The first thing we go through when I work with real estate brokerages — whether it’s in helping them to streamline their technology or to prepare for sale — is their financials. And, one thing that I always spot in these financials is excess spending. I’m not judging them on how much they’re spending, rather, on how they’re spending money on products and services that are redundant. Redundancy is one of the best places to save costs.
It’s not uncommon, whether through acquisition or simply due to the course of time, that a company will have redundant systems providing the same benefits. Sure, maybe one group prefers a certain system over another, but I’ve seen plenty of examples where the spend is across the board. For example, companies that pay for eSignature from three or four providers, or multiple transaction management systems and even multiple CRM systems. I’ve even seen multiple accounting systems!
Whether times are good or not-so-good, it’s always good practice to audit yourself. When times are good, most owners will say that they don’t have the time because there’s so much new business coming in the door. When times are not so good, owners will say they don’t have time because they’re too busy trying to get new business in the door. I get it, running a business can be time consuming. But continuous tweaks like this can keep your business on the right path and mean the difference between profit and loss.
In my previous article about renegotiating your vendor contracts, I talked about taking an inventory of your systems, providers and contracts so you can work with your vendors to get better pricing. But in this instance, it’s crucial to take stock of the systems that you’re using so you know the purpose each one serves.
eSignature: a simple illustration
For illustration purposes I’ll highlight eSignature because, if you look at the 2022 Technology Survey conducted by the National Association of REALTORS (NAR) you’ll see plain as day that agents find eSignature to be the most valuable tool they use. Further, you’ll find that it’s the most valuable tool that brokers provide to their agents. I don’t find this at all surprising and I’m sure neither does anyone reading this.
Do you know how many tools you’re using in your business that include eSignature functionality? If you’re like most brokers, probably not. Or, maybe you are and you just like to spend money. Or, someone once said, “I don’t like this one so let’s get a new one.” But the old one just stuck around because someone else said, “I like the old one and I’m not changing!” Maybe you have a dedicated service, then you have one integrated into your forms system, then another one integrated into your transaction management system. You may even have another integrated with your CRM.
Just recently I was evaluating a brokerage’s spend and saw that they were paying for DocuSign, Transaction Desk, Dotloop and Form Simplicity. There’s no issue with any of these products. Each has its own unique benefits. But, each also has eSignature capabilities. So I asked how they’re using them. It turned out that they were using all of them for different parts of the transaction process. As the one paying the bills, the broker/owner didn’t even realize that they all have similar functionality and that his agents and staff were using the eSignature capabilities of each of them for different reasons. The combination added up to nearly $100k annually.
Every dollar going out the door is as important as every dollar coming in the door. You typically have much more control over your expenses than you do your revenue. It’s the area of your business that you should be most critical of since it’s also an area that very typically creates long-term obligations for you. So when we reviewed this, and other seemingly redundant expenses, it was quite eye opening for that owner.
Putting this into perspective, if you’re hypothetically paying $10 per user for a system and you have 50 agents, would you rather be spending $500 a month or $2,000 a month? That’s what this is the equivalent of and this happens all the time.
How to avoid this spend
For starters, the best advice I can give to anyone is to evaluate your expenses at least once a quarter. Depending on what you use for accounting you should have a vendor list and at least know the category of the expense and who the money is going to. If that’s not enough, go through the credit card expenses, auto-payments and invoices.
Create a list of vendors and products you’re using, monthly costs and other pertinent details like the sales rep, website and contract terms. If you don’t know what a system does for you, Google it. Look at the website, read about the features and functions, ask questions of your internal teams and agents. What you learn may surprise you.
It’s also wise to research the products you’re licensing. That might mean sitting through some training videos. It might mean calling a sales rep to have them “re-pitch” you on something. If this owner had done that with the products I mentioned above he would have quickly realized some significant overlap. He may also have found tangible reasons to be spending on all of them. But at least that’s on purpose.
The bottom line is that the expenses hit your bottom line, so be cognizant of the products and services you’re using. Get to know the products well, leverage the training that the vendors offer and make sure that if you’re spending on seemingly the same thing you at least know why.
Scott Petronis is the founder and principal at Xcentric Consulting, LLC.