Using Metrics to Manage Your Business

U S I N G M E T R I C S T O M A N A G E Y O U R B U S I N E S S

THE PANEL

DAVE COLMAR

NICOLAI KOLDING

DEIRDRE LEPERA

CEO/Founder, Colmar & Associates, Inc.

Senior Vice President, Corporate Development, Realogy Holdings Corp.

Director of Business Development, REAL Trends

6.2%

1,843

$505,328,075

1,700+ firms closed 500 or more

To make the top 500 by sides

To make the top 500 by volume

transactions sides to qualify for

firms had to close at least 1,843

firms had to close at least

the REAL Trends brokerage

residential transactions, a big

$505,328,075 in sales. Up by

rankings. Up 6.2% from 2016.

increase from 1,702 in 2016.

$53,242,124 from 2016.

3,110,960

30.4%

$1.05 trillion

Firms in this year’s REAL

The firms on the REAL Trends

The top 500 firms by volume

Trends 500 closed a collective

500 accounted for 30.4% of all

combined to close a staggering

of 3,110,960 transactions in

residential transaction sides

$1,052,532,344,996 in sales. An

2016. An increase of 6.6%.

closed in the U.S. in 2016.

increase of 8.8% over 2015!

Based on annual numbers from NAR

STATISTICS FROM THE 2017 REAL TRENDS 500

4.9% vs. 6.6% Nationally reported closed transaction sides 2015 to 2016 vs. REAL Trends 500 closed transaction sides 2015 to 2016.

ANALYSIS OF TOP NETWORKS

291,307 !

301,139 !

495,504 !

533,727 !

498,370 !

645,515 !

724,143 !

497,006 !

300,000

287,412 !

400,000

309,577 !

500,000

377,341 !

600,000

510,831 !

700,000

443,014 !

686,947 !

800,000

788,450 !

900,000

789,692 !

2014 to 2017

200,000 100,000 -

2013

2014 Coldwell Banker!

Keller Williams!

2015 Leading RE!

2016 RE/MAX!

ANALYSIS OF TOP NETWORKS

291,307 !

301,139 !

495,504 !

533,727 !

498,370 !

645,515 !

724,143 !

497,006 !

300,000

287,412 !

400,000

309,577 !

500,000

377,341 !

600,000

510,831 !

700,000

443,014 !

686,947 !

800,000

788,450 !

900,000

789,692 !

2014 to 2017

200,000 100,000 -

2013

2014 Coldwell Banker!

Keller Williams!

2015 Leading RE!

2016 RE/MAX!

SOLIDIFY THE FOUNDATION BEFORE REACHING FOR THE STARS Foundational Data Financial/Accounting • Fully-integrated? Fully-adopted?

Market Share • Majority of brokerages don’t access this on a regular basis Are these basics? Yes. But constantly ask yourself “What now?”

• Are you leveraging it to its fullest potential?

• Is it moving your business forward?

• Are you focusing your decisions on a limited number of key drivers?

BROKERAGE PERFORMANCE Think “Moneyball” for Real Estate

Broker Side

Consumer Side

• • • • • •

• • • • •

Financial Performance Benchmark Metrics Agent Performance Efficiency Goal Orientation Core Services

Perception Loyalty Effectiveness Efficiency Goal Achievement

HOW DO WE MEASURE OUR PERFORMANCE? HOW DO WE COMPARE TO THE PAST, TO PEERS, TO THE INDUSTRY? • Per Person Productivity?

DATA….

“Facts & Statistics collected together for reference or analysis”

• Effective Commission Rate?

• ROR – Return on Revenue?

• Co. $ retained %?

• Co. $ / Closed Unit?

• Balance Sheet?

• Return on Equity?

• Debt / Equity Ratio?

A GLOBAL VIEW OF OUR BUSINESS 2016 REAL Trends 500

3,110,960 total sides

360,081 total agents

8.64 per person productivity

REAL Trends TOP HISTORICAL PRODUCTION & EFFECTIVE COMMISSION RATES Year 2016 2015 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 2004 2003 2002 2001 2000 1999 1998

Total Sides 1,875,418 1,775,163 1,580,542 1,560,245 1,410,487 1,218,344 1,189,731 1,238,116 1,241,002 1,454,683 1,728,111 1,990,567 2,074,891 1,942,377 1,795,017 1,682,902 1,620,000 1,582,000 1,406,000

Total Agents 222,974 213,550 200,910 183,575 170,000 170,910 170,744 179,095 186,251 201,328 212,431 210,154 207,908 187,957 168,115 149.984 136,087 129,380 120,690

PPP 8.4 8.3 7.9 8.5 8.3 7.1 7.0 7.1 6.7 7.2 8.1 9.5 10.0 10.3 10.7 11.2 11.8 12.2 11.6

1997

1,081,000

118,060

9.2

1991

840,829

95,421

8.8

ECR 5.12 5.26 5.18 5.38 5.40 5.30 5.40 5.38 5.34 5.28 5.18 5.02 5.08 5.12 5.14 5.12 5.42 5.44 5.48 5.64 6.10

Source: RT 500, public data, individual accounting firms, national brands

2016 STUDY OF 50 COMPANIES All on the REAL Trends 500 • Total Sq. Ft. = 2,900,000 • Total Occupancy Costs = $98MM • Avg. Sq. Ft. per agent = 117 • Avg. Occupancy cost / Sq. Ft. = $33.72 • Occupancy Costs as % of Total Operating Expenses averaged 26.2% • Occupancy Costs / Closed Side: $336 - 714

SOME OCCUPANCY CONSIDERATIONS…

• What is your REAL Occupancy? 25%? 35%?

• Occupancy Costs will continue to rise. What is the changing model for your market?

• Who does the “office” really serve?

• What is the long term goal for office space needs?

• Do I own or do I rent?

• How flexible can I make the lease?

• What is the best design layout?

• Is it an office?? Or a “Convenience Center”?

THE PURPOSE OF PROVIDING WORKSPACE

• Education • Support • Physical Space • Culture

Source: Redefining the Relevancy of Workspace, REAL Trends, March 2017

MAPPING OUT WORKSPACE Overall office design

44% Semi-private

32% Open

24% Private Source: Redefining the Relevancy of Workspace, REAL Trends, March 2017

FOSTER PRODUCTIVITY

Sales associates that spent over 20 hours in the office were likely to almost double their transaction volume.

Source: Redefining the Relevancy of Workspace, REAL Trends, March 2017

SOME OTHER RESULTS MEASURED…

• Agents: FTE (full-time equivalent) ratio = 9.1 • Closed Sides: FTE ratio = 74.4 • Advertising Cost/Closed Side = $99 - $495 • Advertising as % of Total Operating Costs average = 9.2% • OPA Average = 80.75% of Total Operating Costs

OTHER METRICS & QUESTIONS Recruiting • What is your recruiting turnover rate? (agents lost/agents hired) • What does it really cost to hire an agent?

• To train a new one? Total investment?

• What does it cost to take and service a listing?

• How efficient is my agent base? What would happen if a commission plan was based on Agent Efficiency?

(Example: DOM x SP/LP x ECR x Agent Split = Agent Efficiency Rating)

OTHER METRICS & QUESTIONS Teams

50,000

61%

70,873

79%

ESTIMATED NUMBER OF TEAMS

% OF TEAMS FORMED IN THE LAST 3 YEARS

# OF TRANSACTIONS COMPLETED BY TEAMS IN 2015

TEAMS WITH 9 MEMBERS OR LESS

Source: The Real Estate Teams Playbook, REAL Trends, BoomTown, dotloop, ERA, July 2016

OTHER METRICS & QUESTIONS Teams % of Total Sales Volume Produced

by Real Estate Teams in Firms

49%!

18%!

25%!

BROKERAGES

30% 20%

8%!

10%

5% 0%

40%

8%!

10%!

10%

14%!

15%

17%!

20%

50% 21%!

BROKERAGES

30% 25%

60%

30%!

35%

Average Number of Teams in a Brokerage

< 15% 16-25% 26-35% 36-45% > 45% Unsure

Source: The Real Estate Teams Playbook, REAL Trends, BoomTown, dotloop, ERA, July 2016

0%

1-3 teams

4-6 teams

7-10 teams > 10 teams

OTHER METRICS & QUESTIONS Teams Organizational Logistics • Roles, compensation, licensing, employment classification (for assistants), performance standards, dispute resolution, lead management and termination protocol.

Spatial Structure • What is the Average Sq. Ft. per Team? More or less than individual agents?

Purpose of Teams in Your Firm • Growth, Training, Retention

OTHER METRICS & QUESTIONS Technology Decide what is Essential to your Firm • Prioritize from there.

Technology is Not Set-it and Forget It • Outside or inside systems require ongoing maintenance and review.

Don’t Overlook Integration • How will this investment effect current and future initiatives?

Source: How to Improve Your Technology Spend , REAL Trends, Moxi Works, October 2016

OTHER METRICS & QUESTIONS Technology

11% Average amount of a brokerageâ&#x20AC;&#x2122;s monthly budget spent on technology services

5% Average percentage of a brokerageâ&#x20AC;&#x2122;s gross margin spent on technology services

Source: How to Improve Your Technology Spend , REAL Trends, Moxi Works, October 2016

OTHER METRICS & QUESTIONS Piloting Lather, Rinse, Repeat • Start Small. Move Quickly. Learn. Iterate. Refine.

Accept Failure • Frequent failure can be anathema to your philosophy but is essential to successful piloting Have a Design and Plan but Encourage Experimentation • You are trying something different so don’t limit your ability to explore strange new worlds…

“I’ve searched all the parks in all the cities and found no statue of committees.”

- G.K. Chesterton

OTHER METRICS & QUESTIONS Bigger Initiatives If you really want to move an important project forward…ditch the committee.

But be prepared to dedicate at least one to two very capable people completely to the initiative.

• Then backfill to avoid disruption elsewhere.

This will test how committed you are to your initiative.

MORE QUESTIONS THAN ANSWERS…

• What is really important to the Consumer in their real estate transaction?

• What data exists or could exist in transactions that closed 1, 3 or 5 years ago?

• Of my 2012 Roster, how many agents are with me today? Why did the agents leave? Where are they today? And what do I know about my agent base today?

• What are the demographics of my market and how are they changing?

• What does my company look like today? What do I want to look like in 5 years?

• If they are not with me, what am I doing with all of that data?

USING “BIG DATA” Potential Outsource or Partnership “Big Data” is generally best left to experts • Consumer Behavior • Market Segmentation • Predictive Analytics The lure of “Big Data” is tempting…but you can get lost • Have a very specific problem to solve Plan Ahead • Are you today effectively collecting what could be invaluable to you tomorrow?

APPLYING THE DATA

• Set your own benchmarks and targets • Measure Results / Manage Expectations • Seek small incremental improvement • Investigate what you have and what you don’t use • Keep it all in balance… looking at one piece of data is probably not the answer • Realize that each market and business model impacts the data differently • You have a CTO (IT Department) … consider a CDO.

BUILDING FROM DATA TO CHANGE

In the end, any effective business needs to build off a strong foundation based on objective and measurable facts. Your data sources and systems need to be solid.

Brainstorm what you could do if you were collecting the proper data then take steps to capture whatâ&#x20AC;&#x2122;s needed.

From these foundations, you can build your capacity to effectively pilot and take on strategic initiatives.

PRIORITIZE

FOCUS

CONQUER

QUESTIONS