Business mogul Warren Buffett once said that as an investor, it is wise to be “…fearful when others are greedy and greedy when others are fearful”.
His reasoning is that when the market is running hot, you run the risk of overpaying for an asset you think you need. When market sentiment drifts south, you might find opportunities.
So in this cooling market, is it worth taking a risk and being “greedy when others are fearful”?
If you’re a real estate agent working for one of the major franchises or for a boutique business, it can be daunting to feel as though your job is at risk during the current time of business uncertainty and economic gloom.
Unfortunately, even for the best-performing agents, job security is a myth. We’ve all seen a colleague with their personal effects in a box as they head out the door. Often it has nothing to do with performance but because the business itself has made the wrong decisions and needs to cut back on expenses. On other occasions it’s simply a matter of the market shifting in a different direction, leaving agency owners struggling to pay everyone’s salaries as well as overheads.
While it’s easy to feel trepidation about branching out on your own during a time of business uncertainty, the reality is starting your own business gives you more control over your future and your income.
Most people cling to familiarity rather than a job but it doesn’t hurt to look at the bigger picture rather than staying where you are just because you’re comfortable. Remember that people buy from people. You have a list of clients who want to deal with you so when you go out on your own, you have a client base already. You are your own brand.
Here are some of the reasons why a downturn is an ideal opportunity to establish your own real estate business.
1. Control your future
When you work for someone else, they set your commission and therefore you don’t have a great deal of control over what you earn.
As your own boss, more of the money you bring in from a property sale is yours to keep. During a downturn, even if you’re selling fewer properties, it is your choice how much of your agency’s profits you put aside for yourself.
When things are quiet, owning your own business means you can control outgoings, staff numbers and other expenses. You are able to make your own salary a priority instead of being at the mercy of an employer who needs increasingly larger percentages of the property sale commissions you bring in to keep their business afloat.
Owning your own business provides better job certainty than working for someone else.
2. Control your expenses
Larger real estate franchises are machines that have huge teams of front- and back-end staff to stay up and running. In a similar way, heavily branded boutique agencies invest a great deal in designing and creating marketing collateral for their business so they can stand out.
If you take a calculated risk by going out on your own, you don’t have to hire a fleet of staff or spend big on a branding exercise from the get-go, especially if you join an agile real estate group who have this all ready for you.
By starting out small with a few clients and avoiding unnecessary hefty startup costs, you can grow your business in accordance with your profits.
After two years as an independent agency owner it might still only be yourself and an assistant in your lean but agile team. Without the pressure of a franchise head office, you’re free to keep it that way if you choose to.
Plus, as we’ve all experienced, eventually the property pendulum will swing back. Prices will start to rise and you can meet rising demand by rapidly building on the foundations of the good service and client rapport you’ve established.
3. Be an industry leader
The agents who survive in a slower market are the professionals who know the business inside and out, and who stick with what they do because of a genuine love of helping others.
The truth is, although property sale prices have cooled in Australia right now, there are still plenty of homeowners who need to sell. These vendors will be seeking an expert, not someone who is new to the business. They need as much help as they can get to maximise their profits.
As the principal of your own real estate agency, you can market yourself as a professional at the top of your game to attract clients. And with your leaner operation, you might even be able to offer a more competitive price than the big franchises.
4. Pick your team
During a downturn, a lot of people find themselves seeking work. If you create your own agency at this time and wish to hire, there’ll be some top talent ‘up for grabs’. The industry slowdown means you’re less likely to have to offer your team above-market compensation in return for their services.
Top tips for new real estate agency owners
- Don’t go overboard and spend too much on marketing collateral
- Join a model that gives you plenty of flexibility
- Seek the support of a network of like-minded business owners
- Start lean and remember to pay the most important person first — yourself!
By starting a business in a downturn and being mindful of your spending, you’ll build good habits for life. This includes keeping track of (and minimising) expenses. Stick to your operating methods when things pick back up and you’ll be able to build healthy profit margins for your real estate agency.
Take the risk now. Create your own certainty.
If you’d like to learn about One Agency’s lean real estate agency membership model, we’d love to hear from you.