I N D U S T R Y D E S C R I P T I O N
Brokers operate as a person or firm who arranges transactions between a buyer and a seller for a commission when the deal is executed. A broker who also acts as a seller or as a buyer becomes a principal party to the deal. Neither role should be confused with that of an agent—one who acts on behalf of a principal party in a deal.
Ongoing trail and/or one-off transactional income often in exchange for expertise offered pre sale. Often have premises as an overhead as well as admin costs. Relies on referrals and repeat business for stability of income.
A common life cycle for a Broker or Agency business often begins as an individual or partnership that break away from a larger organisation by going out on their own primarily to take control of their commission rates earned from sales. Books of clients can be bought and sold in many brokerage industries such as Financial Planners etc. How far the business expands will depend on the interest and intentions of the owners to add sales and administrative support staff.
If the business can add sufficiently productive sales personnel or books of clients, they will begin the process of scaling up. To achieve this, sales personnel can be recruited with better commissions or books of business can be added in the case of identifying acquisition targets. Often this process can be hit and miss whereby books of clients can sometimes be of varying quality as can additional sales personnel. Additional reception and admin support can also provide significant improvements to sales productivity.
Brokerage businesses are essentially sales intensive meaning the development of reliable sales and marketing systems is the critical success factor. Often value is added by way of educational material and reports to assist buyers and sellers to see opportunities to transact. If there is poor sales training or sales system due to poor prospecting and pitching disciplines, then the business will stall as the owner ends up generating the substantial majority of the sales revenue. Many brokers stall at the 1-3 staff level when this is the case.
Brokerage business can get into trouble when the sales team becomes dominated by a few (sometimes only one) highly productive individual(s) who make the substantial majority of sales. In these situations, there’s a concern they’ll leave and take a significant portion of the revenue with them. In addition, when target markets are not well defined, the sales team can expend too much time chasing too smaller commissions. This is a strong indication that the business owner needs to refine their overall direction and upgrade their training regimes.
Performance management therefore becomes the focus of the business owner who needs to work on creating a performance environment while also balancing with a culture that challenges what the team are capable of. When this occurs the owners can put more work into their sales and marketing systems as their business starts to generate sales growth. If mergers and acquisition strategies are followed, then the business will seek out further targets to either buy their book or add partners to the partnership.
W H E N T O G E T H E L P
Brokerage businesses tend to need help from a Business Advisor to assist with developing sales and marketing systems in line with performance management principles and/or to provide direction on how to scale and grow the business. Typically we assist Brokerage businesses with an initial assessment of their current performance. Then we’re able to assist on how to optimise the current revenue model before engaging in sales and marketing activities to drive profitability.
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N.B. All Advisory Services offered by TAN are provided on a Return on Investment basis. If there is no business case for our services, we will tell you and will not charge for any work done.