Big Ideas for Small Offices
Brokers and Consultants Share Management Tips and Tricks.
In an age dominated by large corporations, mergers, and acquisitions, owning a small commercial real estate business could be likened to a minnow swimming in a sea of sharks. Gaining market share and retaining clients seem daunting, if not impossible, tasks when faced with such heavy competition.
Not so, say many commercial real estate professionals who have shunned the corporate world in favor of owning their own companies.
“Shopping at many of the larger firms is like shopping at Kmart or Wal-Mart,” says James Talley, CCIM, principal broker of James Talley & Associates in Nashville, Tenn. “You may find a salesclerk who knows their product, but most of the time you don't.”
The reasons for favoring a small office vary, but many small-business owners cite flexibility and freedom as the key motivators. Commercial real estate practitioners who run their own companies control every aspect of business, from what color pens employees use to what services they offer clients.
“At this stage in my career, I wanted the freedom to completely manage my business activities and direction,” explains Larry Ilfeld, CCIM, owner of Ilfeld & Co. in Albuquerque, N.M. Other small-business owners also appreciate the lack of corporate politics and rigid management structures of larger companies.
Some commercial real estate professionals even venture into solo practices. Although working alone demands much time and energy and a certain type of personality, it affords many of the same benefits of a small company, and, best of all, solo practitioners don't have to share the profits.
Joe W. Milkes, CCIM, MAI, owner of Milkes Realty Valuation in Dallas, spent eight years with an appraisal company before he started a solo practice to “have more independence regarding the assignments and clients, as well as to substantially increase my income,” he says.
Service Equals Success
Competing to gain market share isn't necessarily a daunting task. Although large, well-established companies have more resources, more money, and more agents, small businesses possess many advantages that potential clients find attractive.
First, due to the lack of rigid management structures, small-business owners can make decisions quickly, which leads to faster customer service. “I sell my size as a plus,” says Ilfeld, a solo practitioner, “by illustrating that I can provide superior service to my clients, which helps them achieve their real estate objectives more quickly, efficiently, and at the lowest overall cost.”
Second, small businesses often have smaller client bases, so they can offer more personalized service. “The personal side of relationships is what ensures success,” says Steve A. Massell, CCIM, president of Massell Commercial Real Estate in Atlanta. At Barrington Partners LLC in Barrington, Ill., run by Jonathan J. Knight, CCIM, and Kevin M. Lynch, CCIM, the four partners and office manager are familiar with every transaction; “Thus, the client has the advantage of many specialists thinking and contributing to their situation,” Knight says.
Third, because small businesses usually are located in only one city, they can carve out a unique niche in the market and offer more customized service. For instance, to differentiate his company from others in Albuquerque, Ilfeld specifically structured his business as a consulting company and offers clients a combination of real estate services. “I find that being able to provide clients with a kind of one-stop shopping has distinct advantages,” he says.
Most of all, small-business owners advise against stretching resources too thin. “Don't try to be everything to everybody,” cautions Frank Hammond, CCIM, partner in Hammond/Tarleton Properties, a three-person business in Greenville, S.C. And Talley advises his two associates, “You don't have to have all the business; you just have to have enough.”
Providing superior customer service is the top priority, but small-business owners also must oversee the day-to-day tasks required in managing a commercial real estate company. Many practitioners agree that competent support personnel can help maintain smooth business operations.
“Quality people are critical to our business,” Knight says. However, quality people can be difficult to find and retain in today's economy. Many small-business owners suggest using personal referrals to locate skilled employees rather than paying for newspaper ads or recruiting companies. Although some small-business owners may not be able to offer salary and benefits packages equal to that of large corporations, the nature of a small business provides its own benefits.
“I think support staff prefer to work in smaller offices where they are more involved in the day-to-day action,” says John V. Propp, CCIM, GRI, president of Propp Property in Denver. Azriela Jaffe, a syndicated business advice columnist and author of 10 books about starting a business, says that working for a small business can offer support personnel a “greater degree of responsibility ... and more flexibility over [their] work schedule.”
Because commercial real estate professionals frequently are away from the office, managing support personnel can present problems. Jaffe advises, “Don't expect [support personnel] to function well in that capacity unless you have given them plenty of training and plenty of authority to act and make decisions in your absence.” She recommends frequently keeping in touch with support personnel via phone or e-mail.
On the other hand, others find that they can live without the expense of support personnel. “In a small office, you have to keep costs low,” Talley says. “We do not have secretaries. We answer our own phones; we type our own letters.”
Some small-business owners prefer to surround themselves with technology, not people. “Equipment and software do not complain or take time off and work most of the time,” says John Shaw, CCIM, solo practitioner and owner of Nomad Investments in Menlo Park, Calif., whose office is crowded with two networked computers, a color printer with scanning and fax capabilities, and two phones with headphone adapters. He uses Dragon voice-activated software with a portable computer to type documents.
The chore of keeping costs low plagues most small-business owners. One strategy is hiring agents who work on a commission-only basis. Owners don't have to pay additional salaries and benefits and can make money by charging a desk fee. Owners should take caution when hiring commission-only agents, however, and thoroughly check their background before bringing them on board. “If they are commission only,” Jaffe says, “they could use inappropriate sales tactics to make a buck,” which could reflect badly on the company.
Many small-business owners attempt to keep a tight budget, but not at the expense of their company's productivity. “The key question I ask everyone to answer before we spend is ‘Does this help us make money, and is it critical to our success?' ” says Michael Green, CCIM, MAI, owner of TCI Group/Michael Green Agency in Johnson City, Tenn.
Green purchases used office equipment to save money. Propp reduces overhead by buying office supplies in bulk to obtain a discount. Other small-business owners shop around for the best deals on everything from pencils to long-distance providers.
Some small-business owners offer creative solutions for saving money. Green formed a cooperative with three other companies in his area to share advertising and marketing costs. Ilfeld uses the Internet in all aspects of his business — for example, marketing by broadcast e-mail instead of print advertising. “The many technological aspects of doing business today have direct cost-reduction benefits to businesses of every size,” he says.
While expensive, technology is fundamental to running a business in today's world, and small-business owners spend almost as much time trying to find ways to save money on technology as they do using it. Many small-business owners suggest fostering relationships with local dealers, service providers, and technicians that can offer the best deals on the most recent technological advancements and are available on short notice to solve possible computer problems. Other sources for finding savings on technology include the Internet and technology publications such as Small Business Computing.
Investing in technology can be profitable, but it also carries risks, since today's new advancement easily can be tomorrow's old news. “If your company shows a profit, you should buy and avoid lease payments and inherent interest cost,” Green advises. “If you don't routinely show a business profit, only then does a lease make sense.” Purchasing equipment also carries tax benefits. “I own everything and write it off in the year of purchase up to the maximum,” Shaw says.
The type of office space small-business owners choose also can help lower costs. Obviously, working from home eliminates mortgage or lease expenses, but this option usually only is effective for solo operations.
A home office has its perks, however. “I have a great view of my pool and am close to my piano,” says Fred Petrella, CCIM, president of Connecticut Realty Group LLC in Northford, Conn. A home office saves money on overhead, Jaffe says, and gives small-business owners “the ability to integrate work and family.”
Solo practitioners also can take advantage of sharing facilities with other companies. Milkes shares an office suite with a property management company and an environmental engineer. “This has provided good quality office space at a reasonable cost,” he explains. Ilfeld leases a private office from a local residential mortgage company and uses all of the company's facilities. The space is convenient for his clients, projects a professional image, and is affordable, he says.
Being a leasing agent or property manager for an office building also can save money on office space. Judy Hatfield, CCIM, president of Equity Realty in Norman, Okla., receives free office space in exchange for managing the building.
However, most small-business owners prefer to own their office if they can afford it. Many suggest investing in an entire building, since unused space can be leased to other companies to help pay the mortgage. Also, “The equity we're building will serve us well around retirement age,” Green says.
Network, Network, Network
While it may be possible to cut corners when it comes to supplies, technology, and office space, small-business owners can't afford to scrimp on some areas such as marketing. Marketing doesn't have to be expensive, however, and some strategies are free.
A company Web site is one of the most popular, inexpensive marketing methods. A Web site can be designed and maintained in-house, using software such as Microsoft FrontPage, Adobe PageMill, or WebEdit Pro. Internet service provider options can be located using sites such as FindaHost.com.
For those who can't afford or don't have time to maintain a company Web site, online databases such as CCIMNet and LoopNet offer listing opportunities. Many perform other services for a fee such as designing and maintaining personalized Web pages and e-mailing color brochures to interested clients. The Real Estate Cyberspace Society provides members with 14 different tools and services including personalized Web sites and a networking listserve for a yearly membership fee.
While the Internet provides many useful tools, public exposure provides marketing opportunities to a more diverse audience. Massell trademarked two slogans that clients immediately can associate with his company: “Strategic Space Solutions” and “Nobody Knows Atlanta Like Massell Knows Atlanta.” Although the trademarks cost $3,000, Massell recommends this strategy to practitioners who have slogans integral to their marketing plans.
However, most small-business owners cite networking as the most successful and inexpensive marketing tool. Commercial real estate professionals advise joining organizations such as local real estate boards and chambers of commerce and staying active in local CCIM chapters. “Business networking and actively assisting others is critical in my marketing plan,” Milkes says.
Business organizations also provide valuable interaction with members of the community for solo practitioners who may miss out on other opportunities. “Every communication is a potential business opportunity,” Ilfeld says.
A Healthy Balance
One of the greatest challenges of running a small business is the many roles to play: owner, broker, office manager, human resources representative, public relations specialist — the list varies depending on the size of the office and the amount of work performed in-house. Small-business owners often must compensate for the added responsibilities by working long hours.
“There is no down time,” says Shaw, who leaves his computer on 24 hours a day. “I work more than I want to and have to deal with it all the time,” he says.
When the company demands so much time and effort, finding a healthy balance between work, family, and social life can be difficult. “Achieving balance is something you work at every day, not achieve once and then you've got it figured out,” Jaffe says. “The question is, overall, over the span of weeks and months, are you feeling the imbalance?”
To keep things under control, Ilfeld advises prioritizing every task and assigning a weekly number of hours to each one. If costs allow, hiring a part-time assistant for administrative duties leaves more freedom to do revenue-producing work, he says.
Hammond and his partner, Bucky Tarleton, CCIM, take time out for fun whenever possible, often mixing business with recreation by taking clients to NASCAR races or to play golf.
“The business of life is living, not business,” Knight says. He recommends taking breaks whenever necessary for recreation and family time and supporting co-workers or employees when they do the same.
Because he often stays at the office past midnight, Talley networked his home computer with his office so he can work from home in the morning to spend time with his wife. Talley, who juggles his commercial real estate business with a flourishing country-music career, always makes time for performing at local Nashville venues.
However, a complicated business plan isn't always necessary to maintain a healthy balance between work and home life. As Propp says, “Big office or small, the answer is the same. Decide when enough is enough.”