Market analysis

Branching Out

Small real estate companies use these strategies to spread their reach.

When he decided to seek more business on the East Coast, Jonathan Hipp, president of Reston, Va.-based Calkain Cos., realized that moving into the market was the best strategy. "If you are there, you will gain a bigger market presence," he says. And, he was right. Calkain, which started in January 2005 with Hipp and one other partner, now has about 18 employees including two offices in Nashua, N.H., and Tampa, Fla.

Expanding into new markets is no easy task. Hipp took advantage of the client base he established while working for a bigger company prior to starting Calkain. He fueled the new business and built the brand through advertising and conducting transactions. "We are establishing [new business] all the time; we build it and make it better," he says.

At some point, many solo practitioners and small commercial real estate companies find themselves considering the option of growth. Changing markets or changes in one's personal life can spark a need for expansion. Growing their own businesses allows practitioners to set their own goals and rules and also to have more day-to-day flexibility. They can pursue new markets or offer additional business services and hire as many people as they feel are necessary to keep the business going strong.

Once practitioners decide to expand, they face a host of decisions. For better or for worse, many of these decisions involve learning new behaviors such as sharing the workload and hiring new employees. For many growing companies, finding new business is the least of their worries; instead, implementing a fresh way to manage the new workload takes both skill and strategy.

After the initial expansion is underway, there are several steps that need to take place, which include formulating new hiring practices, finding leaders within the company, and delegating the workload and responsibilities. One of the best ways to learn these steps is by hearing from those who have been there. Several CCIMs who decided to expand their one- or two-person businesses discuss their experiences growing their companies.

The Initial Expansion
Ed Craine, CCIM, president of Smith-Craine Finance, a commercial mortgage company in San Francisco, began expanding his business five years ago after being on his own for 20 years. He decided to branch out to give himself more time off and more flexibility. The company now has about 10 people - five agents and five support staff. Craine eventually hopes to have around 20 employees.

Similarly, before expanding to 30 people, Applefield Waxman in West Palm Beach, Fla., started out with four people: a president, a vice president, an agent, and an administrative person, explains Peter J. Applefield, CCIM, president and co-founder with Brian K. Waxman, CCIM. Founded in 2002, the company now has three divisions: brokerage, property management, and investment services and has gone from occupying 500 square feet to 3,400 sf and soon will be relocating to a space that is more than 5,000 sf.

Applefield retained his name in the company's title because he was pretty well-known in the market area. He also maintained his previous clients, started advertising the company immediately, and reached out as much as he could by word-of-mouth in the West Palm Beach area.

While some real estate professionals are there from day one of the expansion, others may join the company in the middle of the growth. Robert G. Thornburgh, CCIM, executive vice president of Heger Realty Corp., an independent industrial company in Los Angeles, has been with Heger Realty for six years. The company started out as a single-person operation 50 years ago, but the majority of the company's growth has been in the last 10 years. "What started out as a small brokerage firm now assists tenants, investors, and property owners with lease and purchase negotiations, development opportunities, investment acquisitions, property consultation, and management," Thornburgh says. Currently, Heger Realty has 30 employees.

Growth Strategies and Hiring Practices
When companies go through a major expansion, a good growth strategy and strong hiring techniques are needed.

The first part of Applefield's plan was to notify his staff that they would be working harder and well beyond what previously constituted a normal work day, but they also would be compensated for their efforts. "We needed to know that everyone was willing to do some extra work," he says.

When hiring new employees, they looked for a mix of ability and personality. While strong verbal and written communication skills were important, how the individual got along with the rest of the staff was a main factor. A lengthy background in the commercial real estate field also wasn't as important because "[we] can train new people to think how we think," Applefield says.

Another part of the strategy was to hire for the projected work rather than the current workload. This way, although they sometimes may be overstaffed, if more work comes in, there will be enough people to cover it without scrambling to hire new people. The nature of their strategies and hiring methods keeps employee and agent turnover low, Applefield says.

After hiring, an important strategy is building new business by becoming more active in your specific market. While Craine already was well-known in the San Francisco market, he did even more in the commercial real estate community to get name recognition to promote his growing company. "I became even more involved in my local CCIM chapter," he says. His new-found motivation led him to eventually become president and he now holds the human resources position. Craine also speaks at seminars on topics such as investing and evaluating properties for beginning real estate professionals. These actions allowed him to increase his client base and make business contacts through networking with other designees.

Thornburgh's more business-oriented plan for growth primarily was built on his existing client base and their needs. Heger Realty expanded to become a true full-service brokerage, which meant offering clients strategic guidance in sales, leasing, and development. It also aligned with the best organizations in the commercial real estate industry such as CCIM Institute and the Institute for Real Estate Management. In addition, the company maintained a strong performance and exhibited the highest level of ethics and integrity in all its business transactions. All these strategies combined led to Heger Realty's successful expansion.

Peter Applefield, CCIM, (left) and Brian Waxman, CCIM, grew Applefield Waxman in West Palm Beach, Fla., from four employees to 30.
Photo credit: Peter Morpurgo Photography

Distinguishing Leaders
While strategy is important, seeking out leadership also comes into play when expanding. Heger Realty follows the philosophy that "a true leader has the confidence to stand alone, the courage to make tough decisions, and the compassion to listen to the needs of others," Thornburgh explains. The positions of influence in the office weren't initially intended to be leadership roles. Instead employees' performance determined who really had the initiative to become leaders by making their own decisions while listening to and managing their clients' needs every step of the way.

Craine's strategy is similar to Thornburgh's. He likes to see how individual employees handle assigned tasks as well as how time is spent when they don't have assigned projects or are finished with their current projects. Taking the extra steps to become a leader is important. "You need to be proactive if you want to rise to the top," he says.

"We don't believe in titles," Applefield says of the company's non-traditional approach to seeking out leadership. Instead, they look for hardworking individuals who take pride in their work. For example, when the company first opened, its one agent was young and had little sales experience, Applefield explains. However, he had "the willingness to work hard, an excellent manner, and superior computer skills" and is now a company shareholder and assists in managing the brokerage side of the company. Applefield also finds that the ability to lead others through positive reinforcement and example, instead of by fear, helps to distinguish leaders.

Delegating Responsibilities
Once leaders have been identified, the next step in the expansion process is to make sure that responsibilities and workload are divided up properly. "The key to effectively delegating responsibilities is not to micromanage," Craine says, admitting that he had trouble with this in the beginning. He found that if he didn't delegate the work, he just ended up doing it on his own. Since sharing the work was why he began the expansion, he learned to spread the work among the rest of his employees even if it meant that the work wasn't always done exactly his way. "You can't get upset if it's not the way you want it," he says. "Sometimes it's better to focus on what you do best and let others take on what they do best in order for the work to get done in a timely manner," he adds.

Applefield finds the right person to delegate the specific responsibility to and then gives the individual the space to learn, make mistakes, and then learn from those mistakes. When employees do make errors, Applefield makes sure that he and Waxman are constructive when offering advice and expect their employees and agents to grow. "In our opinion, they will not develop if they are nervous and think that we are watching them every minute," he says.

"Typically, we'll give [employees] an assignment and a clear deadline. The deadline will give us time to fix their work," Applefield says. In order to not micromanage, Applefield leaves the individual alone until the deadline. Once the deadline has passed, he learns if the individual was able to meet it and complete the work well.

Joel Kahn, CCIM, managing director of the Nashua, N.H., branch of Calkain Institutional Advisors, finds that it's important to have a combination of trust and system controls that provide a way to measure individuals' performances. Before actually delegating responsibilities, Calkain spends a considerable amount of time training its team to tap into their strengths and learn their weaknesses. Through this process Calkain managers are able to understand each team member's potential and then can give them the right projects.

Getting to know employees also keeps Thornburgh and his colleagues from delegating to the wrong person. "Knowing that the person to whom you are delegating is fully capable of handling the assignment takes the guessing and worry out of the process," he says.

Whether choosing the fast track or a slower pace for expansion, these CCIMs focused their energy on not only expanding their companies, but on making sure they remained competitive in their respective markets. Commercial real estate professionals who are deciding if they want to expand should consider Thornburgh's advice: "There is no secret to being successful in the industry. We all work extremely hard."

Stephanie Bell

“I went through the [recession in the] 1980s and purposely set out a market plan that would not have the boom-and-bust [nature] that comes with real estate cycles.” — Joe W. Milkes, CCIM, Milkes Realty Valuation, Dallas“We were anticipating a slowdown in the market and wanted to develop an avenue of business that would create a steady stream of income.” — Yvonne Jones, CCIM, CPM, Zifkin Realty Management LLC, Chicago“I help struggling companies rethink their business models, which includes determining the most profitable use of their real estate.” — Audie Cashion, CCIM, Alpha World Properties LLC, High Point, N.C.Stephanie Bell is associate editor of Commercial Investment Real Estate.


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