Revenue rehab: Agency leaders to focus 2024 efforts on mending profit margins

MRI’s Real Estate Leaders’ Outlook, which assesses the issues facing the industry in the year ahead, reveals that looking forward to 2024, 78 per cent of leaders feel maintaining and building profit margins in the face of mounting interest rate pressures is the number one real estate industry concern.

The report, which is generated out of group consultations and individual surveys with industry leaders including representatives of the 12 agencies that make up MRI’s client advisory board like LJ Hooker, Realmark and BresicWhitney, attempts to gauge the biggest stressors from an industry, business and team perspective.

As the firm noted in revealing this edition’s findings, pandemic recovery, the rising cost of living and high inflation have had an impact on every level of the sector.

According to MRI, sales CGI and deal values are down 20 per cent during the year for businesses, overheads are 8 per cent, and profits have dropped by as much as 15 per cent.

Josh Symons, MRI’s director of strategy and growth across the Asia Pacific, said that while leaders are clearly focused on the bottom line, they are overall positive that they can steer their businesses into strength with the right strategy.

“Optimism remains strong: 61 per cent [of agency leaders] believe revenue will increase in the next 12 months but laser focus is required to navigate fast-paced changes,” Mr Symons noted.

It then stands to reason that the next biggest priorities beyond the big financial picture also relate to ways that leaders can increase efficiency and cut down on costs associated with staff turnover.

Second in line, talent acquisition, retention and upskilling for a more digitised world are cited by 61 per cent as the next biggest issue, while 57 per cent said that digital transformation and optimisation, including extracting agency value from technology, as the third top challenge.

That means that other pressing factors have to take a back seat. While industry heads said that building diversity and consumer trust is important, they acknowledged they are not high priorities right now. Instead, they are seen as longer-term challenges to address when business operations are in stable condition.

Mr Symons noted that this year, it seems clear to those at the top of businesses that “having the biggest team, the highest fees, the best performers is meaningless unless your business is profitable and sustainable”.

“The challenge of maintaining a healthy, profitable business that stands the test of time is not easy, particularly in times of economic uncertainty,” he added.

So what strategic changes are leaders intending to make to increase incomings?

MRI found that just over half of survey respondents (53 per cent) cited reducing fixed costs as the number one priority for protecting FY24 profit margin, followed by 34 per cent considering asset divestment such as rent roll purchases. Tellingly, the relatively small proportion of 9 per cent said they will reduce head count, and only 2 per cent said they are considering merging with other agencies or reducing director salary earnings, showing that leaders are putting a high priority on staff to assist in the business transformation.

And Mr Symons revealed that those at the heads of agencies have put the responsibility on themselves to do the work that increases retention and empower staff to bring in the needed funds. The ones who are able to provide a level of inspiration and guidance at this point in time will win in an area called the “leadership premium” and be rewarded with staff performance.

“Leadership premium is where strong leaders will communicate your value, offer what you can offer, and make sure that agents are clear about what they have to do to make money, and what the business needs to do to provide the value,” Mr Symons explained.

“The leadership premium is proven to translate to better retention of staff – another key challenge being faced by the industry. For example, when you bring in junior staff into your agency, you choose how you invest in them to develop successful property professionals who utilise the software and resources the way you want them to use it. Create career pathways so that you get them to be the people that become your future sales agents and property managers,” he added.

With MRI sharing some of the perspectives of their respondents, several business leaders provided insight into how they are communicating with staff and putting this need for strong guidance into practice.

Lindsey Burne, director of LJ Hooker Dickson, said it’s all about giving his team the tools they want to succeed, but not weighing them down with too many processes.

“During times of high revenue and strong markets, it is tempting and easy to continuously add technology. More is not always better! In the current market, business owners should be reviewing their tech partnerships, diving deep to discover which solution best suits their team’s needs. Integral to this process is involving team in the due diligence and selection process. This helps ensure the best possible success of the selected solution,” Mr Burne said.

Realmark founder and executive director Anita Percudani’s strategy takes a similar tack. She shared that they have focused on tech tools that enable the team’s priority, which is to have “more time to communicate with clients, as well as increase proficiency and accuracy of day-to-day functions within the business”.

According to Bradley Brown, director and CEO of the Fletchers Group, he’s conscious of the responsibility to get the strategy right at this point in time, rather than waiting for market conditions to right the ship.

Mr Brown said: “Sometimes, tough markets present opportunities to grow, and those who execute it and take it on and invest when others are looking to shed costs will lead when the market returns.”