When to become your own broker

When is a good time to go out on your own?

I have been selling real estate for about 15 years now. For the last ten years I owned and operated my own brokerage. Below are a few of my experiences, some good and some bad. Please remember these are only my experiences and opinions.

Ten years ago a partner and I decided we should open our own office. We chose a large franchise to affiliate with. We ponied up the money for the franchise fees, office equipment, insurance and other assorted expenses. We leased a not to expensive office space and set up shop. We were fairly successful with recruiting and soon outgrew our small office. By then we were making money, but still no where near a profit. We contracted for a build out and lease with a new landlord. We built a new larger office and subleased the old one. That worked out pretty smooth.

I enjoyed being a broker, but I didn't enjoy feeding the company to stay afloat for the first four years. We kept growing and had a good crew working there. About the fifth year we finally started to cover all of our expenses. A year or two later my partner and I were able let the company start covering our personal office expenses.

At this point we were about six years down the road. I found a perfect office building and struck a fantastic deal to buy it. After we closed on it we subleased out our old office and moved into the new one (after a slight remodel).

My opinion of this experience:

Looking back on my experience with the perspective I have now. I can see that ego was a factor in my decision making process. Thats not a bad thing as long as it's not  the main factor, but an important one all the same. In retrospect I truly believe my agents had a better deal than I had! When you factor in all of the initial and ongoing expenses along with the business risk then ad to that the endless hours required to start and run the ongoing business the return in my experience was marginal at best. Every situation is different. A major factor for the success and profitability of a brokerage is always local market conditions.

There are exceptions to my experience. It is my opinion that the larger the office the greater the economy of scale. This always equates to a higher profit margin. Likewise, a small office, say broker and a couple of agents (not franchise affiliated), that can keep expenses low can also be highly profitable. It's the middle size office that is hardest to profit from.

The best reason to run your own office in my opinion is to buy your own office building and let the company pay for it! I'm probably going to catch a lot of flack from this article, but when your broker tells you he's really not making that much, he's probably telling you the truth. In fact over the ten years I was in business virtually all of my income came from my own sales. There are a few tax benefits and it is nice to call the shots and set policy but the rewards are not as great as you may expect.

After 10 years of running my own company I sold out and now I'm a broker associate here in Colorado selling ranches, homes and land. I have far less responsibility and way more free time. And I still have a pretty good income too!!!

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