The days of the single-office, generalist, residential brokerage may soon be over. Those who survive this down market will most likely have done so because they will have made the choice between getting bigger or becoming a specialist firm, a boutique.
This is a common theme within any industry facing the kinds of historic challenges that we are. It’s the choice between growth or specialization. If there is little differentiation between your firm and the many others in your marketplace, there is little reason for consumers or agents to choose you over another. Now more than ever you need to either establish a dominant market position or find your niche and own it.
Growing under these difficult conditions is not about expanding wildly into new territories. In most cases, it’s about strengthening your position by acquiring or merging with other firms without adding unnecessary costs. It’s about gaining profitable market share to both survive the day and position oneself for accelerated growth when things improve.
I spent a decade in mergers and acquisitions and was centrally involved in the purchase of nearly 350 brokerages. Of these, over 100 were companies with less than $1 million in gross commission income. The overwhelming majority of those acquisitions were what we referred to as “roll-ins.” This was when one firm would acquire another and immediately consolidate offices, effectively “rolling in” the staff and agents from one entity into the other. When structured and integrated properly, these roll in acquisitions generated extraordinary returns, even in soft markets. This was because the buyer didn’t assume major expenses and the purchase payments were generally a percentage of the acquired agents’ gross profits.
Now is the opportunity for many, many firms, even those that are struggling more than ever before. The forward-looking are making bids on companies that will immediately bolster their reputation and profits. Your road to getting big could start with the roll-in of a firm with less than ten agents.
Identifying a specialization differs from market to market. A niche can be staked within price-point, neighborhood, technology, or service, to name a few. What’s important is that you choose a distinction the consumer cares about and that there is enough opportunity in it to make you profitable. You then build your services around it in a way that ensures you have top market position in that niche. Then work your tail off to keep that position.
Consider the barriers to entry before you dedicate yourself to your area of expertise. If you put all your eggs into the technology basket, besides understanding the cost involved in maintaining dominance you need to ask yourself whether someone else can topple you with identical tools. Unless you have come up with something absolutely groundbreaking, technology alone is probably not the answer.
Once you have identified your niche, be sure consumers identify you as that market player. It doesn’t help if you think of yourself as the riverfront condo specialist if nobody else believes it. For every niche, there is an opportunity to get boutique.
The choice is yours. Get big or get boutique.