5 Ways Your CRE Brokerage’s Budget Will Change in 2021
Daniel Levison | September 14, 2020
As the year is moving towards the holiday season, every business starts thinking about budgeting for the upcoming year. Budgeting season is typically mundane. Most businesses have their standard process for creating next year’s budget and in most years there is nothing unusual or different about the process. However we can all agree creating your company’s budget for 2021 will be anything but normal.
With a potential or partial shelter in place order for the upcoming flu season lingering 2021’s budgeting process should include a thorough evaluation of how productive your brokerage business can work digitally if they are required too.
During your evaluation, if you are like the numerous managing principals we have spoken with, you will likely determine every aspect of your business will be under review and possible evaluation as our industry moves into the digital age. Although there seems to be an overwhelming number of opportunities to digitally market your listings there are also multiple options to consider that will help your CRE brokerage be more productively and profitably in the back office.
Amid all this chaos, covering the basics is still important when creating a thorough budget for the upcoming year. Some of the focus other managing brokers have shared with us as they create a 2021 budget are: how can they enhance specific agent team efficiency, and effectively managing corporate desk cost and understanding and managing their deal pipeline.
No matter how successful your brokerage business has been, generating budgets and strategic plans will always be an integral part of its continued success especially during abnormal economic times. While there is no standard for every brokerage, based on our discussions with multiple managing brokers, there are a few commonalities managing partners seem to be mindful of as they create their budgets and strategic plans.
Preparing your future budget includes doing your best to predict your brokerages revenue including understanding your booked but unreceived revenue as well as your potential pipeline opportunities. It also includes staying abreast of the evolving CRE technology available to help you manage your CRE brokerage from pipeline to agent pipeline.
Part of the budgeting process can also include asking your top producing agents what tools they have researched and believe will help them and the organization increase productivity and profitability. Agents can be helpful with understanding what tools they need to improve efficiency and their success rates especially if they are early adopters of technology.
Checking in with the back-office is critical when it comes to creating a budget for 2021. Whether there is a second shelter in place order, as we move into flu season or not, – it’s only a matter of time before other pandemics will require businesses to work remotely. The real question is – is your CRE brokerage business truly prepared to effectively work remotely?
Reaching out to the back-office is an essential element that is often overlooked but can significantly enhance your brokerages productivity which also leads to more profitability. Enhancing the back office processes can also improve transparency for your agents to have a thorough understanding of their earnings. Some of the important questions to consider as you engage your back office in understanding how to help enhance their productivity are:
- How efficient do you feel our back office processes are?
- Does the current system effectively and timely determine and distribute agent commission?
- Are there any tasks or activities in your process that currently take too much of your time?
- Are there any tools or resources that would help you accomplish your job more effectively?
After reviewing these questions with your key back office agents and marketing staff personnel it is likely worth reviewing your entire tech stack as you move into this year’s budget season. Since technology is constantly evolving, your tech stack should also be constantly adjusting to your brokerage’s needs.
It sounds like a given, but without communicating and discussing your budget and strategic plan with your entire team, you may be putting a wall between your goals and the various departments of your organization. Taking the time to communicate to your team why you’re taking the approach and direction you have decided to pursue will significantly increase your brokerage’s successful implementation of the company’s 2021 budget and strategic plan.
As earlier mentioned, one key element was the time and effort they took, on a regular basis, to stay abreast of the new technologies in the CRE industry and the best blogs in our industry is Michael Beckerman’s CRETech. In many cases, businesses might not even realize how much their outdated technology is hurting their bottom line. How can you know with certainty that it’s time to upgrade your technology? With technology moving at such a rapid pace your technology stack has to be continuously evaluated, and just like a computer if it’s more than five years old it is likely outdated and needs updating.
Platforms with the ability to track historical transactions of the firms, built-in pipeline features and rich reporting capabilities while integrating with other aspects of their business was also consistently mentioned by CRE executives we spoke with.
Additional managing brokers also shared that one of the best ways to gauge the health of your brokerage is the frequent monitoring of the firm’s desk costs. Factors included in desk costs can be anything from business costs such as advertising or continuing education, licensing costs, office space, support personnel and informational platforms.
CRE brokers also spoke about how the revenue generated by CRE brokers being more complicated than residential real estate given 70% of their revenue is generated through leasing commissions as opposed to sales. Trying to determine and understand desk cost, by sector, can become very time consuming when breaking down the percentage of revenue coming from office, industrial, retail, land, investment agents and property management fees.
Having a clear picture of what sectors generate the most revenue allows brokerages to see where they should utilize resources. Should you be hiring land guys? Investment brokers? Focusing on industrial because it’s more profitable? Staying connected with industry trends helps managing brokers understand if their firm is already leaving money on the table in certain sectors, as well as, understanding if just hiring more agents will increase profitability.
A commercial real-estate specific platform can help you easily and effectively manage sector revenue percentages, and how to apply that information to your budgeting process. An easy way to calculate this is simply dividing the total costs of your brokerage by the number of agents; however, that only allows you to see an average, which, in the long run, can give an inaccurate view of your firm’s desk cost. A technology platform that will do all the heavy lifting and automate calculations and individual desk costs can increase productivity for the brokerage’s operational team.
CommissionTrac brings trust, clarity and transparency to your back office operations. Budgeting is so much more than simply making sure your brokerages expenses don’t exceed its income. As you plan and review your 2021 CRE brokerage budget over the next several weeks, don’t forget to factor in agent revenue, sector revenue percentages, and desk costs to create the most effective and thorough strategic plan for your businesses future.
CommissionTrac is here to assist you with all your back office and budget-planning needs, and all the analysis factors associated therewith. To find out why over 1,000 users and affiliates of Colliers, CBRE, Cushman Wakefield, NAI, SVN, Lee & Associates, as well as largest national ‘tech-enabled” brokerage business, TenantBase have chosen CommissionTrac as there back office CRE platform – request a demo today by visiting our website at www.commissiontrac.com
Authors: Daniel Levison – CRE Holdings (CommissionTrac, Commercial Property Consultants, SharedSpace) and Turner Levison, CEO, CommissionTrac