"Bigger is better" is the usual expression, a bumper-sticker slogan meaning that if you're a company you must grow, you must be bigger than competitors and companies that don't grow will likely fail.

Wall Street, for one, certainly believes in the concept that bigger is better. Woe to the company that doesn't show a quarterly increase in revenues and profits -- shareholder value worth millions and billions of dollars can be lost once disappointing results have been announced. You have to wonder how much of the financial flimflam and book cooking seen in the past few years has been a direct result of the bigger-is-better commandment.

In real estate virtually every market is dominated by one or more large firms, giants that control 15 or 20 percent of all transactions and sometimes more. Indeed, the market penetration enjoyed by the nation's 250 largest brokerage firms is impressive.

"According to the Real Trends Top 500 list," says The Future Of Real Estate Brokerage, a recent study from the National Association of Realtors, "the market share of the top firms - - as measured by number of agents and sales -- is increasing. In 1993, 16.8 percent of all agents were affiliated with the Top 250 largest firms. By 2001, 24.1 percent of all agents were affiliated with the Top 250 firms. The Top 250 firms in the United States accounted for about one million of the six million total home sales in 2001."

Now let's see: The top 250 firms engaged 24.1 percent of all agents and produced one of every 6 sales in 2001. One-sixth of all transactions is 16.67 percent. Seen another way, 24.1 percent of all salespeople have a 16.67 percent marketshare.

If being large is such a great idea -- and there are certainly good arguments to be made for that perspective -- would not one expect marketplace efficiencies, bigger ad budgets, greater name recognition and more offices to result in more sales per agent? Given such size-based advantages, should not 24.1 percent of all agents produce more than 24.1 percent of all sales?

Alternatively, could it be that the broker with one or two salespeople, a small office and a limited sales area is actually quite efficient and profitable? As anecdotal evidence, I remember one broker with hundreds of salespeople who closed many offices and started working from a small space near his home. Why, I asked, had he made the contraction?

Less hassle, fewer hours and more money, he replied.

The oft-overlooked reality of real estate brokerage is that small firms and sole practitioners -- like lawyers, accountants and physicians -- can do quite well, thank you. You don't need 97 transaction "sides" to make a substantive income, especially if you live in a high-cost area and have low-overhead.

But what about those big firms with their armies of agents? Should they not dump the salespeople who are not bringing in their share of the business?

I keep looking at the Real Trends numbers and my sense is what they likely illustrate one of the great attractions of real estate: Low barriers to entry.

What's interesting and redemptive about real estate is that you don't need a college degree, massive investment or lots of tuition dollars to obtain a sales license. This means that at any time huge numbers of people -- hundreds of thousands each year -- enter the industry. As well, huge numbers also leave each year, done in by the realities of marketplace competition. In effect, real estate offers a chance, an opportunity, that is simply not available in most other fields.

Many of the larger firms with huge numbers of salespeople are performing a public service of sorts: They welcome entry-level agents and have extensive training programs in place not because the fledgling agents offer proven productivity but because they have potential. It is expected that many, if not most, new licensees will wash out in their first few years but the thinking is that the ability to attract and retain future top producers makes entry-level educational programs worthwhile.

Adding salespeople has a cost and one could argue that the present system of taking on new salespeople does not result in maximized profits for big firms. But there are other ways of measuring value, and there is surely a social good which comes from a localized industry where all are welcome.

Rather than measuring the 250 largest firms, their agent rosters and sale volume, it might be more interesting to look at the 250 largest firms, their sale volume and the number of agents on their staff for at least a year or more. It's just a guess, but I bet that staff size and productivity would match-up more closely with the rest of the industry.

For more articles by Peter G. Miller, please press here.

Published: April 8, 2003

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Peter G. Miller, also known as OurBroker®, is the author of six real estate books -- including The Common-Sense Mortgage -- and is the original creator and host of America Online's Real Estate Center. Peter's weekly columns appear in more than 100 newspapers nationwide, he is also published in a variety of other media outlets and he is a frequent speaker at national events and conventions. Peter welcomes your questions, comments, and news releases via e-mail at .