Evaluate & Improve Your TECHNOLOGY SPEND. Strategies for real estate brokerage leadership

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1 Evaluate & Improve Your TECHNOLOGY SPEND Strategies for real estate brokerage leadership

2 Introduction KEY TAKEAWAYS The mobility and speed of today s real estate market is due to the advances in technology tools and products over the last 15 years. Without paperless transaction systems, lead capturing websites and mobile apps, items such as fax machines, up desks and filing cabinets would still be in hot demand. $ Where and how much you should spend on technology Today s brokerage leaders clearly understand the need for technology systems. What that technology should cost or how to measure its success is what many brokerages don t understand. Read on to find out what systems brokerages need to invest in and what those systems should cost. Don t miss out on learning how to make the most of new tools and products before and after they ve launched. Best way to implement and track the success of new technology How to plan for success today and tomorrow 2

3 BROKERAGE PROFILE Table of Contents Brokerages from all over the country participated in the following study. They varied in size from under 50 sales associates to over 450 sales associates with a combined Introduction average sales volume of 1.25 billion dollars for Key Takeaways Brokerage Profile Technology Spend Northeast Systems to Invest In West Determining Your Technology Spend Midwest Who Pays for What? Make Sense of the Cents Southeast Measuring System Success One Step Forward; Two Steps Back Providing the Right Tools Conclusion Methodology About the Sponsor: Moxi Works West 27% Southeast 23% Midwest 33% Northeast 17% About REAL Trends Participating Brokerages by the Number of Sales Associates 27% 23% 20% 17% 13% 3 Less than to to to 450 More than 450

4 TECHNOLOGY SPEND Systems to Invest In Brokerage decision-makers are approached with a new or improved version of a technology tool almost every day. The hard part for many brokerage leaders is not in identifying the available tools, but in deciding which products will bring the most value to their business. 1 Company Website 2 CRM/Database Management When REAL Trends surveyed brokerages across the country, they identified company websites, CRMs, back-office accounting, platforms and transaction management systems as most important business technology tools. Back-office accounting or platforms aren t the most glamorous tools; however, they, like others on the list, have a defined purpose that supports the infrastructure of the brokerage. Company websites ranked as the most important 5 Transaction Management/ Storage Most Important Technology Tools for Brokerages 3 Back-office Accounting tool among those surveyed. For in-depth insights on website feature must-haves, review the current REAL Trends Website Rankings. 4 Platform (i.e. Google for Business, Microsoft Exchange Server) 4

5 The good news about the top five systems listed is that many of these services are offered by a variety of technology companies in a bundled format. On average, brokerages tend to partner with four to ten service providers when it comes to their technology services. Number of Technology Service Providers Used by Brokerages TIP: 10% 10% 40% 40% Less than 3 4 to 6 7 to to 15 Combining systems into fewer platforms means greater clarity in tracking a lead from initial outreach to closing, and the potential for overall lower costs. Integration between those platforms improves the user experience for sales associates and leadership alike. Moxi Works is an example of an open platform that provides several tools and integrates a wide variety of others. WHEN DETERMINING WHERE TO INVEST YOUR TECHNOLOGY BUDGET, first consider the tools that have the greatest impact on your brokerage s productivity. This eliminates the stress of deciding what systems to invest in and makes it easier to turn down vendors who may have a cool product that isn t functionally critical for your business at that moment. Consider partnering with technology providers that provide multiple tools a plus, but don t overlook their ability to customize your solution. You want to ensure that you are only paying for the tools you need. 5

6 Determining Your Technology Spend Technology costs can add up quickly considering the multiple systems and services used by brokerages in their day-to-day operations. To complicate matters, similar systems can differ in functionality and features, making a side-by-side comparison a challenge. Company websites ranked as the most expensive technology tool for the brokerages surveyed. The variety of front-end and back-end features available for brokerage websites makes it difficult to calculate an average monthly spend. In the survey, brokerages reported spending anywhere from $500 to $18,000 a month for their website. Unsurprisingly, as the number of features increased, so did the cost of the website. Commonly provided features include database/lead management, back-end communication networks (intranets) and marketing platforms. Average Monthly Expenses of a Brokerage Phone & Internet 6% Office Supplies 5% Legal & Professional Services 8% Technology 11% Marketing Advertising 11% Lease & Utilities 21% Personnel Costs 35% Other 3% 6 Brokerages may not spend the same amount of money across the board on any one technology service; however, on average, 11 percent of their monthly costs are from technology services. For firms that employ developers or programmers, personnel costs averaged 5 percent higher with technology costs averaging 5 percent lower. TIP: IF YOU RE UNSURE OF WHAT YOUR BUDGET FOR TECHNOLOGY SHOULD BE, work backward. The firms surveyed compared their annual technology costs to their annual gross margin. Gross margin is the revenue that a brokerage firm has after referral fees, franchise fees, and sales associates commissions are paid. In most cases, the amount spent on technology services was equal to 5 percent of their gross margin. This number fluctuated minimally from three to eight percent and is a useful benchmark for where your technology expenses should be.

7 Who Pays for What? There is a way to expand your technology offerings without incurring all of the costs. Several brokerages across the country share the technology costs with their sales associates. This is done through a monthly fee that all sales associates pay or a cost paid only by participating sales associates for specific products. Monthly technology fees range from $25 to $200 and depend on the services provided. Either approach is effective, and provides the service or tool at a better price than either party could accomplish individually. Lead generation tools, agent websites, marketing platforms and design-to-print services ranked as the systems that brokerages are more likely to share costs on with their sales associates. Unlike the other systems listed where a monthly fee is applied, lead generation costs are generally shared through referral fees collected by the brokerage from the sales associate once the lead closes. Customer Relationship Management (CRMs) systems offer valuable way for brokerages and sales professionals to maintain existing customer relationships and manage leads. However, many CRMs aren t one-size-fits-all models. To circumvent this issue, several brokerages offer more than one CRM solution for their sales force. It may mean more work for the broker-owner to analyze the overall flow of business, but it allows for greater agent adoption and buy-in. When considering the structure of how to share costs for services, determine how valuable the service is to the sales associate and the brokerage. The more valuable a tool is to a sales associate s business, the more accessible it should be to them. Also, if you can, combine multiple tools into one, fixed monthly cost. As long as the brokerage does a good job of explaining the benefits included with that cost, it simplifies the expense for both parties. Percentage of Brokerages that Split Costs with Sales Associates on Specific Technology Services TIP: Lead Generation Agent Website Marketing Design-to- Print Services CRM/Database Management 41% 31% 27% 26% 10% REAL ESTATE PROFESSIONALS ARE DRAWN TO TEAMS OR BROKERAGES because of their ability to provide them with viable leads. Consistently evaluate the lead generation tools your brokerage is using, and identify which source is producing the highest quality leads. Quality wins over quantity and strengthens recruiting and retention efforts. Collecting a referral fee at the end of a transaction is just one way to share the cost on leads. Further, differentiate yourself from the competition by diversifying how you share costs on lead generation tools. 7

8 MAKE SENSE OF THE CENTS Measuring System Success Calculating the return on investment (ROI) for technology services isn t widely practiced by broker-owners for one simple reason, it s hard to figure out. For those who do track their ROI, it s largely based on the product usage. Google Analytics and website registrations can help when it comes to websites. For other technology tools like intranets, transaction management systems and mobile apps, brokerages rely on basic methods for assessing product usage, also known as agent adoption. 3 Most Common Ways to Track Agent Adoption How frequently an agent uses the product or service over a time period To accurately determine the value of a product or tool, brokerages must assess the sales associate s sense of value for the product. The best way to measure value is through user feedback. Informal verbal feedback is common, but can fluctuate from day-to-day and user-to-user. Anonymous surveys give broker-owners the most valuable feedback about the technology services they provide; however, this extra step requires more planning, time and interaction with agents. Some brokers reported measuring the success of their technology systems based on their production levels or their ability to retain sales associates. When taking this approach, a broker-owner must factor in market conditions and competitor offerings. Otherwise, this method can be misleading in evaluating the success of a technology platform or tool. If an agent uses the product or service on a consistent basis Based on an agent s sense of value of the product or service TIP: Tracking agent adoption through login activity is the most common way to gauge interaction with a tool, but can be flawed if assistants or team members login on behalf of the sales force. Platforms that don t indicate what features or functions people log in for are also limiting. For example, in a multi-level platform, users may log in to update leads, schedule campaigns or make a change to their website. Single sign-on (SSO) is a must for simplicity, but a good platform should measure and report various activity as part of the product. DON T DISCOUNT THE IMPORTANCE OF FORMALLY SURVEYING YOUR SALES ASSOCIATES. Find the survey method that fits your brokerage, brand and agent base. It could be an annual survey to the entire company or a short quarterly poll that you post to your company s private Facebook group. Whatever you do, don t miss out on feedback from your sales associates. Their insights may save you from a technology investment nightmare. 8

9 One Step Forward; Two Steps Back Ensuring the adoption of a technology tool starts months before sales associates have access to it. No matter how great a product or service, it s still a disruption to business. The amount of strategic planning behind the launch of a new tool can help reduce the amount of distraction and boost overall usage. Announcing new technology services during company meetings and offering in-person training for sales associates ranked as the most popular methods for rolling out new technology services; however, no single method is used as a stand-alone solution. Each brokerage surveyed used a combination of communication and training strategies to reach their sales associate base. Percentage of Brokerages that Use these Rollout Strategies Increasingly brokerages are using internal focus groups and multiphase rollouts to increase the odds of a successful launch and long-term adoption of a technology tool. One brokerage surveyed vets its new technology through three different groups (leadership, assistants, and select sales associates) before introducing it to the entire office. A rollout strategy is not complete without considering timing. Less than 20 percent of brokerages consistently introduce new technology during their market s slow season. For most brokerages, this falls anywhere from October to February. Instead, a majority of brokerages launch a product or service as soon as it is ready to launch. When possible, integrate new technologies, especially ones that will have a dramatic impact, during the slow season. 100% 100% 88% 75% 63% 63% 50% Announce during company meetings Offer in-person training of the product/service Announce in an or campaign Announce through a company communication tool Showcase product/ service at a company event Offer virtual training of the product/service Launch a contest centered on learning/using the product/service TIP: AVOID AN UPHILL BATTLE WITH TECHNOLOGY ADOPTION by first vetting products through multiple groups. You can start with staff to test new products, but don t forget to include some of your sales force. The more detailedoriented people, the better, because they can help you find inefficiencies quicker. Nothing is worse than presenting a bugged system. An agent s first impression of a new system is hard to shake good or bad. 9

10 Providing the Right Tools It s easy to get caught up in implementing a new service because the competition is doing it, or because it is the latest buzz in the industry. Brokerages can cut through the noise and determine a specific mix of products to offer, fully paid for by them or not, by looking at what services benefit where their business is at today and where it headed. Online reputation management is by far the least provided service by real estate brokerages, but it is also the newest tool. Online reviews of sales associates and brokerages will grow as time goes on, as will the need to monitor an agent s online presence. This is a tool that is worth investing in now. Planning for a technology change isn t always possible. A vendor may go out of business or there could be a sudden loss of personnel. However, the majority of brokerages who make a change to their technology do so voluntarily. Switching website providers, changing lead sources or adding new features to a CRM are all proactive decisions. From those surveyed, approximately 80 percent of brokerages decide to make changes to their technology on an as-needed basis. As needed implies that the decision is made either proactively or reactively. When possible, brokerages should avoid a reactive approach to technology product changes. Online Reputation Management On the other hand, providing a company intranet system is still done by 93 percent of brokerages. As the number of group texting, chat and cloud storage platforms grows, the use of intranets in brokerages could decrease. A change like this wouldn t happen overnight, and may not be an issue for platforms with integration options, but it s something brokerages should look at when considering their infrastructure five years from now. Lead Generation Percentage of Brokerages that Don t Provide these Specific Technology Services Mobile App Lead Routing 45% 24% 17% 15% 7% 7% Intranet Design-to-Print Services TIP: BEFORE JUMPING INTO USING A TECHNOLOGY PRODUCT, stop and evaluate the long-term goal for your brokerage and your sales associates. To avoid the shiny object trap, know what systems fit your business model and culture. For example, if your sales associates rely heavily on their responsive websites, it may not be worth investing in a mobile app platform on their behalf. Also, don t forget the amount of time it will take to launch a new product. Is this something that you can roll out in three months or will it take 12 months? Can you roll out this product during the slow season? Will this product or service have enough value for sales associates so that they will allow it to disrupt their business? These are just some of the questions to consider before signing the contract. 10

11 CONCLUSION The way technology products and tools aid in the speed and efficiency of the home buying and selling process is invaluable. As those services continue to evolve, brokerages should not underestimate the importance of planning not just for the tools themselves, but for their integration into the brokerage s workflow. Because not every product, tool or partner is a good fit for every firm, brokerage leaders must rely on what they know. They know the culture and work style of the people in their company, the best way and time to introduce tools to their staff and sales force, and the tools they need to bring efficiency or create opportunity for their sales associates. Methodology From May to June 2016, REAL Trends surveyed and interviewed 30 broker-owners or technology directors of real estate firms across the country. Participating brokerage firms varied from under 50 sales associates to over 400 sales associates. Brokerages participated from both franchise and independent firms. About the Sponsor: Moxi Works Moxi Works is a residential brokerage services company that makes agents significantly more productive and brokerages more profitable by helping them effectively run their businesses. Backed by a solid knowledge of who they are, what they need and a better understanding of how much to invest in technology, brokerages may proactively approach changes to technology systems. Moxi Works integrated platform is centered on a sphere-based selling process that drastically increases agents repeat and referral business, while lowering overall technology, training and support costs for the brokerage. With Moxi Works, brokerages are able to make their agents lives simpler and their businesses more successful. 11

12 About REAL Trends REAL Trends is a privately-held publishing, consulting and communications company specializing in the residential brokerage and housing industries. REAL Trends provides a wide range of advisory services to a clientele of local, regional and national real estate organizations. REAL Trends areas of expertise include operational analysis, valuations, merger and acquisition advisory services, compensation analysis, consumer and business research, strategic planning and technology and digital marketing consulting services. REAL Trends is The Trusted Source for news, analysis, and information on the residential brokerage industry since Visit REAL Trends at 12