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A business that needs to grow is a good business.
If you’re reading this article, chances are I can take a guess at how your real estate brokerage is faring. You’ve most likely been in the real estate game for a couple of years now and are feeling confident with the experience you’ve gained. You’re also probably feeling overwhelmed because of all the clients you’re taking on. Perhaps you’ve spent some nights worrying how you can keep up with the high demand that your brokerage is generating. Don’t worry, that’s a great problem to have.
If you relate with any of these symptoms, then congratulations! These are growing pains and signs that it’s about time you scale your real estate brokerage. If you’ve been considering growing the business but aren’t sure where to start, don’t worry. We’ve got you covered.
What Is Scaling?
Before moving on, it’s probably best that we clarify a very important point: what exactly is scaling? Simply put, you can think of scaling as synonymous to growing and expanding. More specifically, scaling is the process that occurs and the steps that you take to allow your business to grow and expand. It means having the capacity to grow without being hampered. In most cases, scaling does not simply occur overnight. It involves planning, funding, hiring the right staff, among many other things.
How Do You Know It’s Time To Scale?
In general, you can get a rough idea of when to scale by paying attention to a few telltale signs. We’ve listed them down below.
Business is booming. You’ve established rapport with clients and they return the favor by consistently working with you. Your income stream has grown to be larger than ever and has become relatively stable. Over time, success will test your brokerage’s capacity. This is when it’s time to scale.
If you find yourself overworked and running low on resources such as time and manpower, you’ll eventually have to turn down potential business opportunities. You can look at this pessimistically and think of it as you losing potential income. I’d much rather have you think of it in a positive light, as a sign that people trust your business and your work and the only way for you to provide for everyone is to scale.
When first starting out a business, you won’t have any past historical data. This makes setting goals for the next month or quarter more of a guessing game. What most small businesses do is to analyze the metrics of already established businesses and make estimates of realistic goals.
When first starting out, you probably set many short-term and easy-to-achieve goals. You’ve also probably set some longer term and more aspirational goals. These are the goals we want to take a look at. If you’ve already met some of your bigger goals, you may not know how to proceed.
Goals are important because they chart a clear course for your real estate brokerage. By scaling your brokerage, you give your business the capacity to aim for even higher goals.
All small business owners have experienced wondering when the next client will walk through their door. We’ve all had times when business was quite dry. Sure, a big-ticket customer might walk through the door once in a while and just barely cover expenses for the month.
The real magic doesn’t happen with the occasional high-paying customer. The magic happens when you get a consistent stream of customers. Consistent streams of customers mean regular and predictable cash flows. If you’ve established a stable cash flow, you probably are capable of scaling your business.
So you’re working in the real estate industry. Ask yourself what sets you apart from everyone else. Do you offer unique services? Do you go above and beyond with client relations? You should have a proven concept that adds value for your clients and sets you apart from the rest of the competition.
Aside from a concept, you should have established a reliable infrastructure. Improvisation can be a useful skill in a few rare cases. However with business, it’s best to have a set system in place. This allows you to consistently provide the service that your client demands, without looking as if you aren’t sure what to do.
Let me make it clear. Only scale up when you are ready to scale. Don’t simply scale because you see opportunities present themselves. Taking opportunities is a good thing, but make sure you take the opportunities that you can handle. Scaling involves changes in structure, increased capital expenditure, etc. It’s a big change on its own. Might as well scale up when you’re in an atmosphere of minimal risk.
The Costs of Scaling
In general, we can divide the costs of scaling your real estate brokerage into two broad categories: time and money.
First, let’s talk about the monetary cost of scaling your business. Expansion is expensive. You’ll need to hire your first few employees. Remember that employees are not paid only once. They’re paid monthly. This means that if business isn’t doing too well, it’s your responsibility to make sure that your employees get paid, even if it means reducing your own paycheck.
In addition to employees, you will need to spend on infrastructure. You might not be able to work from a small office anymore. You’ll need to purchase a bigger space. And what about the office desks, computers, and equipment of your new team? Guess what, you have to cover those expenses as well.
Scaling is also costly in terms of the amount of time you spend. Sure, you can hire some of the best real estate brokers in your area. However, you’ll still need to train them with skills specific to your brokerage. You need to invest time orienting them about the values and mission of your business.
The First Hire
Perhaps the most important decision you need to make when first scaling your business is choosing the right people to hire. You need to keep in mind that in the real estate business, quality always trumps quantity.
Be deliberate in your hiring process. Sure, you can hire 10 new employees and hope that the odds are in your favor. Maybe out of the ten you’ve hired, 9 are great employees but 1 is a bad apple. That bad apple can ruin your business. That bad employee carries your business’s name. Unsatisfied clients won’t remember the employee’s name. They’ll remember your business.
What to Look for in Your First Hire
There are two important qualities to keep in mind when interviewing potential employees. These qualities are grit and loyalty.
Grit is an important quality for any employee. As the boss, you’re most likely going to delegate administrative tasks to your employees. What if these employees don’t know how to perform basic tasks? They should have the grit to learn. What if they don’t feel like they have the time to do the tasks? They should have the grit to make time.
Loyalty is also an essential quality for new employees. Remember, you’re going to invest a significant amount of time training these new employees. That’s time spent that could’ve been used sealing deals with clients. You wouldn’t want your new investment to jump ship and climb aboard another company.
Making a List of Tasks
Before even considering hiring any employees, you need to know exactly why you’re going to hire employees. Let’s do a quick exercise. Make a quick list of every task you perform for day-to-day operations. Include both small tasks and big tasks. Now, categorize the tasks into the tasks that you enjoy doing and are good at doing, and the tasks that do not require your talent and can be delegated to someone else. Chances are, the items that you’ve listed in the latter category are mostly administrative tasks. These are the tasks that you’d want your employees to work on in addition to the main real estate work, of course.
Pace Yourself
Your business has been showing signs that it’s time to scale your business. That’s great! However, there’s no need to rush. I’ve seen companies hire dozens of employees at a time, too early. This leaves the brokerage with too many employees with free time on their hands and not enough work coming in. These are unnecessary costs. You’ve heard the saying that prevention is better than cure. In the case of scaling, it’s probably best not to come up with a solution until a problem arises. That way, you can ensure that your growth is scaling at an acceptable rate.
Steps To Scale Your Business
If you’ve made it this far, you now know everything there is to know about scaling and why it’s done. Now, let’s get into some more practical steps you can take to get started. Check out our list below.
It’s a good practice to have small and easily attainable goals. However, your business will only truly flourish once you learn how to think big. Think about where you want your business to be 10 years from now. How about 20 years from now? Sure, your ideal business may make it seem like you’ve got a long way to go, but it’s good to have a direction to head in.
Don’t just think big, act on it. Small tasks everyday that focus specifically on helping your business grow can build up over time.
Now, there’s no need to build yourself a $1000 website or anything like that. A simple LinkedIn page for your business will do. In the digital age, people can easily do a background check on the businesses they consider working with. What’s worse than a hastily made public profile? Having no public profile at all.
Work on your business, rather than in your business. It’s time to take a step back from being involved in the bulk of the work that goes into the day-to-day tasks. By now, you should now be adopting an ownership mentality. Oversee and supervise your employees. Guide them into achieving the results that you want for your business.
My grandfather once told me that learning in college is important. But what’s more important are the connections that you make in college. The same concept applies to running a business.
Try to expand your professional network as much as possible and build healthy relationships. The people you network with can become future business partners and can even help you out when you find yourself in a tight spot.
Be sure to build diverse relationships in many industries, not only the real estate industry. For example, your brokerage may need an additional boost in advertising. What will you do? Well, the answer would be to call your friend Mike from that marketing firm. Relationships are powerful.
As I mentioned earlier, scaling your real estate brokerage can be costly. Don’t think that the only way to fund your growth is out of your own pocket. Do your research on the different financing options available to you and choose the path most appropriate for your situation.
References
Deen, A., Yonatan, R., Michael, J., Gerber, S., & Fionn Concannon. (2020, March 9). Palo Alto Software. Bplans Blog. https://articles.bplans.com/five-signs-that-its-time-to-scale-up-your-business/.
Wagner, E. T. (2016, March 28). 5 Steps To Scale Your Business (You Won’t Make It Otherwise). Forbes. https://www.forbes.com/sites/ericwagner/2013/11/20/5-steps-to-scale-your-business-you-wont-make-it-otherwise/.
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