is worthwhile noting that proven performers in other agencies and brokerages were approached to see if they could be enticed to move across to the new business.  They didn’t move across to this new brokerage; they simply were not interested.  Perhaps the ‘GFC’ had a bit to do with their decisions?

The only agents working in the new brokerage were inexperienced, and new to the location or the industry; they are what I would have called ‘really green’.  On that basis they could not bring real systems of value and momentum to the business.    On a scale of 10, most of the agents in the brokerage were only a 4 or 5 by level of skill and commitment.  Yes, I know people can improve but there was still another issue stifled personal improvement.  The team leader principal was relatively inexperienced in commercial real estate brokerage and certainly was not much good when it came to ‘team leadership skills’.

So this I am sure you will agree is a ‘bit of a mess’, and it was for quite some years and still remains a problem brokerage of little industry profile.  A reasonable property management portfolio eventually rescued the business to bring in some income stability.  Sales and leasing activities however remain really average, so the really big commissions never really eventuate.

Here are the main issues that you can learn from:

  1. Leadership problems – The leadership model was erratic and emotional.  It was hard for the team members to build traction and confidence.  One week they were being praised at the team meeting, and the next they were being ridiculed.  You can’t build a good real estate business without encouraging and nurturing the team in a positive, constant, and ongoing way.
  2. Listing stock – The listing stock was always random by type and ‘open’.   There were very few ‘exclusives’ coming in.  The property owners had little reason to agree to ‘exclusivity’.  That was largely because the individual agents were not experienced in selling and pitching for exclusivity and obtaining vendor paid marketing funds.
  3. Zone of focus – The listings for the brokerage business were all over the city.  That prevented a growth of market share and did not help when it came to referring buyers and tenants onto other properties.
  4. Prospecting systems – Most if not all of the agents had little momentum with regularly prospecting and pitching for new business.  Just about all of the listings came in by ‘luck’ and certainly most of the listing stock was of little quality.

You can learn a lot by looking at the negatives in this story.  You can reverse the 4 factors mentioned and easily see what needs to be done to establish and improve a great brokerage business in commercial real estate.

Competitive Advantages with Systems and Procedures in Commercial Real Estate Agency

So many salespeople in commercial real estate struggle with getting things done.  Each day many pressures and client challenges will shift your focus (or try to).  Before the end of the day you will feel that nothing of importance has happened.  Here are some tips from our Commercial Real Estate Newsletter.

There is a saying that ‘a person that feels in control will get a lot more done’.  Feeling in control is just a mindset; however it helps a lot when you are a commercial real estate salesperson that is responsible for earning a good income (or trying to).

When you look at your job, career, and real estate agency, you can see lots of tasks that if well done, can help you get good results.  Here are some key systems that you can optimise and improve on.

  1. Develop a marketing information packet that you can send via mail or email very quickly to a client, property owner, investor, tenant, or business owner about the alternatives and services that you can offer them.  The marketing packet should be specific to sales, leasing, and property management.  Retail information packets will be different and much more unique than the others.
  2. Have a pre-listing or pre-presentation kit ready that you can send to clients a day or two before you meet with them to talk about their property.  The kit should contain market facts, examples of advertising, and samples of brochures, strategies of promotion for sales, leasing, or property management.
  3. Create procedures for canvassing and prospecting so that each day you can repeat processes that will help take you forward in your property market.  Don’t reinvent new systems; just repeat the ones that work for you.
  4. Your database should be well controlled.  I am a great believer that a database is a personal process that cannot be passed on to others.  In only this way will you take ownership of what you need to do and that will ensure that the information is correct.
  5. Client contact systems will always be of benefit.  It is a fact that more listings will put you under pressure.  Open listings are a waste of time, but exclusive listings and their clients need to be well serviced.  In most cases, commercial real estate agents can only handle up to 20 exclusive listings at any one time.  Beyond that point you will be out of control and stress will take over.

Look at the things that you should be doing every day.  Learn to delegate mundane ordinary tasks to the administrative staff that support you.  If you do not have the benefit of administration support then, the only way forward is to systemise everything that you do.

Commercial Real Estate Agent – Staff Evaluation and Employment Interview

In commercial real estate agency today, in any given year, you will be seeking new staff to employ and also evaluating their relevance to the agency.  To assist in the process, you should have an evaluation system that allows you to understand the candidate, and the value that they can bring to your agency.

For this reason you should create a checklist to be used in an employment interview.  It should also be said that you should have two or three interviews with the ‘short listed’ candidate to ensure that all of your observations are understood and confirmed.  In each meeting bring a further person from your existing staff into the interview so that they may give you extra comments and observations from the meeting.

Here are some evaluation processes and questions that can help your employment interview in commercial real estate today.

  1. Get detail from the candidate as to what they have done in the industry and where that occurred.  Check out the information they provide to you.  Ultimately you need to know that the candidate is suitably skilled and professional in their business activities.
  2. Talk to previous employers to understand the way in which the candidate operates at a professional and business level.  In most cases you should be talking to two separate employers.
  3. Get details of the successes that the person has achieved and can prove to you are relevant to your industry and location today.  The role of an agent or salesperson in commercial real estate today is quite complex.  They are required to undertake specific tasks related to prospecting, presenting and pitching, inspecting, qualifying, negotiating, and documentation.  Each facet of the job has specific disciplines.  Make sure that your candidate qualifies in all respects.
  4. Always talk to referees provided by the person.  Those referees should be unrelated and preferably from a business environment and workplace.  Get to the real truth of employment.
  5. If you don’t feel 100% regards a particular person in the interview, then there is something that is wrong and you simply need more time to understand what that is.  It is better to take time in your decision than to step into a new employment arrangement was someone that is not totally correct for the role.
  6. Today a salesperson or an agent in commercial real estate must bring considerable technology and computer skills to the task.  They must be prepared to undertake personal administrative work using computers and technology.  Ensure that the person is comfortable with this process and can prove to you that they understand computer usage and also software applications.
  7. Your sales team will be supported by administrative staff.  That administrative process and backup will differ based on how you want to run the agency.  It should be said that the administrative process and backup system will cost money and that cost recovery should occur from commissions and or a particular desk fee that applies to each agent and salesperson.

Here are some questions that you can put to the person under interview circumstances.

  • What is the most frustrating thing about commercial real estate today and how would you handle that?
  • How do you handle the paperwork part of the business and what systems do you use to support that?
  • What do you enjoy about the commercial real estate business today?
  • Why do you want to be employed in commercial real estate and most particularly in this agency?
  • What do you know about our business?  They should be able to show that they have researched your business prior to the interview.
  • How do you prospect for new business, and what are your processes and systems of support?
  • Tell me about the database and the customer base that you established in your previous place of employment.
  • What do you believe are your most relevant skills that you bring to this agency?
  • Tell me how you work within a team, and how you would improve the team and its interaction with you.
  • If you could describe yourself in two or three sentences, what would that be?
  • What are your most significant challenges as a professional salesperson?  How would you improve on these challenges to resolve them and build your future business?
  • Where do you see your career heading in commercial real estate today and over the next five years?
  • Why should I employ you?
  • What do you know about commercial real estate? Tell me more about that.

So these are very tough questions for some people to address.  That being said, commercial real estate is a tough industry and requires tough people that can handle difficult questions.  Formulate a questionnaire based on these questions and others that can help you fully qualify the candidate for employment in your agency.

Get more tips on employing Commercial Real Estate Agents in our Newsletter right here.