Shift in focus from transcation sales to outbound sales

It is tough out their!

With the state of the real estate markets around the world, I don’t think there is any single marketplace that is not experiencing reduced enquiry rates and as a consequence, sales rates. Which ever way we look at it, this is effecting property businesses underlying profitability.

I was recently discussing this with one of our clients, and put forward a suggestion that I want to share with you today. That suggestion is to change the culture of your organisation from sales transacting to outbound sales.

So what does this mean?

Sales transacting is is culture of effectively waiting for the prospect to make the purchase. Your sales team is entirely reactive. They wait for a prospect to enquire, and often wait for them to purchase, and then effectively take on a role of facilitating the transaction. This sales transacting role can also be described as  ‘order taking’. This culture is really born out of bull markets. When times are good, and a new prospect is around every corner, your sales team really only needs to focus on sales transacting to make target, and a very acceptable living.  However this is a very poor sales culture, if we can call it sales at all. At best it can be described as a sales administration role, at worst simply an administration role full stop.

So what is an outbound sales culture? That is where your sales people are proactively chasing prospects. They are hunting for business, rather than order processing.

It goes without saying that is a slowing (slow!) market, you need your sales people busy. They need to be proactive and to be chasing every opportunity and can not be waiting for the next purchaser to walk in.

How do you create this type of culture?

Here are just a few ideas:

– break the mold. You really need to confront your sales team and get them to understand that things are different. The market has moved, and they need to move with it or they will be pushed out of the property industry. You need to make clear to them that the ‘new’ corporate culture of your organisation is about ‘outbound sales orientation’.

– give them the tools.

– systemise, systemise and systemise. When your business is effectively processing deals, you don’t tend to need to many systems. You can afford to operate inefficiently simply because they are good times and plenty of profit to go round. However in tougher times you need your business running like a well drilled team and it is systems that will achieve this. If you don’t have paper based systems – put them in. Better still though get effective software to manage, control and report on the key aspects of your business so you are operating as efficiently as possible.

There is never a better time to drive real change in your business then when times are tough. Everyone, from your board through to your sales people are all concerned about revenue and profitability, so now is the perfect time to effect that change in your business.

Consistency, persistence and attention to detail – the keys to success.

I recently read this article at which I thought was fantastic. It so simply demonstrates many of the core benefits of implementing software into a real estate agency – consistency and detail. The author Robert Freedman refers to consistency, persistence and attention to detail as being ways for a small agency to complete against larger competitors. This is certainly the case, although every business, large or small, should be trying to adhere to these ideals.

In our business we talk about ‘sophisticated users’. These are not necessarily large or small businesses, but they are businesses that see that technology can give them a competitive advantage and are prepared to invest the resources to make it happen. It is very important that real estate agencies understand that these two items are intimately connected. Getting the very best software solution is the start, but you then need to ensure that you use it. Smart operators know that every day they need to be reviewing and pushing the boundaries of what they can get from their software. This can be frustrating, as in some cases the software will simply not be able to do what is asked of it, however this is where a great relationship with your software vendor comes into play. This is when a phone call to your software vendor with some gentle suggestions on improvements to the software is warranted.

We love these phone calls in our business. This is when we get a better understanding of what our software can or can not do. It is an opportunity for us to make our software better, and after all, that is what we are all about. The satifaction we get is from knowing that our software is making a real difference in the lives of our clients and their staff.

To ensure that we respond to customer requests as quickly as possible, Brightfox provides Software Assurance with foxEnterprise, our leading software. This enables our clients to upgrade to the latest release which occurs every 3 months. These regular releases give us the opportunity to rapidly release new functionality to our clients, rather than having to wait 1 to 2 years for the next major upgrade which is the norm in the software industry of course.

New Real Estate Sales Models

There have been a number of innovations to the traditional real estate sales model around the world in the last few years. There has been a signfiicant increase in the number of agencies that will sell a home at a fixed price, usually mush lower than prevailing commission % scales.

A very interesting model that is starting to gain significant momentum in the USA is a company called Redfin. They have been operating since 2006 and I think many realtors in the US thought that they would be a flash in the pan. They are however still going strong and by all accounts are growing.

The model is quite simple. They reimburse to a Buyer 2/3rd’s of the commission that a buyer would otherwise pay. So in circumstances where a buyer would pay 3% commission, 2% is reimbursed.

Buyers commission you might say! What is with that!

Well in the US it is very common for a real estate transaction to have up to 6% commission paid – 3% to a selling agent and 3% to a buyers agent. It is probably the highest in the world (certainly the highest in all of teh markets that Brightfox is involved in) for a standard real estate sale. You will have instances of higher commission paid on off-plan sales in places such as Spain, France and sometimes even in Australia, however this is always paid by the Seller.

So when looking at Redfin and contemplating the affect of a model like this in Australia you first need to realise that the US is starting from a very different place. I think we would all agree that there is a lot of space in 6% commission for some efficiency improvements / cost cutting.

I find the whole issue a very interesting dilema all round. There is no doubt that all property transactions should have a buyer and seller agent involved to best protect both parties. The concept that one agent can act for both parties is in itself impossible (the term ‘agent’ itself means to act on behalf of another party – with the law providing a fiduciary duty to act in the best interests of that party. So how can a single agent act for two parties!) as well as being commerically unworkable. Both parties actually seek different outcomes (one a higher purchase price, the other a lower purchase price). However a 6% transaction fee on commission alone, not to mention stamp duty, legal fees etc, is simply not workable.

Without question the Internet is making it easier for buyers to determine a accurate purchase price for a property. Only a few years ago access to property sale data was the exclusive domain of property professionals. Now websites like give it away for free. So I think that the advent of increasingly sophisticated anlaysis websites for buyers to use is perhaps the future for australian real estate rather than the Redfin model. We just don’t have that much ‘fat to cut’ to make the Redfin models commerically viable on a significant scale.