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4 Types of Business Models For Real Estate Brokerages Compared

The term business model refers to a company’s plan for making a profit. It identifies the business’s target market, the products or services the business plans to sell, and includes any and all anticipated expenses. Establishing a business model is important for all businesses.

There are many types of business models. For example, franchising, direct sales, brick-and-mortar, and advertising-based are traditional business models. 

In this article, we’ll look at the 4 most common and useful real estate brokerage business models, including brick-and-mortar, virtual, hybrid, and team structured offices.

The Best Real Estate Brokerage Business Models

When starting a real estate brokerage, you need to get your business model right the first time. Otherwise, you may find it difficult to compete with other, more experienced brokerages. 

1. Brick-and-Mortar Model

A brick-and-mortar brokerage is a traditional street-side business that offers products or services to its customers face-to-face in an office or storefront the broker owns or rents. 

Although many brick-and-mortar chains have found it difficult to compete in the digital economy, as they don’t enable remote work, several brokerages have soared under this business model.

Positives

Having a physical office allows agents to communicate with each other and hold meetings, usually more effectively than through text or video. Agents also benefit from improved local visibility and a gained older customer base. If you want to franchise, you need an office.

Negatives

Brick-and-mortar businesses are expensive to run. Scaling can also be difficult if you purchase a building that’s too small. If you don’t add on a digital element to your business, you’ll have a hard time attracting Millennials and Gen Z, which are your prime home-buying demographic.

2. Digital Model

A digital or eCommerce business is a more modern business type that offers products and services to its customers through a computer screen and typically has no physical store.

It makes sense to adopt the digital model to compete in the new Internet-based economy. Technology has allowed brokerages to go remote, which became essential due to COVID-19.

Positives

Running a virtual brokerage has many benefits, including saving money on office space and making it easier for you to scale. Considering 93% of Americans search for their new homes online, your brokerage would be missing out on a profitable market if it avoids the Internet.

Negatives

While the digital model does make recruitment easier and provides agents with more flexibility, the biggest thing you’ll miss out on is face-to-face conversations with clients. This could limit your agent’s ability to form strong relationships with your clients, customers, and co-workers.

3. Hybrid Model

Hybrid business models combine the best of the brick-and-mortar and the digital/eCommerce model. With a hybrid model, you can successfully eliminate the negatives that come with either the brick-and-mortar or digital/eCommerce storefront, provided you utilize tech appropriately.

Since you may not have enough room or capital to finance a large brokerage, you may need to use this model out of necessity anyway. At your brokerage, you can limit the amount of tech used in the space, which minimizes operating costs and appeals to young workers.

If you have few employees, rent a small space and use the extra money to hire photographers and videographers for virtual showings, and ask your agents to communicate by smartphone.

4. Team Structure Model

Unfortunately, most brokerages are seen as competitive workplaces. When agents are tracked via the number of homes they sell, some agents are more well-liked than others, while newbies are, internationally or unintentionally, left in the dust and may not receive coaching.

A team brokerage operates differently. Instead of a hostile atmosphere, agents operate more like a team, making any small group more productive and focused. Each agent is put into teams led by a senior agent or manager who helps support and coach staff to bring in sales.

Team structures also produce a more service-orientated structure, which brings in more clients. When initiated correctly, team structured brokerages sell more homes per year on average.

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