What really affects brokerage profitability

This article was originally published on Inman.com and has been replicated below.

Profitability is a top concern facing brokerages in the next two years, according to NAR’s 2019 Profile of Real Estate Firms.

Understandably so: today’s broker is beset by a host of external factors putting downward pressure on their revenue, with very little opportunity to increase their company dollar and bottom line.

Compounding these concerns is the concept of profitability itself. In a hyper-competitive market, is it even in a broker’s control? If so, where do you start?

A common pitfall for brokers is to ramp up recruiting efforts or hire top producers. Profitability is more than an agent-count numbers game or a big-name play, especially when a top producer or team tends to bring little to the bottom line.

Profitability cannot be influenced without humans, obviously, but it’s not about how many of them you have or what their name looks like on a bus. It’s about human intelligence—creating a thoughtful strategy and following it through with deliberate action. Strategic intel using operational data is a greenfield opportunity for today’s brokerage.
None of which is possible without the right information.

Wendy Forsythe knows how important information is to a brokerage, having served as COO for HomeSmart International, a top-five real estate company with 18,000 agents and 190 offices nationwide. Today, Forsythe runs a consulting firm to provide small to mid-size brokers with operational guidance.

“I regularly work with brokers who’ve built detailed business plans for the year,” Forsythe said, “and I typically say, ‘That’s amazing! So tell me, what is your transaction goal for this year? And how much of an increase is that over last year? More often than not, they don’t know the answer. Nor have they identified company dollar, new hire, or attrition goals.

“They are often unsure about most of the core components to profitability in their business—and it’s hard to blame them.”

To Forsythe, brokers face two common roadblocks for profitability.
  1. They don’t consistently track their own KPIs (key performance indicators), such as gross commission income (GCI), company dollar, production per person, or even transactions.
  2. They don’t have the information needed to interpret their operational KPIs such that they can improve the profitability of their agents and their brokerage. Indicators like company dollar per agent or year-over-year changes aren’t commonly tracked.

Both factors are essential to informing the strategic decisions and coaching conversations a broker must lead to ensure their business’s success.

Both factors also happen to be an industry-wide blind spot for brokers. Operational information is typically scattered amongst multiple systems or tracked manually, so the insights brokers need to inform their KPIs or coaching efforts are too difficult to find and/or to parse.

A solution to these problems is Lone Wolf Insights, a new addition to the tech leader’s broker suite. Insights translates data into plain language for brokers and provides them with actionable information they can use to manage their business, lead their agents, and improve their profit margins.

“What I like about Insights is it gives you things like company dollar, sales forecasts, and GCI on-demand,” said Forsythe. “Because it’s so simple to understand, it’s also easy to act on. A broker can use Insights to have data-driven conversations with their agents, negotiate splits, identify agents who need coaching, target agents to retain, etc.

“It removes roadblocks for brokers and puts the ability to affect their business back in their hands. So profitability becomes less about the numbers, and more about how the broker uses those numbers to empower their knowledge, experience, and leadership. Qualities they have in spades, especially when it comes to real estate.”

Lone Wolf Insights is a brokerage command center that puts the power to influence profitability in the broker’s hands. Translating essential information into plain language, the solution provides prescriptive insights into company dollar, sales forecasts, and GCI. Read more about Insights and what it can do for your brokerage.