Can You Manage It?

By Christopher M. Leporini, REALTOR® Magazine

Salespeople become managers for a variety of reasons: to seek out a personal challenge, to own their own real estate office, or simply to call the shots. No matter what their motivation, fledgling managers will need to adapt to a variety of new situations. Real Estate Office Management: A Guide to Success (South-Western, 2003; $19.95) by Robert L. Herd, a branch manger with Long Realty Company in Tucson, Ariz., explores what new managers can expect and provides practical advice choosing a company and on recruiting a sales force.

Of course, the real estate industry offers several options for would-be managers. “Chapter One: Conversion From Sales to Management” describes these alternatives. For some practitioners, entering management effectively marks the end of their sales career. The author reminds you that giving up sales doesn’t have to mean giving up incentives; make sure you negotiate a minimum monthly salary, plus an incentive bonuses. You can also move into management without entirely sacrificing your sales career. Broker/owners or managers at newly formed companies, often embrace this option, the book says; these companies might lack a sufficient budget for a manager who doesn’t sell. Instead, the company might hire a salesperson to double as an administrator, rewarding the manager with a higher commission split (and possibly a percentage of net operating profits).

Salespeople who decide to seek a management position at an established company shouldn’t expect to inherit a stable, thriving office, states “Chapter Two: Managing for Another Company.” These plumb assignments are usually reserved for employees who have already proven themselves. Instead, you will probably be assigned to a troubled office or a new branch location. In evaluating potential employers, you should consider such factors as the physical condition of the office and the equipment, the company’s reputation, the office’s location and whether the company will consider relocating it, and the makeup of the present sales and administrative staff.

New managers will also want to consider intangibles such as whether their personal styles will gel with the company’s philosophy and policies. Specifically, you should ask questions regarding how much latitude you will have to hire and fire workers, establish what benchmarks the company will use to evaluate your success and award bonuses, and determine how long you have to make the office profitable.

The book also offers advice for salespeople who want to open their own office. “Chapter Three: Opening Your Own Firm” contains guidelines for evaluating a potential office’s chances of success. First, the book advises, you should thoroughly examine your area’s demographics and study the MLS listings for the previous three years. At a minimum, you should be able to answer the following questions.

  • What are the total units of annual sales?
  • What is the average company dollar per sale?
  • What are your projected monthly operating expenses (plus a reasonable profit)?
  • How many units must your office sell every month to achieve these results?
  • Is there enough excess business available to feed your business?
  • Who are the dominant agencies?
  • Who are the dominant salespeople and what are the chances of recruiting them to your office?
  • How seasonal is sales activity?
  • How much business is lost to out-of-town brokers?
  • Can you save money by buying out a local office rather than opening a new one?
  • Is the area prospering, static, or declining?

Later chapters give practical advice on basic knowledge that you’ll need in preparing your office. For instance, “Chapter Four: Getting Started” provides advice on everything from what furniture, equipment, and supplies you will need to information on error and omissions insurance. Meanwhile, “Chapter Five: Recruiting” covers the pros and cons of newbies versus experienced hands. Newbie salespeople operate on a lower commission split, which can (temporarily) boost your company’s income. Plus, you can more successful mold beginners to your way of doing things. However, they require more supervision, and their inexperience can cause them to inadvertently land them and you into trouble.

On the other hand, established salespeople bring knowledge and experience to the table. They may have an established client base and generally work more effectively with less supervision. A respected top producer’s reputation might also be a magnet to attract other salespeople to your office. However, established salespeople also carry drawbacks. They may want more money than you’re willing spend and may have developed a bad work ethic.
Making a change from salesperson to manager is a big leap, but it helps if you are prepared. Real Estate Office Management: A Guide to Success prepares you step-by-step through the operational issues that you will face. You already know that you can succeed in real estate sales, but the book will help you figure out whether you can manage it.

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This post was contributed exclusively for REALTOR® Magazine.

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