Will new business models last? – by Stan Albert

Stan Albert: Will new business models last?

Apr 03, 2007

As I See it From My Desk this month has somewhat of a new paradigm.

Last month I was diagnosed with age-related macular degeneration. The “wet” variety, which, with new and advanced treatment, can be treated with injections of Avastin. Now I can only see out of one eye, as the left eye has no central vision. With the excellent treatment at Sunnybrook Ophthalmology Department, we know that the required procedures will work out.

If I play slow-pitch ball again this summer, and I don’t swing at a bad pitch and my teammates yell, “Good eye Albert,” I sure will appreciate their scrutiny! You have to have a sense of humour, regardless of any affliction, right?

I’m among 600,000 Canadians who are afflicted annually with eye disease. (For more information: www.amdcanada.com). The specialist says I will still be able to drive and continue on in my profession for many years to come, and my wife and I are much relieved.

Now I have to concentrate better with one eye on our industry. If you’re so moved, make a donation to the C.N.I.B. – they’ll truly appreciate it.

Some months ago I wrote, “What is your value proposition?” Is it a quality one? Is it one that you can be proud to put your name to?

During the past several years, we have seen some newer brokerages entering the playing field. Some of them are growing at phenomenal rates by offering zero per cent fees/shares in the brokerage, and nominal charges per transaction. They are certainly entitled to offer whatever fee structure they want to. Registrants are apt to opt for lower fees so that, quoting from a recent article in one of the Toronto newspapers, “they can offer a lower commission structure and spend more on promoting themselves.”

One has to wonder if this format is truly sustainable. It may be. But from this viewpoint, we’ve seen new approaches come and go. Some stay around a long time: Century 21, Sutton Group, HomeLife, Coldwell Banker, Royal LePage, Prudential and Re/Max, just to mention a few. Why they have stayed around so long is because they have a solid business plan and systems that most registrants thrive on.

But as a long-time member of this industry, I, like others, marvel at registrants rushing into lower fees for more money, so that they can spend more on advertising and put more in their own pocket.

It does make sense for those who do less than five to 10 deals a year. I believe that the national average last year was about five transactions per agent. And if one checks the stats on that brokerage, one would see what the average registrant earns.

Just a minute.

Isn’t it a fact that the more business you do, the more proficient you get at honing your skills at negotiating and closing? If you do it right, would they be likely to refer others to you? You take pride that you’ve justified your commissions, whatever they were; based on your skills, number of transactions done annually and the ultimate: the numbers of people in your data bank.

If you work for less, the seller will for sure be happy. He’s saved money. Sure, the registrant will get a referral from the seller, who’ll tell his friend that he made more money as a result of lower commissions. The word will spread. Jack Salesperson will do the deal for x per cent!

So, if a registrant does 30 deals, as an example, at lower fees, compared to a registrant who believes that he’s worth every cent he currently charges who’ll do 25 deals, then who’s ahead of the game and works less, and with quality clientele who will refer other clients based on quality, not on price point?

Let me illustrate this with an excerpt from Malcolm Gladwell’s latest book, Blink.

In Flemington, N.J., there is a Nissan dealership that probably outsells all other Nissan dealerships in that state. One of the reasons is a guy named Bob Golomb. Bob is in his 50s, and is a short guy with thinning hair and glasses. (Almost sounds like a younger brother if I had one!) Since Bob went in business over 10 years ago, he has sold, on average, about 20 cars a month, which is twice what the average salesperson does. In the world of the car business, Bob is the Michael Jordan of the industry. A true virtuoso.

Here’s his secret: He has a careful watchful intelligence and courtly charm. He’s thoughtful and attentive and a wonderful listener.

Here are his three simple rules that guide his every action: Take care of the customer. Take care of the customer. Take care of the customer.

Bob follows up every sale to see how the owner likes the car. He gets repeat business and referral business on an ongoing basis. Is he solely “transaction based”? No, not on your life. He believes in repeat business by treating each customer as a future lead to maintain his business. He’s not in business for the short run.

The Bob Golombs will be around for a long time building their business by not looking at it as a job.

So how does this relate to your value proposition? Is it to do a few deals here and there….pay a few mortgage payments, go on a cruise? Or do you really want to find yourself in a career where you have the comfort of a known brand that the public relies on? Sure you have to pay for that privilege, and if all you yearn for is a cheaper way to make a few more dollars than you would at your previous employment, then go for it by all means.

It always begs the question: can a registrant who is part-time or does little business retain his customers? Can he deliver the service needed in our industry to move us up the ladder of the professions that are most trusted?

History has a way of repeating itself in any industry, in any economy, in any field whatsoever.

New brokerages enter our field constantly, yet few survive because the economy is not always static. Inflation comes and goes and it affects us all.

Brands are self-sustaining because they are constantly striving to provide the services and the synergy for a true professional in this business. And I’m not just talking about franchises.

There are fine independent brokerages across North America that continue to improve the services to their registrants. It cannot be done on a shoe-string budget and not on reduced fee structures for registrants. I just don’t believe it. The service levels would suffer and the profit margins, as low as they are today, would suffer even more.

Brian Buffini’s 100 Days to Greatness amplifies what I’m trying to get across this month. He says this is not a job, this is a business. It is a business where you have an opportunity to establish relationships through lead generation.

Would a registrant who is looking to save money by reducing his fees invest more in his career? Invest more in promoting himself? Invest more in his community? I would love to see that happening. Perhaps down the road I will live long enough to see it happen.

Time will tell which paradigm will succeed on a consistent basis. The public will judge us on that.

And that’s the way I see it from my desk this month.

Quote of the month: “Equal opportunity means everyone will have a fair chance at being incompetent.” – L. J. Peter, The Peter Principal.

Stan Albert is celebrating his 36th year in active real estate. He serves on the Complaints, Compliance and Discipline Committee at RECO, and on two committees at the Toronto Real Estate Board. He is an established trainer and business consultant and can be reached at salbert@trebnet.com.

The preceding article was posted with the expressed permission by Stan Abert.