Brokerage Models, REALonomics, Technology in RE

G B B B S A O

When I first wrote the second of the Ten Commandments in 2002 my own real estate company was moving into markets in non-traditional ways…without an office. We were getting big by being small all over or, GBBBSAO, if you please.

Vertical growth models (the idea of getting big in one market place) have a failed, at least from a sustainable ROI perspective. But they have also failed due to the chosen modus of growth used by brokerage firms for decades. REALonomics speaks to growth models that are fundamentally sound and utilize state-of-the-art tools coupled with consumer-centric appeal and direct interaction.

Is the best real estate company the largest or the one with the most agents, offices, highest number of listings, most sales, highest gross commission income or the biggest name brand in town? An even more penetrating question might be:

“How does a real estate company expand and what is expansion, anyway?”

We can answer this question by disecting the OLD business model in light of the New Real Estate Economy and then comparing it with newer REALonomical models.

The traditional real estate business model contains a set of operating characteristics that are incompatible with the Third Economic Wave which is characterized by fluid models operating in open environments that empower consumers with information attainable in cyberspace, a.k.a. the Internet.

The old real estate company growth model is characterized largely by the following ten business model traits, each can be an REALonomic study of its own:

1. Uni-market presence expressed primarily by bricks-and-mortar operations (offices).
2. Internal agent services designed to pamper and retain agents in fixed offices.
3. Ego mechanisms designed to divide agents into classes, exemplified by awards.
4. Commission scale tensions that are the primary economic equation of the business.
5. Print advertisement at the owner’s expense designed to placate sellers and agents.
6. MLS property information control through local Realtor® Associations and NAR.
7. Single geographic market focus, i.e., the Effective or Market Service Area.
8. Defining a Company by its agent count and annual gross commission income.
9. Competing for agents, in the same limited market(s) for the same income.
10. Operating the business through the feast-and-famine market cycles.

Does this exhausting bump and grind model sound familiar to any owners out there? The principle behind the commandment Get Big by Being Small All Over (GBBBSAO) deals with a fundamental redefinition of market success measured purely by horizontal growth (branding) and profit (ROI), having little or nothing to do with agent count, GCI measurements, etc.

GBBBSAO is actually a kind of “decentralization”, “de-merger” or “de-acquisition” of our real estate businesses so that they can operate with ease and profitability in open freedom markets anywhere and everywhere without the shackles of our former labor-intensive industrial models.

GBBBSAO is the Democratization of Real Estate, a kind of thinking thinking that stands in stark contrast to the manner in which we owners have been previously educated. I am talking about the school of thought that urges us to get bigger and bigger and bigger in our territorial market, which is the assigned, static, community slot in which we have our office(s) and where we have traditionally defined our business and derrived our ROI.

Until recently, we have not had much of a problem despite the fact that owners have had no sustainable and replacatable business model platform because the markets bailed us out.

Do we have the will power to GBBBSAO. We are now faced with huge overheads in the midst of a sliding market. As a result owners are now ready to take a look at alternative growth and profitability models. Networks like e-Partner provide owners with the market penetration platform that empowers them with the tools and market model to GBBBSAO and reposition themselves for sustainable and higher ROI.

Read more about the growth equation GBBBSAO.

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