So you’re thinking of starting your own real estate brokerage? Congratulations on taking that first and often scary step towards becoming a business owner. I know that brokers always talk about how being an agent is like having your own business, but is it really?
Yeah, of course you can set your own schedule, work independently, and control your income; but you still lack a lot of control when working under a broker.
As the owner of the business or broker-of-record, you have a lot more freedom to run the business how you want and set the standard that you’ll expect agents to follow.
In this guide, I’m going to break down the seven most important steps you’ll have to take when starting your own brokerage. Of course, there are many steps and I can’t cover them all in one article so think of this as an overview to get you started.
1. Find Your Motivation
The first step before you even think about finances, hiring, and marketing is to find your motivation. What is your reason for wanting to start a real estate brokerage? The first thing I have to say is if you’re doing it for money, you won’t last.
There has to be a deeper reason than that because in many cases, you won’t make a lot of money for a while and you can make just as much as you would as a broker as an agent if you know how to hustle.
My motivation was my desire to do things the way that I wanted to do them. I wanted the agency to be under my name, my rules, and my expectations.
Maybe you want to prove something to yourself. Eventually, we all get tired of the daily grind and we wonder what’s next. As a real estate agent, this is a real possibility and there are few places to go besides becoming a broker and opening up your own agency.
2. Meet the Legal Requirements
If you’ve determined that starting a real estate brokerage is the right choice for you then it’s time to start thinking about the boring legal stuff.
Do you have a broker’s license, do you plan to get one, or do you plan to hire a broker? If you’re an agent you know that you need to operate under a broker so you can’t open a real estate office without having a broker of record. Some states allow you to hire a broker of record but I don’t recommend doing that because it takes a lot of the control out of your hands because you can’t be legally responsible for any of the transactions that take place in your own business.
Another factor to consider is funding. You’ll need working capital to start the business and you’ll want to be prepared to operate at a loss for at least 12 months before making any money. This will mean that you’ll not only need to have plenty of money saved but you may also need capital to get started.
3. Prepare a Business Plan
Now it’s time for the fun stuff. Put together a business plan that will act as your roadmap to success. I’m not a big believer in the traditional business plan because most of the time that’s only used for securing funding anyway. Instead, just jot down your objectives for the next week, month, year, and so on.
Get an idea of your financial goals as well as your company goals. How many agents do you plan to hire? What is your commission split going to look like? How are you going to draw agents to your agency?
The biggest factor that a lot of people overlook when starting their own agency is how they plan to compete with the big names. When you’re stacking “Mr. no name real estate” up against Berkshire Hathaway and ERA – it’s going to be a little difficult to get agents to want to work with you because they may feel they’ll have a harder time making sales. You need to sweeten the deal by offering “small agency” incentives.
4. Figure Out Your Brand and Company Culture
In addition to determining your business plan, goals, and how you’ll draw in new agents you’ll want to have an idea of what your company culture and brand is like. Here is where you’ll think about your company name, brand colors, target market, logo, and slogan. Not every brokerage needs to have all of these things but it’s important that you’re memorable.
Will you choose a name like “Home At Last Realty” or go with your own name such as “Christian Saunders Real Estate”?
The name and brand image you create will have a huge impact on your brokerage over the long term because it’s what people will use to identify you. When they see a sign in the yard, will they know that it’s your agency or will they have to take a second look? You want them to know right away who is listing that house.
5. Choose a Location
Determining the work environment is important because it will weigh heavily on your overall company culture. Some agents have a strong internal presence where the brokers require agents to spend a certain amount of time in the office. This could be good for morale or it could be bad. Some agents don’t ever want to come into the office and they’d rather do everything remotely, this has become even more popular in recent months.
On the flip side, some agents love coming into the office. They find it motivating and they enjoy the camaraderie. You need to make that decision for yourself and determine how important you think it is for accountability and morale.
You’ll also want to pay attention to your location and determine how important visibility is for you. If you live in a small town, having the agency office in the city square might be really beneficial for you. If you’re in a huge city, it may not matter where you locate the office because you’ll fall into the shadows anyway.
6. Determine Staffing Needs and Start Hiring
Next it’s time to figure out how many agents you plan to hire right away and what your plan is for them once you do. You can go one of two ways with this decision. You can choose to hire seasoned agents who won’t require any hand holding. These agents will help you build a strong culture quickly but they might be more difficult to work with and will not accommodate all the changes you want to make.
If you choose to hire a newer agent they will likely have a hunger and thirst for success but you’ll need to hold their hand more which might not be the best choice for a new brokerage.
I believe having a mix of agents is important. You’ll want to hire at least one agent that is very popular in your local area because it will draw other high-performing agents to you as well.
Keep in mind that the hiring doesn’t end there. Many brokers hire administrative support people to help with bookkeeping and records. This is a huge part of running your own business that is a bit different from being an agent. The last thing you want to do is fall behind on your bookkeeping.
7. Get The Word Out
The last thing you’ll need to do is get the word out about your agency. Times have changed and things like postcards and mailers aren’t as popular anymore. I like the idea of real estate marketing via social media and word of mouth. Having a grand opening event is also a great way to let everyone know that you’re open for business and accepting new listings and buyers.
As with most brick and mortar businesses, word of mouth advertising will drive your success. Let everyone you know in on your new endeavor and if you’ve operated as an agent in your local area, the transition shouldn’t be too difficult.