Brokerage Models, Consumerism, REALonomics
Ten Commandments for the New Real Estate Economy
December 9, 2006 by REALonomics · 1 Comment
REALonomics seeks to create a Model Math for the New Real Estate Economy. There should be little doubt that we are entering one of the most competitive eras in the real estate industry’s historical flow.
The tide has ebbed, the economic wave known as the Broker-Centric Era has come and gone and the Agent-Centric Era is meeting its match by an all powerful consumer, whose appetite for all things real estate is insatiable and who is neither brand loyal nor a proponent of the practices of our industry.
What the traditional industry, its institutions and its broker/owners do in the next 12-36 months will define what, if any, grip and controlling position the real estate industry will have with respect to consumer confidence and loyalty. What are the REALonomic principles that are coming into play that must be adhered to in order to remain competitive?
First written in 2002, and now updated, I respectfully submit to the owners of real estate companies the following Ten Commandments of the New Real Estate Economy (2007). I shall dissect and amplify the business concepts contained in each commandment and articulate their respective applications in the weeks ahead.
The first five commandments are positives, the second five are negatives, forming a set “to do” business principles and set of “not to do” business principles.
The Ten Commandments of the New Real Estate Economy
- Thou shalt be very, very agile; then more agile;
- Thou shalt get big by being small all over;
- Thou shalt have no markets with borders;
- Thou shalt create assets through alliances;
- Thou shalt execute without permission;
- Thou shalt not manage agents, but markets;
- Thou shalt not embrace static territorialism;
- Thou shalt not attempt to purchase markets;
- Thou shalt not self-capitalize, but extract
- Thou shalt not bet ALL on one brand…ever;
REALonomics Business Principle: Agility is a deliberate cultural business priority and it can be a business verb having to do as much with the character of a business culture as with its operating models. Real estate operating models in the New Real Estate Economy must move with quick graceful precision. Business models are enhanced when they are nimble to economic and market factors that can change quickly. Bulk is out, buildings are bulk and manual environments are bulk. Paperless transactions create agility, as but one example. [more, later...see next post].
REALonomics Business Principle: Getting big was once about Mergers and Acquisitions (M&As), becoming a market player by establishing a retail presence. REALonomics declares that the M&A is alive and well, but not in the old retail format. Sprinkled presence in multiple markets that are joined at the hip by technology and Internet market penetration will be a key for owner expansion. [coming soon...].
REALonomics Business Principle: In the clunky Broker-Centric era, aka, the First Economic Wave, markets were defined vertically…with borders, tops, bottoms and sides. Market Service Areas and Effective Service Areas were contractually articulated stifling the ability of owners to build horizontal models. This was the age of Permission Based real estate models (see my blog on this). The Non-Brokers who have entered the macro market have done so without borders. Building a brokerage with universal appeal should be our Quest for Model Perfect.
REALonomics Business Principle: Our real estate ROI must lean heavily toward economic alliances, shared revenue models, partnerships and ancillary services where real estate is the base transaction and simple serves as the nucleus of economic fission. [I will hit this nail squarely on its head, later].
REALonomics Business Principle: Although I have written about Permission Based RE, I’m concerned about out industry’s inability to tear down its self-imposed Berlin walls. At every turn in the industry business models, owners have to get permission to do just about anything. This stifles business dexterity and empowers the Non-Brokers, who need no one’s permission to simply propel their models into the market arena, unimpeded. [hmm, whose permission do you need to enter an ancillary market? I'll get to this hot topic].
REALonomics Business Principle: As a business model centerpiece, I suggest we no longer nail jello to trees with mallets. The Agent-Centric era is winding down…of course; owners have lost most of the battle for adequate ROI as a result of pandering to independent contractors. In the Third Economic Wave, the Consumer-Centric era, we will discover and redefine who our client really is and who is buttering the slice of bread in front of us. Fundamental to ownership of any business is defining one’s ultimate allegiance. [watch for this blog].
REALonomics Business Principle: Real estate, as a business enterprise, has always been dynamic, but our local models have been mostly static. Our bricks and mortar models were embraced in a day and time where the technology tools that could propel us into the macro arena did not exist. Owners who embrace limited models that stem from territorial blueprints have already begun to suffer from acute economic asthma. [territorialism will suck out the oxygen of profitability].
REALonomics Business Principle: Truth be told, most M&As are not successful, despite the high cost of entry. Broker/Owners who purchased markets from 1994-2005 are suddenly faced with the premise of operating boxes (aka buildings) without the necessary market energy to simply pay the bills. REALonomics believes that buying a real estate company with cash dollars is economic folly. [yea, I'll detail this].
REALonomics Business Principle: Market penetration and capital extraction is the next business model. Markets are the new battle fields. Capitalizing new market presence via bricks and mortar is akin to throwing oneself under the economic bus! Why do keep perpetuating a business model that is dying when we don’t have to do so? By developing and deploying e-Partner business model concepts, we can take money out of markets without actually being in those markets. [risk assessment...].
REALonomics Business Principle: Are brands important? You bet they are! Are all brands equal? Of course not! The old principles of brand adoption and deployment need to be dismantled, however, and then reconstructed so that owners are protected from protracted loyalty that can choke their ROI and render their exit strategies non-existent. Franchising is powerful; their market definitions, business modus and protracted terms may not always be suitable to a dynamic, agile company that wants to roll with the market trends in a Consumer-Centric Economic Wave.
Each day for next ten days, REALonomics.net will post a thought provoking owner-focused blog for one of the Ten Commandments of the New Real Estate Economy.
Copyright © 2006, REALonomics®, L.L.C. All rights reserved. “e-Partner” is a registered trade name of eParnter USA, Inc. Use of “e-Partner” is governed by separate license agreement and such use is not granted herein. Patents Pending. For information about us visit us on the web at e-Partner or, you may email us or call us toll free at 877-380-1000.
Related posts:
Thank You