REAL ESTATE REAL ESTATE BROKERAGEBROKERAGE

MANAGEMENTMANAGEMENTPrepared for thePrepared for the

Georgia Real Estate Georgia Real Estate AssociationAssociation

byby

Gail LyonsGail Lyons, , ABR, CCIM, C-CREC, CIPS, CRB, CRS, DREI, QSC, SRESABR, CCIM, C-CREC, CIPS, CRB, CRS, DREI, QSC, SRES

GoalGoal

To understand and develop an Action Plan for the practical operation of a real estate office

OverviewOverview

1. Definition of management & the management process

2. Bridging the transition into management3. Recognizing management & leadership

characteristics4. Identifying and utilizing your resources5. Designing accounting systems to manage for profit6. Understanding your staff 7. Marketing and statistical reports8. Building a successful management plan for your firm

Class SurveyClass SurveyPlease complete the survey (handout #1)

Survey Results

1. Years in business: ___1-, ___2-5, ___6+

2. Job function: ____ Owner, ____Manager, _____ Sales Person, ____ Not in Real Estate

3. Size of Real Estate office: __ 5-, __ 6-15, ___ 16-25, ___ 26-50, ___ 50+

4. Number of branch offices:

5. What did you do before real estate?

Workshop AWorkshop AMove into small groups (about 4-6 people).

List all the jobs in a real estate office.

1. 7.

2. 8.

3. 9.

4. 10.

5. 11.

6. 12.

The Management Decision:The Management Decision:Should You or Shouldn’t You?Should You or Shouldn’t You?

• Hard work, not as glamorous as it may appear

• Can be agonizing, lonely, emotionally draining

• Not everyone is “cut out” to be a manager

• It’s OK to be a sales person

• Do you really want to manage?

Management Responsibilities:Management Responsibilities:NecessaryNecessary ResourcesResources

1. Time: allocate between “must”, “should”, “could” and “don’t” do jobs (handout #2)

2. Systems & information: records, forms, reports, policies

3. People: seek, select, train & retain the best sales & support staff

4. Money: personal assets, investors, bankers, lines of credit

5. Equipment: office furniture, machinery, signs

Management Responsibilities:Management Responsibilities:What jobs does a manager do?What jobs does a manager do?

A. Planning/Goal Setting• Define your market: find the need• Establish company goals based on filling the

needa. Short term (survival) goalsb. Profit goalsc. Growth goals: when?, where?d. Perpetuation/regeneration/continuity goals

Management Responsibilities:Management Responsibilities:What Jobs Does a Manager Do?What Jobs Does a Manager Do?

B. Organizing People to Produce1. Establish an organizational chart

a. Everyone should know his/her own accountability & reporting responsibilitiesb. Everyone should know everyone else’s accountability & reporting responsibilities

2. Delegate

Management Responsibilities:Management Responsibilities:What Jobs Does a Manager Do? What Jobs Does a Manager Do?

C. Keys to Managing Your Time

• Schedule yourself (handout #2)

• Delegate to lowest paid competent staff

• Pay for good clerical help

• Help sales people solve their own problems

• Upgrade sales staff

• Replace yourself: hire assistant manager(s)

• Close your door when you’re not MBWA

Management Responsibilities:Management Responsibilities:What Jobs Does a Manager Do?What Jobs Does a Manager Do?

D. Staffing

1. Selecting the Sales Team

a. Application (handout #3)

b. Interviewing Process (handout #4)

2. Selecting the support team (handout #5)

3. Your success in achieving your goals depends largely on your ability to motivate the staff on both a group and individual level

Management Responsibilities:Management Responsibilities:Workshop BWorkshop B

Complete the Office Task Analysis Chart (handout #6)

1. If nobody is doing a particular job, leave blank

2. If two or more persons are doing/supervising a job, note that fact

3. Compare these tasks with your list from Workshop A; what are the differences? Why?

Management Responsibilities:Management Responsibilities:Workshop CWorkshop C

1. What are my strengths?

2. What are my weaknesses?

3. Which jobs am I most skilled at?

4. Which jobs am I least skilled at?

5. Which jobs should I delegate?

MEASURING RESULTSMEASURING RESULTS

“Your goals are meaningless “Your goals are meaningless unless you keep score!”unless you keep score!”

Discussion & ReviewDiscussion & Review

1. Form small groups: discuss the resources (see slide #7) you’ll need to

a. plan,

b. organize,

c. manage,

d. staff your company

2. Appoint a leader to report to the class

Company IncomeCompany Income

• Accounting system: a true method of reporting and controlling your money

• “The funds remaining from gross income after all sales & listing commissions, including those to co-brokerage firms, have been distributed.”

• Success measured by gross sales volume is meaningless

• Number is very useful in mergers & acquisitions

Company Income:Company Income:Variables & PercentagesVariables & Percentages

• Variables include:size of operationhigh/low periods of business activitiesproximity to large metropolitan areaefficiency of operationsexpansion of programslocal customs

• Percentages used are averages of offices surveyed by the National Association of REALTORS (NAR)

Average Expense PercentagesAverage Expense PercentagesAll Commissions Paid

60.4%

Net Return4.2%

Sales Managers Salery3.9%

General Business Expense

5.8%Telephone

5.6%Occupancy

7.5%

Advertising6.4%

Saleries6.1%

Company Income: Company Income: “Desk/Associate” Costs“Desk/Associate” Costs

• Needed to determine minimum production necessary from each sales person in order to “break even”

• Desk cost = annual expense of operation* number of available desks**

* = exclusive of commissions paid on sales** = whether occupied or not

• Per associate cost used when some or all salespeople are home officed; divide by # salespeople

• Homework: Calculate your desk/associate cost, bring to class tomorrow

Budgeting to Manage Budgeting to Manage Company IncomeCompany Income

• Consider seasonal variations, business cycles, growth plans

• Include all expenses that can be anticipated which = gross income needed to pay expenses and desired profit

• Prepare budget minimum of 1 year in advance

• Primary responsibility of management is controlling expenses & income

Real Estate Income:Real Estate Income:Common Commission OptionsCommon Commission Options

1. Split commissionsa. 50/50, 60/40, … 90/10

b. split between salesperson & company c. as salesperson earns more, split increases

2. 100% commissionsa. salesperson receives 100%b. salespeople pay desk cost, most or all of business expenses

3. Salary or salary plus commission

Establishing Your BudgetEstablishing Your Budget

A. What gross income can you expect?

1. Total of sales associates’ goals (handout #7) adjusted to “reality”

2. Convert to gross commission income

(# closings x average price x commission %)

B. What commission plan will you use?

C. Expenses for a real estate office (handout #8): one time start-up and monthly

Establishing Your BudgetEstablishing Your Budget

D. What are your company objectives? a. break-even/survival?b. expansion, growth?

E. Company incomea. If you split commissions, what split will be necessary to break-even?b. If you use 100%, what desk costs will be necessary?

Establishing Your BudgetEstablishing Your Budget

F. What will your net profit be? (company income – expenses)Is it worth the liabilities? If not, make adjustments:

a. cut expensesb. increase productivityc. add sales personnel

Budgeting SuggestionsBudgeting Suggestions

1. Be conservative in forecasting income

2. Be realistic in forecasting expenses

3. Allow flexibility until you have a “track record”

4. Prepare a contingency budget for a worse or better year than expected

5. Compare actuals with budget every month

6. Let staff help: get their suggestions

7. Compare your budget with “industry standards”

Managing People:Managing People:Types SalespeopleTypes Salespeople

1. Employee: A person hired to perform services for another who is subject to the other’s control.

2. Independent contractor: A person who contracts to do something for another who is not subject to the other’s control.

Managing People:Managing People:Nature of Sales AgentsNature of Sales Agents

• Character: capable of independent thought & action, aggressive, competitive, creative, enterprising, self-confident, self-motivated

• Security: irregular hours, no salary guaranty

• Earnings: based on individual effort & hours

• Other jobs: most have had other jobs

• Reality: in spite of all the rules brokers set up, agents do what they want when they want

Managing People:Managing People:Management StylesManagement Styles

1. Control* employs rules & procedures that provide close control over subordinates* reduces sense of freedom, tends to treat people as objects, minimizes personal incentives

2. Leadership* management by example* uses participative decision making* results in improved morale, high production,increased retention

Developing Your Sales Agents:Developing Your Sales Agents:GOAL SETTINGGOAL SETTING

1. Sales agents base goals on their needs

2. Manager’s goals are based on agents’ goals

3. Manager’s role: guidance & follow-up

4. Goals must be written and be a commitment

5. Goals must be realistic, specific, measurable

Goal Setting SuggestionsGoal Setting Suggestions

• Quarterly one-on-one performance reviews by manager (handout #9)

• Bulletin board showing individual and company progress toward goals

• Voluntary public commitment by agents to goals• Encourage agents to relate money goals to

number of sales, listings, contract necessary to meet goals (use handout #7)

The Skills & Desires of The Skills & Desires of Good Managers: A Self-TestGood Managers: A Self-Test

WORKSHOP D (handout #10)

1. Please complete this self-evaluation without discussing answers with others

2. Move into a small group; discuss

a. What is the easiest thing to do?

b. What is the hardest thing to do?

Matching Your Skills & DesiresMatching Your Skills & Desireswith the Job of Managementwith the Job of Management

• If your skills & desires don’t match, find someone else to manage!

• If your skills & desires generally match, delegate where you have shortcomings

The Jobs of Management:The Jobs of Management:MotivatingMotivating

• Creating an atmosphere in which agents can develop to the limits of their capabilities

• Know each agent’s needs & desires

• Motivators: educationsetting a good examplefear opportunitiesrecognition & rewards

The Jobs of Management:The Jobs of Management:TrainingTraining

• Opportunities: orientation, regular sales meetings, one-on-one

• Include field training & a “mentor” system

• Include: role-playing, audio-visual aids

• Include individual counseling at least monthly

• Budget time & money for training

The Jobs of Management:The Jobs of Management:Training SubjectsTraining Subjects

1. Listing procedures2. Selling procedures3. Forms & systems4. Financing5. Showing techniques6. Open houses7. Closing techniques8. Negotiating

9. Presenting the offer10.Ethics11.Disclosure12.Agency duties13.Market analysis14.Staging15.Advertising16.Government

regulations

The Jobs of Management:The Jobs of Management:Knowing Top Knowing Top

Consumer Complaints (U.S)Consumer Complaints (U.S)1. Failure to disclose

property defects2. Lot size and lot line

problems3. Misrepresentation4. Errors in contract

language5. “Deep pockets”!

6. Failure to clarify agency relationships

7. Failure to explain financing

8. Poor communication & follow-up

9. Property management10.Sewer & septic

problems

The Jobs of Management:The Jobs of Management:Teach Agents Liability ReductionTeach Agents Liability Reduction

1. Document statements & events

2. Watch out for “red flags”

3. Answer specific questions carefully

4. Encourage use of other professionals

5. Avoid predicting the future

Data Collection & Analysis:Data Collection & Analysis:Why Do You Need It?Why Do You Need It?

• Determine if & how your plans are working• Show where business is coming from• Basis for setting goals, plans, budget• Use for training, guidance, counseling of agents• Basis for money planning, cash flow projections• Show growth patterns, strengths, weaknesses• This month’s/year’s actual records become next

month’s/year’s guide to management action

Data Collection & Analysis:Data Collection & Analysis:Listing DataListing Data

• Market share• Source of business• Geographic area of influence/area trends• Sales price ratio: sales divided by list price• Life of listing in days (list to contract date)• Number of listings per sales agent• Percentage of listings sold, expired, withdrawn• Determine trends by monthly comparisons

Data Collection & Analysis:Data Collection & Analysis:Listing Control SystemsListing Control Systems

1. Competitive Market Analysis (CMA) (handout #11)

2. Form for recording information during initial property inspection (handout #12)

3. Complete listing files: all notes, forms, documents

4. Listing follow-up procedure

Data Collection & Analysis:Data Collection & Analysis:Advertising Control SystemAdvertising Control System

1. Record source, time & nature of every inquiry that results from advertising

2. Determine media effectiveness based on #1

3. Cost of ad call: cost of advertisement number of consumer calls

4. Conversion rate: # of consumer calls# of appointments made

5. Use data to increase effectiveness of ads

Data Collection & Analysis:Data Collection & Analysis:Sales DataSales Data

1. Source of buyers

2. Buyer profiles

3. Average sales price

4. Average # buyers per sales agent

5. Percentage who actually buy

6. Market share

7. Determine trends by monthly comparisons

Data Collection & Analysis:Data Collection & Analysis:Sales Agent ProductionSales Agent Production

• Schedule quarterly goal review sessions with each agent

(use handout #9)• Measure results against goals• Adjust goals as needed• Review Satisfaction Survey results

(handout #13)

Data Collection & Analysis:Data Collection & Analysis:Keeping RecordsKeeping Records

• Who: lowest paid competent staff

• Time reduction: use forms

• Management by “gut” feel may work in exceptional markets but it’s devastating in sophisticated markets in which everyone else is using computers!

Data Collection & Analysis:Data Collection & Analysis:Decisions Based on DataDecisions Based on Data

1. Planning budgets & goals

2. Where to spend money

3. Where to save money

4. Directing sales agents

5. Sources of business

6. Growth patterns & trends

7. Strengths & weaknesses

A successful real estate A successful real estate company is always based on company is always based on

good managementgood management!!

GOOD MANAGEMENTGOOD MANAGEMENTRequires:Requires:

• Management & leadership skills/competencies• Desire to be a good manager• Sufficient resources• Written, realistic & measurable goals• Accounting systems ($ and data) to manage for

profit• Marketing & statistical reports• Understanding both sales agents & staff

We hope you’ve enjoyed this class.We hope you’ve enjoyed this class.We hope it will increase your success.We hope it will increase your success.I’ve certainly enjoyed being with you I’ve certainly enjoyed being with you

and have learned from you.and have learned from you.

, !გმადლობ გმადლობთ, !გმადლობ გმადლობთ

Gail Lyons &Gail Lyons &International Real Property International Real Property

FoundationFoundation