Recently, the airlines have initiated fees for passenger luggage that exceed new weight and size restrictions. This new source of revenue will supplement airline income stemming from a relatively simple step… taking a new look at how to increase profits. This "re-margining" strategy is critical for any business affected by the rising new costs of doing business.

The real estate business is also impacted by profit pressures. The costs of doing business today are far different from those even 10 years ago and include a robust cost escalation in hardware, software, lead and client relationship management software, as well as Internet, intranet and extranet fees. It is factors like these that require the broker/owner/company to study how to "re-margin" their profit zone by thinking "outside the box".

Where to start?

The savvy broker/owner in today’s market must look through every inch of the transaction to see where profit can be created. A good look at ancillary relationships might produce a source of revenue previously not enjoyed. The introspection begins by studying what services and resources offered can minimize time, costs and offer new value added profit and services to customers and clients.

The most obvious place to start is with those services directly related to the sales transaction. Early adapters saw the trend of working "on the business" rather than "in" it, and became affiliated with or bought their own title and lending services. Smaller companies, not willing to invest the money or suffer the risk factors had to simply "refer" the prospect to a lender that they trusted and would provide good solid service. Today, however, a real estate company can now compete by offering full service mortgage options to their clients and customers via mortgage services without the investment or risk, nor be concerned about poor service or noncompetitive rates.

Currently available in some states, is the opportunity to be a licensed branch of a mortgage company. This relationship allows that fees previously passed on to an outside lender, are now being retained by the broker-owner and with a sizeable fee to the referring agent. This financial incentive provided by the branch-lender relationship encourages the agent to participate in the mortgage process with basically the same energies and time invested previously, but with an opportunity to collect a fee from the mortgage transaction. This revenue incentive increased the percentages of in-house lending from about 18%-33%, helping the company survive the onslaught of declining commissions and agent demands for higher commission splits. This new type of lender/broker relationship comes with the blessings of RESPA and is successfully operative in several states.

Agents enjoy a larger split of the fee than the broker, and the broker enjoys better cooperation from the agents, a win-win situation for propping up the bottom line. .From a recruiting and retention standpoint, the broker has an alternative way to offer the agent an additional income steam, which in turn offers the management a way to retain agents and recruit new ones, while building revenues with a mortgage service

Another revenue opportunity for the agent and the broker/owner comes with the ability to offer a value added service to past clients and customers that are ripe for refinancing or equity loans. Suddenly there is a new and profitable incentive for the agent to follow up with past clients and offer these new services when the call might result in a sizable check for the time investment. Getting paid for a service agents already provide makes good money sense, along with offering great competitive, and dependable financial services to their customers and clients.

Title companies are painfully aware that the title business is also vulnerable to the newly empowered consumer and are busy adapting their business model to expand services and resources to keep profits humming.

New Profit Strategies - Steps to Survival:

Here are a few of the questions to evaluate every step of your current business model:

1. What products and services that are currently outsourced can be redesigned to produce a new revenue stream?
2. What strategies that were traditionally not changeable, be now open to review?
3. How can you re-evaluate your present relationships and systems to incorporate new and different service options that offer revenue participation?
4. What cross marketing opportunities will service clients, customers and prospects, and contribute to the profit line of my business?
5. What win-win relationships can be developed to create positive cash flow and a solid cross-marketing of databases, with accountants, investors, contractors, insurance companies I presently do business?
6. What past client business can be resurrected by offering new services, like refinance, home equity lines, real estate investment opportunities that can create a longer relationship and clients for life?

Take a good hard look at what has traditionally been "impossible" and apply a creative "what-if" strategy to your current business model to effectively re-margin your profit zone.

Published: September 13, 2002

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