5 Key Factors Driving Brokerage Profitability – Wire Real Estate

5 Key Factors Driving Brokerage Profitability

Jul 29, 2019

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Brokerages’ gross margins and company revenues are continuing to face downward pressure, according to a new report from REAL Trends looking at brokerage profitability. However, some brokerages are standing out from the pack and maintaining and driving profits.

REAL Trends surveyed hundreds of brokerages to identify the top five key drivers influencing profitability. The five profit drivers they identified are:

1. Team productivity

Sixty-six percent of brokerages surveyed considered teams an additional source of profit for their firms. REAL Trends and the California Association of REALTORS®, in separate surveys of teams nationwide, said the top services that teams bring to a brokerage are technology services, marketing services, low fees and costs, legal and regulatory support, and mentoring and coaching.

2. E-lead programs

Leads are the path to creating a steady pipeline of new business. “The key to success lies in maintaining aggressive costs per lead and in having a system in place to effectively route and nurture those leads for maximum conversion,” the report notes. Fifty-nine percent of brokers said they currently run a brokerage-paid lead generation program. Thirty-one percent said they spend between $1,000 to $5,000 per month on such a program.

3. Coaching and training programs

Seventy-six percent of brokerages say they have a coaching program. To help with agent productivity, firms say they’ve done coaching programs on topics like lead generation, farming, negotiation, and more.

4. Ancillary services

Some brokerages are boosting profits by offering ancillary services, such as mortgage, title, escrow, insurance, and property management areas within their firms. Of the brokerages who responded to the REAL Trends survey, 73% offered some type of ancillary service.

5. Technology platforms

About 37% of brokerages with a technology platform reported it as an additional source of profit. Seventy-two percent said their technology platform has proprietary offerings, and 83% of them reported those proprietary offerings effectively differentiate their brokerage. “While agent adoption is always a challenge, the key lies in your rollout, education, and overall value it provides to your agent,” the report notes. Thirty-percent of the brokerages surveyed said that half to 75% of their agents use their technology platform on a daily or weekly basis.

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