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In 2012, at the ripe age of 28, I had the bright idea to open my own real estate brokerage just as the country was emerging from the greatest real estate recession in modern history. I rented a swanky storefront office on the main street running through Downtown Orlando.
Today, Mainframe Real Estate is one of Central Florida’s top brokerages. When people ask, “Why did you open your own brokerage?” I tell them the truth: I was young and naive.
I’ve given advice to many who have asked about opening their own brokerage, and I’ve encouraged almost all of them not to do it.
Opening a brokerage seems like the next natural step in a successful real estate career. Truly though — it’s the biggest backward step most could probably take. Here’s why.
Pick a poor reason
There are two main reasons someone might want to open a brokerage. First, they are naive, though maybe not young, and completely underestimate the complexities involved.
The other reason is ego. They think they can do it better as their own boss, want to have complete control of their brand, and don’t want to be held accountable to anyone. You might guess someone would open their own brokerage to make more money, but that would fall under the category of being naive.
If you think owning a brokerage means being your own boss, that is a naive assumption too. Now, you are under the command of every agent you hire.
Especially at the beginning, each agent who joins will come with a new list of requests, and you’ll quickly realize how much it takes to keep everyone happy. Ultimately, being a business owner means everyone else is your boss, and you’re accountable to more people now than ever. A true leader is always last after the needs of everyone else are met.
Master of never done
Being young and naive, I didn’t realize that opening a business is creating a monster. It grows arms and legs and ugly heads. It eats your money and ravages your time.
Just when you think you checked something off your list, four more things get added to it. As soon as you think you’re about to become profitable, you desperately need to hire more support staff. As your business grows, so do your problems. It’s impossible to simplify things as the organization becomes increasingly complex and expensive to operate.
If you’re successful, you’ll eventually have the support staff to delegate responsibilities and reclaim your sanity. If you can’t, you’ll drown in a quagmire of projects and tasks that aren’t your strengths or producing profit.
Every business owner must have a grasp on every aspect of the business: operating procedures, marketing, branding, accounting, technology and more.
As a small business owner, you can’t ignore any of these things and should become a semi-expert in all of them. If you can’t comprehend how every aspect of your company functions, then you surely can’t grow and scale. Most agents don’t excel in all of these vital functions, and if they open a brokerage without these skills, everyone in the organization will suffer.
If someone insists that they absolutely will open their own brokerage, then I provide the most serious yet counterintuitive advice imaginable: Don’t hire agents or open an office.
Those are the two things that are emblematic of having a successful brokerage but will kick-start the never-ending list of expenses and growing pains. If you must open a brokerage, don’t go big. Go tiny!
Agents come, stay and go
If you thought prospecting for home sales was grueling, welcome to the most unfortunate part of being a broker: Recruiting. Convincing new and inexperienced agents to join your company might be easy, but the training and turnover will be tortuous.
Persuading experienced and producing agents to join your company is challenging, even with the best value proposition in town. Making a career change is a high-stakes consideration, and it doesn’t happen quickly most of the time. Because recruiting is the lifeblood of a brokerage, this very slow sales cycle can be far more discouraging than the fast-paced nature of real estate sales.
Once you start hiring, keeping a healthy culture at an office is more important than anything else. Happy agents are complacent agents. It’s the perfect recipe for retention. However, keeping a wide range of personalities happy at once is a challenge that almost nobody is educated to handle.
As a broker, you soon discover that you’re more of a politician and therapist, managing egos and emotions more often than transactions.
If you’ve ever felt like a buyer has sucker-punched you with betrayal, it won’t compare to that of a die-hard loyal agent and long-time friend leaving your company. You can pour your heart, soul and trade secrets into the people you care about, but it doesn’t mean they will stay forever.
Go big, but why try?
When it comes to opening your own brokerage, I say go tiny, go big — or go home. If you’re going big, good luck.
Understand that on your first day in business, you are competing against goliaths in the industry who have incredibly established brands, technology, processes, recruiting strategies and more.
You are starting from scratch. How will you compete against the endless army of competitors? What’s your value proposition for hiring agents? Going from zero to hero is a treacherous journey, but what’s your end goal anyway?
Commission compression is a reality for the modern real estate brokerage model. Many brokerages compete solely on their ability to be cheap. If a brokerage isn’t cheap, it must provide extraordinary value. If it is cheap, it needs a huge volume of agents and transactions. Either way, every broker is competing in a landscape with endless cheap models in a seeming race to the bottom.
Regarding your end goal, consider that the landscape of mergers and acquisitions with real estate companies has completely changed in the past decade.
Large brokerages are less often purchasing their competitors and more likely to acquire just their competitor’s top agents with sign-on bonuses and bribes. Brokerages don’t necessarily purchase their competitors anymore; they try to gut them instead.
It hasn’t been close to happening yet in real estate, but if we have a disruption to the equivalent of Amazon or Netflix, the traditional industry could be devastated in a short period of time.
If you’re looking for a powerful exit strategy by selling your brokerage in the future, you might now be nervous about the untold number of years it can take to grow and how quickly it could possibly collapse, either by innovation or ruthless competitors.
Finding success
Of course, there are success stories of opening a brokerage, but most are not. Most are stories of dysfunctional small businesses where the owner thinks everything is fine, but everyone else disagrees or is oblivious to how much better it could be.
I have seen single-agent brokerages be successful, but they invest time into things they shouldn’t and aren’t fully equipped in an increasingly competitive industry. I’ve also seen teams open brokerages with success, but building an infrastructure for a multiperson organization overnight is impossible, and it will be painful.
Team-style brokerages require even more support and systems than a traditional brokerage, including dedicated staff, more robust lead processes, hands-on meetings and more.
What’s my definition of success? Simplicity. Being in command of your work-life balance while creating the income you want is the highest level of success, in my opinion. Opening a brokerage is a long and windy path to get to this version of success.
Consider all of the other ways you could find success. Maybe it’s through scaling and simplifying a powerful real estate sales business. It could be by investing in real estate and creating a portfolio that generates passive income for you in the future. It could be chasing your other passions that bring you more fulfillment than showing homes on the weekend.
A realistic conclusion
Despite my pessimism, which I call realism, I want it to be known that I have no regrets either. My office has some of the best agents in the region, which helps make it fulfilling.
More importantly, we have developed our own technology and have a powerful intellectual property portfolio. If it weren’t for our tech, which allows me to be creative, I probably would have shifted gears a long time ago and transitioned into something else. Like most real estate agents have a hard time absolutely loving what they do, you would feel almost the same about being a broker. So why do it?
The wisest thing you can do is learn from the mistakes of others, especially when it comes to long-term career decisions that are hard to reverse. You might expect me to end with a hopeful note, suggesting that you could be the one to successfully open a brokerage. Statistically speaking, that’s unlikely.
But perhaps you are the exception — the one with the talent and drive. Maybe you’re the one with the resilience to outsmart the competition, create a profitable brokerage and maintain a great work-life balance.
Maybe.
But before you dive in, ask yourself if you’re being just a little bit naive.
Sean Frank is the founder and CEO of Mainframe Real Estate in Florida. Connect with him on Instagram and LinkedIn.
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