Biz 2.0 Real Estate -- Model # 1
Thursday, March 20, 2008 at 11:39AM I appreciate Rob carrying this further. So, for micro-modeling's sake, let's say we forsake the independent contractor route and devise an employee model with salary and bonuses based on results.
Let's also assume the better angels of humanity are at work and that it's possible to cherry-pick the best, the brightest and the ones who fit a team approach without losing the individual fire of innovation and ambition to excel.
Part of the problem with devising a new model is that we're trapped in old mental models that assume the worst in human nature -- I'm guilty of this, and it causes me to place limits on certain ideas, because they not "practical", or they don't take "human nature" into account. I've seen the worst and the best of human nature and I believe the best is possible.
One possible scenario is salaried, RE licensed employees divided into areas that make sense locally. Ten employees are a team chosen for the mixture of skills, compatibility, and knowledge of their area. Each team has a team leader who co-ordinates, mediates and coaches. Some areas might have higher priced homes and fewer sales, other areas might have more sales at lower prices, but say it's possible to select teams for areas that are fairly equal all the way around. Perhaps in the higher priced and fewer sales areas the team would be less than 10, but let's assume all this can be worked out equitably.
The listings in each area are the team's listings. Every member of the team knows all about the listings and, through intranet 2.0, information is continuously passed along among the team. The team leader co-ordinates all the activity to make sure sellers aren't confused by so many different people being involved, and the leader has explained fully to the seller the team concept so that the seller understands the power of the approach - the seller gets a whole team to work on selling the listing. There would be many creative ways to use the strengths of individual members: some are good at blogging, some are good at sales,some are good at buyer agency, some are good at staging, on and on.
To cut down on layers of management, the team leaders are highly skilled, capable of being cross-trianed to deal with finances, management, technology, marketing, etc. -- and they are well compensated. However, the strength is in the teams and the "leader" is trained to understand the value of human capital and the concept of interactive participation.
There are no company offices -- all communication is done online or face-to-face meetings at designated places. The only physical "place" would be where the the intranet structure is set up. I don't know about the viability of hosted intranet but let's assume the company has worked out the best, least expensive way to do this -- that the infrastructure has been built. Everyone on the team is somewhat tech/savvy and continous education is given to improve these skills.
This type model, if viable, could be viral, spreading to other areas in a wider and wider circle. The power of all this effort applied to the internet should create a steady stream of online leads by excellent placement and connections with RE listing sites. The employee compensation model could be a base salary of $60,000 and the possibility of bonuses adding another $60,000. The actual numbers might vary, they would only have to be appealing to the employees who opt for safety rather than the commission route. RE agents who can make $300,000 - $500,000 a year would not be interested but many good agents would be interested, just to relieve the pressure of uncertainty so they can concentrate on being the best without financial anxiety.
This would be a big risk for the company. And this is where the worst of human nature prevents being able to take a step outside the commission box. Will people work less if they know they are assured of $60,000? I'm sure companies have tried this and found it wanting, but did they fully implement it with strict hiring criteria? Did they really search for the best and market the approach to attract quailified, mature, internally motivated employees? Did they have a good enough bonus system to encourage better performance? Did they have excellent team leaders? I don't know.
What would a company have to offer the consumer to attract enough business to pay the overhead and make a good profit? Service and price. I suggest for the sake of this micro-model a 4% model with a cap. Let's say the cap is $10,000, so sellers would pay 4% until the cap is reached, which is a $225,000 priced home, and every price above $225,000 would be capped at $10,000. I'm just throwing this out as a place to start thinking. the numbers would need to be crunched with local knowledge of the market and what share of the market is a reasonable projection. I ran some numbers and projected a financial scenario for Savannah based on capturing 25% of the market and it came out profitable for high functioning employees and the company. Can 50-100 agents working together in a model like this with lower costs and lower service prices for consumers capture 30% of the market. Maybe.
Would some agents slack leaving the other agents to take it up? Can a system be created with mature, talented people that works in fairness for all? Ah, the old human nature thang.
More thoughts later. This brings up 2235 questions.
Reader Comments (6)
Very interesting, Mr. Farmer! :)
I'm going to have to think through this and post something as well. There are, methinks, lessons to be learned from Wall Street....
-rsh
Perhaps you and I can design something that works :)
Mike & Rob,
While both of you focus on the front end management/ logistics side of this I can draft the back end flow as it pertains to the web, technology, content and overall RE world domination. Let's collaborate!
Colby
Sounds good to me.We'll design the super company -- but we'll have to have a name. Good names are motivational.
I'll start thinking of some good names....I'm not sure why the first one to pop into my head was "Simple", perhaps because this is how the buy/sell process should be perceived by consumers once this Super Real Estate Company model is set and in place.
I'm also working on catching up on some of your other posts. I've also been over to Rob's and have some catching up to do there as well.
How are both of you going about post locations? Some here, some at Rob's and some over at BloodHound? This topic is opening up a lot of issues I am passionate about so I'm launching my own blog soon as well.
What is the best way to go about collaborating on a single topic across several blogs?
I look forward to change the industry with you!
Colby
It's like herding cats. I guess we'll just have to follow the links.