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In 2012, when I was 28 years old, I had the bright idea to start my own real estate agency, just as the country was emerging from the worst real estate recession in modern history. I rented a swanky storefront office on Main Street in downtown Orlando.
Today, Mainframe Real Estate is one of the top brokerage firms in Central Florida. When people ask, “Why did you open your own agency?” I tell them the truth: I was young and naive.
I give advice to many people who ask about opening their own brokerage, but I encourage almost everyone not to do so.
Opening a brokerage seems like the next natural step to a successful real estate career. But it’s true – it’s the biggest step backwards most people can take. Here’s why.
Choose a bad reason
There are two main reasons why someone would want to open a brokerage. First, they are naive, although probably not young, and completely underestimate the complexities involved.
Another reason is ego. They think they can do better as their own bosses, want complete control over their brand, and don’t want to answer to anyone. You might guess that someone would open their own brokerage to make more money, but that falls into the realm of naivety.
If you think that owning a brokerage means being your own boss, that’s also a naive assumption. You are now under the command of every agent you hire.
Especially in the beginning, when every agent that joins brings a new list of requests, you quickly realize how much effort it takes to keep everyone happy. Ultimately, being a business owner means everyone else is your boss, and you are now responsible for more people than ever before. A true leader always does so after the needs of others have been met.
The master who has never done it
Being young and naive, I didn’t realize that starting a business was creating a monster. It sprouted arms, legs and an ugly head. It will eat up your money and waste your time.
Just when you think you’ve crossed something off your list, four more are added. Once you think you’re about to turn a profit, you’ll be desperate to hire more support staff. As your business grows, so will your problems. As organizations become more complex and more expensive to operate, simplifying things is impossible.
If you’re successful, you’ll eventually have support staff to delegate duties and restore your sanity. If you can’t, you’ll get bogged down in projects and tasks that aren’t your strong suit or don’t generate profit.
Every business owner must master every aspect of their business: operating procedures, marketing, branding, accounting, technology, and more.
As a small business owner, you cannot ignore any of these things and should become a semi-expert in all of them. If you can’t understand how every aspect of your company works, you certainly won’t be able to grow and scale. Most agents are not skilled in all of these important functions, and if they open a brokerage without these skills, everyone in the organization suffers.
If someone insists that they will absolutely open their own brokerage, I offer the most serious yet counterintuitive advice imaginable: Don’t hire an agent or open an office.
These two things are the hallmarks of a successful brokerage business, but can also lead to a never-ending list of fees and growing pains. If you must open a brokerage, don’t make it big. Get smaller!
Agents come, stay, and go
If you thought searching for home sales was hard work, welcome to the most unfortunate part of being an agent: recruiting. It may be easy to convince new and inexperienced agents to join your company, but training and turnover will be bumpy.
Even with the best value proposition in town, convincing experienced, productive agents to join your company can be a challenge. Changing careers is a high-risk consideration, and most of the time it doesn’t happen quickly. Since recruiting is the lifeblood of a brokerage, this very slow sales cycle can be even more frustrating than the fast pace of real estate sales.
Once you start recruiting, maintaining a healthy culture in the office is more important than anything else. A happy agent is a complacent agent. This is the perfect recipe for retaining talent. However, keeping people of all personalities happy at the same time is a challenge that few are educated to handle.
As a broker, you’ll quickly find yourself acting more like a politician and a therapist, more about managing your ego and emotions than trading.
If you’ve ever felt betrayed by a buyer, there’s no comparison to the feeling of a stubbornly loyal agent and old friend leaving your company. You can pour your heart, soul, and trade secrets into the people you care about, but that doesn’t mean they’ll stick around forever.
Go big, but why try?
When it comes to opening your own agency, I recommend going small or going big—or go home. If you want to do big things, good luck.
Understand that on day one of your startup, you are competing against giants in your industry who have incredibly proven brands, technology, processes, recruiting strategies, and more.
You are starting from scratch. How will you compete against the endless army of competitors? What is your value proposition to recruiting agents? From zero to hero is a dangerous journey, but what is your ultimate goal?
Commission compression is a reality of the modern real estate brokerage model. Many brokerage firms compete solely on their ability to offer low prices. If a brokerage isn’t going to be cheap, it has to offer exceptional value. If it’s cheap, it requires a lot of agency and trading volume. Either way, every broker is competing in an environment with countless cheap models in what appears to be a race to the bottom.
Regarding your ultimate goals, consider that the M&A landscape with real estate companies has completely changed over the past decade.
Large brokerage firms rarely acquire competitors and are more likely to use signing bonuses and bribes to acquire competitors’ top agents. Brokerages no longer necessarily buy their competitors’ stocks; instead, they try to gut them.
In real estate, this is not happening yet, but if we cause disruption to companies like Amazon or Netflix, traditional industries could be devastated in a short period of time.
If you’re looking for a strong exit strategy through the future sale of your brokerage, you may now be worried about how many years it will take to grow and how quickly it might collapse, either because of innovation or It’s because of ruthless competitors.
looking for success
Of course, there are successful examples of opening brokerage companies, but most of them are not. Most are stories of dysfunctional small businesses where the owners thought everything was fine, but others disagreed or ignored that things could get better.
I’ve seen single agent brokerages be successful, but they invested their time in things they shouldn’t be doing and were ill-prepared in an increasingly competitive industry. I’ve also seen teams successfully launch brokerages, but setting up the infrastructure for a multi-person organization overnight is impossible and painful.
Team brokerages require more support and systems than traditional brokerages, including dedicated staff, stronger leadership processes, hands-on meetings, and more.
What is my definition of success? Simple. In my opinion, managing your work-life balance while generating the income you want is the pinnacle of success. Opening a brokerage is a long and winding road to this kind of success.
Consider all other ways to achieve success. Perhaps by expanding and simplifying a strong real estate sales business. You can invest in real estate and create a portfolio to generate passive income for your future. Pursuing your other hobbies may bring you more satisfaction than house-sitting on the weekends.
a realistic conclusion
Despite my pessimism, which I call realism, I want people to know that I have no regrets either. My office has some of the best agents in the area, which helps keep me feeling fulfilled.
What’s more, we develop our own technology and have a strong intellectual property portfolio. If it weren’t for our technology making me creative, I might have switched gears and moved into other industries a long time ago. Just like most real estate agents have a hard time loving their job completely, being an agent can feel the same way. So why do this?
The smartest thing you can do is learn from other people’s mistakes, especially when it comes to long-term career decisions that are difficult to reverse. You might expect me to end on a hopeful note, suggesting that you might be the one to open a successful brokerage. Statistically speaking, this is unlikely.
But maybe you are the exception—a talented and driven person. Maybe you have what it takes to beat the competition, create a profitable brokerage, and maintain a good work-life balance.
perhaps.
But before you dive in, ask yourself if you’re a little naive.
Sean Frank is the founder and CEO of a large real estate company in Florida. Connect with him on Instagram and LinkedIn.
