Five Proven Steps to Grow Company Dollar
As an owner, you should be concerned about maximizing the value of your brokerage which gives you greater options and flexibility. Recently, I received an email from a southeastern broker who asked me how to build equity in his company.
“If you could narrow it down to just one thing,
what would make my brokerage worth more?”
Narrowing it down to just one factor isn’t easy; so much comes into play when valuing a brokerage. In my experience, here are the key factors (excluding any company-owned real estate) that influence a brokerage’s value:
- Market location
- Business model
- Market competition & trends
- Total revenues
- Average sales price
- Agent turn over
- Brand affiliation or independent
- Historical M&A market activity
- Sales composition by all agents & Broker/Owner
However, the one common driver impacting a brokerage’s value is company dollar. Company dollar is what the broker has left after commissions are paid. It provides ownership the means to cover the operational expenses, service any debt and provide profits for a return on his or her investment. Here are five (5) proven steps to build better company dollar.
- Focus on growth
Agents prefer to be part of a vibrant, growing organization. It provides the opportunity to attract agents and teams as well as merger candidates. Increasing market share has a direct impact on value.
- Ongoing recruiting
Your recruiting focus should be on the right candidates, those who fit your culture and provide you a reasonable company dollar. The market’s top agents will have to be bought with high splits (so much for company dollar) and newbies require so much time that they take you away from running your company. Your best bet is to actively recruit moderate producers at lower splits whom you can increase their production and earnings and still have a good company dollar.
- Focus on productivity and accountability
It’s all about the basics. You can’t control an agent’s income, but you can direct their activities that lead to success. Make them commit to performance standards and hold them accountable.
- Lead generation
Company-generated leads with a 50/50 or 60-/40 split build company dollar, provided the leads are actually worked (see above). Focus your marketing on lead generation, manage them with an effective CRM and focus more on conversions than the number of leads generated.
- Inventory control
Listings belong to you; not your agents. Do not allow your listings to sit for too many days on the market tying up your inventory along with your company dollar and profits. Make certain your agents service your listings properly so that price reduction conversations can happen often and quickly.
Does the business model impact value? Absolutely! 100% models, flat fees, reduced commissions and many of the “new models” (aka cheap) create little company dollar for the owners forcing them to either have a high number of fee-paying/low producing agents or the broker/owners themselves must produce instead of focusing on running the business.
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