Call it guts, genius, ego, or folly, but some agents believe they can swim upstream against established local competition and the franchise consolidation current and open their own mom and pop realty shop. What are the pros and cons of becoming your own managing broker?

One agent writes Realty Times:

Blanche,

I have read many articles and have listened to the HV master mind calls of yours. I believe you know your way around real estate and thank you for the contributions you bring to the table. I write to you to ask for some assistance and guidance.

I am exploring the option of opening my own real estate brokerage. I am unclear of what path I am going to take, whether it be with others for capital assistance, franchise or not, or go it alone. I am desperately seeking education, books, and resources. I have read articles and they assist at the surface level at best. I need a more in-depth look at infrastructure strategies and dynamics. I am green, as green as they come, when it comes to bringing in others and how best to educate myself on what most business people look to have access to when they pick partners and what I should be making sure of. My potential business partners are the big fish in our pond and I am the guppy.

I am looking for my brokerage to be more of an Exit Realty strategy. I am actually considering this to be a strong option. This is what I envision ... bring tools, resources, and training to agents to guide them to a successful career, to focus on training and having the agents call within themselves and base their business around their passions. I want my agents to have real estate be incorporated into their life vs their life being incorporated into their real estate career. I want to train and guide them how to use their passions to fuel their business. I like the residual income type strategy that Exit has.

I want to do this because of my passion and desire to use all the strengths that I have within me. Please, do not take this as arrogance, however, as I truly believe I can do it and posses the skills to make a successful firm. I love to create, train, build, manage and inspire. I do not know how well this would be received, but I envision an office that would incorporate what I have previously stated along with some other ideas I have.

I feel that many agents struggle because they lose focus for too long of periods of time. They have always done x, y, or z, year after year but find it no longer working and wonder what is wrong and why. There is also the hungry agent that does whatever the latest and greatest that they read someone else is doing, though they lack the understand as to why it works for that person and so forth. They try it, sometimes successful and more often than not are puzzled when it did not work for them.

The crazy thought at the moment and who knows, maybe it is out there (and in some extent it is however I do not believe on a company wide scale). I have heard that real estate "teams" are more common in some parts of the country over others. There are many reasons why they do this and the one that interests me the most is, they have their agents that come on board specialize. I have yet to meet an agent when asked what clients they enjoy more buyers or sellers, unable to answer. My point with this is then why doesn't a company help their agents do what they love, focus on it and negate the fear they have that they will lose money when they don't try to do it all?

If you have an inner office network and referral type system where it is understood the specialist work together as a team. Most usually know when they go on a listing appointment the seller will need to buy. If two agents go out as a team on this appointment and introduce each other as the agents they will be working with and hiring then there will not be that unease moment when work with the other specialist on the opposite side of the transaction. It could be done smoothly or at least in theory it sounds possible. I think the way you make it happen is outstanding training, giving them the tools to follow their passions they develop and leaving the door open if they should desire to switch it up after sometime.

Maybe you take Ford's engineering training and work it into real estate. Basically, what they do is train you in the different fields of engineering they have. They rotate you through (this can be a long process there) working on different projects and then in the end of the program you are allowed to pick what division of engineering you desire to go into. Obviously, Ford has veto power but I think you get the gist of what I am saying here.

So you do the same with real estate, you teach then buying, selling, new construction/development, investments and so forth. Evaluate what you have seen with them in this process and then listen to what they feel and help cultivate their skills in the area that is decided on.

If you can give some guidance as to some resources that will guide me in an excellent direction I would appreciate it. Anything you can give will truly mean the world to me.

Thank you so much for your time. Sincerely, Broker-To-Be

Realty Times responds:

Without knowing anything about you, I would have to ask you some hard questions.

What do you know about yourself and your local market that convinces you that you would be a successful broker and that your shop will be able to compete against others? The answers to that question are important because they are going to provide you with the necessary fuel it takes to get through the hurdles you'll need to leap -- to create a business plan, get funded, find agents, get them performing, and growing the business. It takes a lot of management savvy to grow the incomes and balance the personalities of a largely independent contractor workforce so they can in turn grow your income.

You sound fully capable of managing yourself, but when you open up a shop, that introduces people management into the mix. If you like managing others and you're good at it, you'll make a great broker. If you're not good at it, you'll have chaos on your hands.

According to Richard Smith, CEO of Realogy, parent to franchise organizations Century 21, Coldwell Banker, ERA, and Sotheby's, consolidation is the wave of the present and future. He told Realty Times, "About 80 percent of the industry is independent (not affiliated with a brand), so it's evolving like the '70s hotel business. Then most hotels were not affiliated with national brands, now they are affiliated with national brands, and boutique hotels are a small part. That's also happening in real estate. As consumers become more global, we think they will tend to migrate to brands they know and trust."

So, do you live in a market that supports boutique brands, or do you need to affiliate with a franchise to get the marketing clout and branding you might need to compete?

Next, I would look at your business philosophy and then you can find a franchise partner to match up with it.

1. Do you want your business to be broker-centric (you provide most leads, branding, training, etc.) or agent-centric (95 percent commissions to agents, they do their own lead generation)?

2. Will you be competing with your agents in the field?

3. How hands on do you want to be? Sounds like you're more interested in mentoring than in selling homes yourself.

"Not all brands focus on franchisee start-ups, but it does happen with the right level of experienced agent looking to open a franchise and run a brokerage business," says a Realogy spokesperson. "As a general resource to our franchising value proposition, visit the B2B section of our Realogy website."

Realty Times also turned to one of the nation's most well-known franchisors with a residual-type plan -- Keller Williams.

Founder Gary Keller suggests that you ask the right questions:

"Know your big why. "Why" are you doing this? Be very, very clear about your expectations of owning a business.

Businesses are built on two foundations:

• Value proposition. Be very clear on your value proposition. What will truly make your business special and unique? Why will an agent want to join your company? What will your business do for them? Write out your recruiting pitch to agents and then build your company around that. In other words, become who you need to become. Do the same for buyers and sellers.

• Economic model. Be very clear on how the money works. Run various scenarios so you're clear on what your gross income and expenses and net income will be. In good times, expenses chase revenues to support growth. In tough times, expenses are cut to be efficient to maximize the profit from the income you can get.

• Study the competition very carefully. Make your business decisions based on being very competitive and realistic about what market share your business can expect to get out of agents -- not real estate sales. Companies make their money based upon their commission plans not gross sales volume.

• Design. Design your company culture up front and then build the company to live up to it.

• Pro/con sheet on opening a business vs. doing something else. Be very clear about your decision so you'll stick with it when it gets tough. And real estate brokerage always has cycles that are tough.

Good luck, and let us know what happens.