FOR MANAGERS: Best Practices
Teams drive small shop success
Top salespeople who spin off their own companies point to bottom-line boost.
BY ROBERT FREEDMAN
After working for years as one face among many at a large real estate company in Lawrence, Kan., Cheri Drake, CRS®, GRI, did something many top sales pros dream of but rarely do. She set off on her own.
But Drake has no plans to grow her company much beyond the close-knit support team she has assembled. Instead, like many newly minted independent broker-owners, she plans to work as a solo practitioner with a staff that unites on sales, each staff member bringing a set of strengths to each transaction.
The move has paid off. In her first full year operating as TeamOne Real Estate, in 2001, Drake closed $10 million in 106 transaction sides, a 41 percent increase over the $7.1 million she had closed in her last year as an associate with another company.
What’s driving the business boost? It’s the opportunity to use her time more effectively and to plow more of her earnings back into generating clients. The change has also ignited her entrepreneurial spirit.
“Making this move has allowed me to do something beyond selling more real estate; it’s given me the opportunity to build a lasting business,” says Drake, an 11-year industry veteran.
Stepping out on your own isn’t for everybody, of course, say practitioners who’ve made the move. It takes strong name recognition, a loyal client base, some cash reserves to carry you through the transition, and a clear view of how you want to grow.
Starting from a strong base
When he launched his company, Tom Pleimling’s name was already synonymous with home sales in Fort Hunt, a compact area along the Potomac River in Virginia, just downstream from Mt. Vernon. So the transition was relatively seamless. Pleimling is broker-owner of Tom Pleimling Realty Inc., in Alexandria, Va., a five-person company he launched about two years ago.
Pleimling had spent 15 years working the area as a RE/MAX associate, selling from $12 million to $15 million annually at $350,000 to $400,000 a pop. In the first year he opened his own shop, he closed $26.6 million in sales in 108 transaction sides, about half of which were based on referrals from clients he developed during his RE/MAX days.
“As an associate at a 100 percent commission company, I’d been paying all my expenses since 1986 anyway,” he says. “And for the last three years, I’d had my own office, so for me, opening my own company was
a matter of just flipping the sign, although there were some costs.”
Those expenses included basic materials, such as stationery, signs, business cards, and the legal fees for incorporating the new entity. Total transition costs were about $3,000.
Pleimling handles listings and negotiates contracts, while two other licensees work as buyer specialists. A full-time office manager and a part-time contact coordinator field calls, process paperwork, keep the computers running, and make sure signs are posted and brochures are printed.
To create income stability, soften the tax bite, lower health insurance costs, and feed a retirement plan, the Pleimling team is organized as a corporation. Pleimling and the two support staff are on a salary-plus-profit-sharing plan. The buyer specialists take a commission split on transactions they work on.
Under the salary structure, his draws are typically smaller than he would earn on a commission basis, Pleimling says, but he comes out ahead in other ways. Among them, his taxes and insurance costs are lower, because the corporation assumes much of that burden, and with the profit-sharing component, he’s able to fund a pension plan for himself and his two support staff using pre-tax money. He also uses corporate money to pay for his car, client meals, and so on.
A ready-made client base
Like Pleimling, Cheri Drake launched her team on the strength of her referral base, but she supplemented it by buying a former colleague’s client list. Combined, the lists gave her company a strong roster of potential clients the day it opened its doors.
“It was an ideal situation for us both,” says Drake. “My colleague needed to slow down. So I purchased her client base. Now she refers her past clients to my team, and in exchange, she draws a salary.”
All of Drake’s team members, and Drake herself, are on a salary-plus-bonus plan. The team, which is organized as a corporation, includes a transaction coordinator, an office coordinator, two buyer specialists, and an intern.
The buyer specialists are relatively new to the industry and are attracted to the salary approach because it gives them income stability while they learn the ropes of the business. “Their salary pays their startup expenses,” says Drake. “Once they start attaining some sales goals, they get a bonus based on the team’s productivity.”
The transaction coordinator’s bonus is dependent on how smoothly each transaction proceeds. “Are the documents error free? Were the deadlines met?” says Drake.
Except for the office coordinator, everyone at TeamOne is licensed. Near-universal licensing is key to the team members’ ability to cover for one another, which helps ensure all aspects of the transaction are completed when promised.
“It’s a security blanket,” says Drake. “If the transaction coordinator is the only one in the office, she can answer pricing questions or present a contract.”
Focusing on their strengths
For Dan Forbes, CRS®, GRI, and Marie Avery, CRS®, GRI, who launched The Premier Team Inc., REALTORS®, in Bradenton, Fla., last year, having their own six-person company has enabled them to focus on what they enjoy in real estate—working with clients—rather than getting bogged down in support tasks. And the change is resonating in their sales.
In 2000, while at their previous company, Forbes and Avery together closed $10.7 million in sales volume. In 2001, after one year in business, their volume grew about 10 percent to $12.4 million.
“It’s synergistic,” says Avery. “Each member of the team supports the other.”
Forbes handles listings, trains the team, and splits administration with Avery, who also handles buyers and advertising. Two buyer specialists handle prospects interested in the team’s listings. A client case manager oversees the listings and closings and works closely with clients. A systems manager handles behind-the-scenes paperwork.
The Premier Team is organized as a corporation, with Forbes and Avery, as well as the two support staff, drawing a salary. The two buyer specialists work on a commission-split basis.
The team funds a retirement account for the salary-based support staff, but doesn’t fund an insurance plan. “It’s still too expensive to offer insurance, so we’re each getting insurance on our own,” Forbes says.
In the last several months the team has formed two additional companies: Premier Team Referral Inc., a referral company, and a limited liability corporation (LLC) that owns a moving truck with The Premier Team’s company logo on the side. The truck is offered free to clients for in-county moves and also to local charities. Setting up truck ownership under the LLC creates a liability firewall between the company and the team in case a customer is hurt while operating it, Forbes says.
The referral company was launched to recruit practitioners interested in earning referral income. Under Florida law, the referral company must be under a separate broker. So the Premier Team enlisted another broker to serve as broker of record for the company. But all the administrative tasks associated with the referral operation, including recruiting sales associates to hang their license in the referral company, is conducted by Premier Team staff. The broker of record receives an agreed-on percentage fee for each referral.
Going beyond more sales
At the end of the day, stepping out on your own is about more than just increasing sales. At the core of the decision is the desire to take greater control of your time and resources.
“It gives us a chance to have flexibility in our lives,” says Drake. “We don’t always have to work. We can rotate duties.”
It also gives top performers more control over their income.
“There are no commission splits or franchise fees when you’re on your own,” says Pleimling.
Of course, you must be willing to roll up your management sleeves, but that’s nothing new for many top performers. “If you’re growing with assistants, you’re dealing with managerial issues anyway,” says Drake.
Going the team route also gives practitioners a chance to create something of lasting value, and that’s an objective that can’t be quantified.
“I wanted to build something, mentor some people, and give them opportunities for ownership in the company they work for,” says Drake. “This gives everyone on the team a chance to grow together.”
