These are challenging times in our industry. As many markets move into the 33rd month of the down cycle, the efforts of brokerages to succeed and stay focused have taken on an almost marathon like quality. Many only vaguely remember the last time that they were not out of breath. For them, “hitting the wall” has taken on a whole new meaning.
For thousands of American real estate brokers the real issue has become twofold. While meeting the challenge remains critical, finishing the race in good position for the next round has become critical.
According to bestselling author and olympic blogger, Seth Godin, what really sets the superstars apart from everyone else is their ability to escape dead ends quickly while staying focused and motivated when it really counts.
What has now become clear is the fact that struggling to survive is a dead end (“Cul de sac” as Godin terms it), if the objective of that effort is not going to prevail.
In plain English it is now obvious that the traditional real estate brokerage business model, that has been in use since 1947, is simply no longer functional as an investment quality vehicle. The evidence is everywhere. Consider the fact that the average pretax profit for the traditional brokerage business model has been somewhere between abysmal and non-existent at 4.3% and 5.4% for the past several years. Consider the comments of Home Services of America CEO Ron Peltier, the keynote speaker at the recent 2008 Connect MLS meeting, who declared that the traditional brokerage business model is dead and that three quarters of brokerages where broken.
Consider the fact that without core service programs, few brokerages would be making any profit at all. Consider further that the market for this antique business model has now been reduced to “roll up” transactions that net out at 15% of 2007 company dollar.
Finally, consider the fact that few brokerage firms in business today have not been subjected to round after round of hunkering down that has left them shells of their former selves, and more cuts are coming.
That traditional business model will never come back because there is no reason to bring it back. What will emerge, and what will succeed moving forward, is a whole new business configuration – a business configuration that recognizes where we are today and where we will be tomorrow, but is not directed by the practices of 1988.
The point of all of this is simple. For brokers who are going through hell in an attempt to save a traditional brokerage model, it is time to quit.
For brokers trying to find their balance and equilibrium, the perfect touch point is Seth Godin’s book The Dip. Godin is the best selling author of such business classics as Permission Marketing, Unleashing the Ideavirus, Purple Cow, and his latest marketing masterpiece, The Meatball Sundae.
The Dip supports the stressed broker on every page. Godin points out that winners quit fast, quit often and quit without guilt until they commit to beating the “right Dip.” Winners realize that the bigger the barrier to success, the bigger the reward for getting past it.
There is no reason to continue to beat one’s head against the wall trying to save a business model that hasn’t worked properly for the past several years and will not work effectively in the sustaining market that will find its way to our industry in 2009/2010. Such an effort is a classic dead end.
Success in real estate ahead is all about a new business configuration. It is about rearranging the pieces of the old model. There is no guesswork involved, the research has already been completed. There is no leap of faith. There is however a moment of contemplation and a mighty jump in self-confidence
We know so much about the future of this great industry. We know that the market will return. It matters not that it will not be at seven million units, we did just fine under five million up to 2000. We know that the consumer will demand, and deserves, a whole new experience. We know that our businesses, services and the transaction will be centered on the web. We know that in our next effort we are going to create a business whose economics makes it, as Gary Keller says, “worth owning.” We know that in this new world everyone on the team is going to be accountable. We are tired of prima donnas. We know all of these things because we have learned them the hard way. The fact is that there is very little we don’t know about what success will look like moving forward.
So what is the problem? Why are thousands of brokers clinging to a ship that can’t float? Once again Seth Godin steps in with the answer. In fact the solution is so simple it would not be appropriate to let it out during the ten minutes it will take you to read this column.
No, a little effort is required here.
- Step one: Get the book, it is The Dip by Seth Godin.
- Step two: Instead of losing yourself on a golf course next week take a beautiful afternoon to sit under a spring fresh tree and read the book. It is only 80 pages, so how long can that take? Bring a pad and pen along so you can start making a Dip List.
- Step three: Go back to the office and announce you are quitting the Cul de Sac. Let everyone know that you are now in the reconfiguration business. Those who wish to continue to the dead-end can send you a post card.
Be on your way soon, there is no time to waste. A wonderful new market is headed in your direction and you won’t want to miss a moment, a smile, a great feeling or a dollar in profits. Welcome to spring, you have just survived an economic winter.
