Real estate agents are optimistic people by nature. Every deal is a great deal; every month is a great month; lower interest rates are great for buying; higher interest rates means there is confidence; the doom-and-gloom market gurus are just negative people – not to mention the real estate market has never been better!
A lot of hopes are being pinned on a steady 2016. A simple Google search reveals a plethora of ‘expert’ opinions – many of them are contradictory, so let’s assume that no one really knows. What we do know is that apart from mining areas, real estate has had a great run and no prudent real estate principal should assume this will always continue.
So here are my 10 key steps to help you prepare for a downturn and ensure your agency has a consistent flow of inquiries, listings, open home numbers and contracts.
1. Know your agency’s break-even sales point at all times and sit with your accounts person to create optimistic, realistic and worst-case sales revenue targets and profit scenarios.
2. Your daily morning mantra should be ‘prospecting equals profit’. KPI measurement based on new listings is inadequate. Your agents’ KPIs have to start with how much and how well they prospect and the pipeline they created. Record the weekly one-to-ones on paper so it’s clear what each sales agent and property management must achieve.
3. Don’t confine yourself to just the old practices simply because they worked before – try different things. For example, use different methods of prospecting, whether it is phone calls, door knocks, letterbox drops, business networking, sponsorships, social media advertising, web banners or roadside signage. With sale strategies, we know auctions are successful, but these are best in thriving city markets and are one third of the market any way. During slower, flat times, private treaty may be a preferable way to negotiate a sale.
4. Manage your cash levels assertively. Don’t borrow on the basis of blind optimism and don’t mix your business cash flows with tax money. Make sure your accountant has a handle on tax estimates now as January to May is tax season with FY2015 taxes, December 2015 quarter BAS, March 2016 quarter BAS and two quarters of superannuation guarantee all falling due for payment. Cash is key, so don’t take this planning lightly.
5. Invest in marketing and profile on a consistent basis, especially when things start to slow down. It is important that the market hears from your people continuously if you want any chance to qualify for the fewer leads.
6. Remember that agency business is ultimately won and lost due to relationships, so your agency needs to be a relationship-centric business towards residents, schools, local businesses and area professionals. There is no shortcut to the process of getting to know people and nurturing a prospect into a client. One skill everyone can learn is the art of investing time and money towards building genuine and long-term relationships and not just chasing listings.
7. Keep an eye on market statistics each month from sources like REA Group, CoreLogic RP Data and APM Pricefinder, and focus on what sales have occurred and whether your agency is getting its fair share of deals. If you have a five per cent or 10 per cent market share in a quarter, that’s not pretty, but the good news is that there is still plenty of activity out there for you to chase.
8. Get creative in securing leads and don’t lose out on a great listing over an issue like vendor-paid marketing or 0.25 per cent commission. If you have to negotiate, just do it to get the deal across the line. In tough times, you have to think of the bigger picture. If it becomes a choice between standing on principle and conceding a little to secure a sellable listing, don’t always go by the rule book.
9. Re-assess your quality and be honest – review the quality of people you have hired and get rid of the dead wood. Review your administration structure and ensure everyone is trained for efficiency. Review your database and electronic systems to ensure you have access to cutting-edge services. During tough times, sellers will appoint only the best.
10. Seek assistance – your accountant should always be able to review your figures readily and tell you the truth. Don’t wait after it’s too late. Get your figures in early, then sit down to understand how things look and work through sensible options to navigate any crunch.