What's the True Cost of Technology?
How Much Should I Pay and Budget For Technology?
Before I get into what technology should actually cost for real estate professionals today I think we need to look at why this is even an issue. You could argue that the cost is the cost, etc., but I think there is a deeper issue that impacts many real estate professionals when it comes to paying for technology that we need to look at as part of this conversation. We get to see it all the time since we create and license technology, but I don’t think the average real estate professional really sees it the same way. Let me give you an example of why I say that.
I had a conversation with a tech consultant recently who works for a real estate company regarding some proposed changes to the company’s custom website. The website we were discussing is actually a great website. It had a great design, strong calls to action and good content but as I pointed out, there are definitely things that can be done to make it much better given where things are today. I also pointed out that he shouldn’t be surprised that a website could use a facelift and upgrades in 3 years given how fast technology is moving. I found it a bit surprising, from my vantage point, that he wasn’t explaining this same thing to his client, but the truth is, this happens all the time. Many people in our industry just done have a true appreciation for what the real costs of technology are today.
Here’s The Problem
At times, on a subliminal level, I think a lot of us look at our business technology as a one-time investment. We know there are ongoing costs, of course, but every time we buy a Mac or PC or make a major purchase we think we are “over the hump”. We are good! There is that feeling we all have when we have a new toy, car, computer, boat, etc. that the need to think of its replacement is the farthest thing from our minds. The truth is, however, that as soon as you install any technology today it is quickly becoming dated and in a very short time that Mac, PC, website, software or app is going to be old when compared to the latest and greatest of the moment. “Old” is very relative. Software and hardware ages like dog years times ten! Technology is changing exponentially at every level from the hardware and software we use to the whole concept of design on the web. As a result, if you want to be one of those winning on the technology front, you have to see this not as a “once in a few years” investment, but as a continual cost of doing business. If you do that, and plan accordingly, you are going to be in position to welcome these needed changes and to really crush your competition because the majority of your competitors will not.
Treat Technology Like a Utility
We all pay for utilities every month, electricity, water, gas as well as cable and Internet and quite honestly most of us don’t even think of these anymore. They are in our budget. Living in Western NY I pay my gas on a balanced plan that charges me the same every month so I don’t have to pay huge monthly bills in the winter. Yes, my summer bills are higher too but just facing the fact that these are a part of my life in Western NY allows me to set up a budget I can live with. I think the same should be true for business technology costs. This means not just budgeting for your monthly technology costs but also for those periodic upgrades that are a 100% fact of life in today’s world! You will need new hardware and you will need new web tools and new software in the not too distant future, regardless of when you bought your most recent versions of the same. Doesn’t it make sense to really look at what your real technology costs are as an ongoing expense so you can manage it more easily like my gas bills?
At REW, I manage business that falls into what we call the “enterprise” group, which typically means larger companies. Larger companies have some innate advantages when it comes to managing technology costs and so yes, size does matter!
The advantage that enterprise accounts have when managing technology costs is the fact that budgeting can be offered by vendors to spread true costs of technology out over time, to allow for a small “per agent” payment each month that includes everything including site upgrades, redesigns, agent sites or subdomains as well as the ongoing costs of service each month. The vendor, like REW, looks at the total costs over time; say 36 months, and breaks down charges evenly over that time. The vendor will receive less in year one, just like my gas company does during the winter, but it balances out over time. The advantage to the business is having a manageable technology fee that can be budgeted while insuring their technology never does a backslide. Upgrades and staying current are built right into the model.
For smaller companies, teams and agents it’s not as simple, at least it doesn’t appear to be at first glance. A large company with 2000 agents can have everything they need for a fee significantly less than $10 an agent per month, for their whole company. This is very attractive and is even easy to justify to their agents, if they pass this fee on. Smaller companies, teams and single agents, however, don’t have the size to get these fees down to such a small per agent fee, so this approach may not seem to work, but in truth, it does. The problem is, the average small company, team or agent may not have a true concept of what their real technology costs are over time, so this approach isn’t even considered. It should be!
Managing True Technology Costs
If you want to take the stress out of your technology costs and at the same make sure you are not going to fall behind, because your website and web tools are old and dated, all you really need to do is to look at what your real technology costs are over time and budget for them. If you use the Enterprise approach we offer at REW, we’ll set it all up for you. If you do it on your own, you just need to look at real technology costs over time and decide whether you are willing to pay these each month to eliminate the big hits when you need to upgrade significant areas of that technology. Let’s look at an example. I mentioned that a company with 2000 agents can get top shelf technology for well under $10 a month per agent. What might this include? That might include:
- · Necessary hours for a custom site build now and over time– all design and programming
- · Fully responsive site
- · Hosting on a dedicated server
- · Subdomains for all agents with a custom company design
- · Latest and greatest tools on company site like:
- · CMA/valuation Tools, other modules, etc.
- · Monthly service fees
- · All regular tools like CRM, Lead Management, etc.
What this means is that changes can occur as needed, and at the end of 36 months when they might have to reach into their piggy bank and pull out thousands of dollars to redo their site, this just happens as a part of business. It is painless. Plus, they have the latest and greatest modules we offer over time because they build that into the plan.
But what if you are a company with 50 agents, how can you do it? The answer is simple, the exact same way. The only difference is what the cost per agent is each month. For an office with 50 agents that cost might be $40 - $50 a month or for 100 agents it might be $25 - $30 an agent per month. The actual cost will really depend on what you include, the degree of customization you want to build into the model, what tools you include and so on. But whatever that cost per agent a month is, remember, that is actually what you would have to spend regardless, over time, if you want to maintain that level of technology excellence. Treat it like your mortgage, rent or gas bill and just build it into your budget and you will see the benefits. The companies, teams and agents that are crushing it out there have this mindset. They understand technology is not like buying furniture that you will use for years and years. They get that it is a utility that is just a fact of business life today that they can’t afford to do without or to let get stale.
Know Your Costs and Share the Costs
If you haven’t done it already, look at what your technology investment really needs to be over time to be competitive. Take into account system upgrades, redesigns, data costs, subdomains, modules and always build in dollars for surprises. If they don’t happen you will be ahead of the game, but when they do your are ready. Figure out what that translates to in terms of a cost per agent. Budget it. Put that away each month or use the Enterprise approach with REW and make sure your business has a clear way to recapture those expenses within your business model. For those of you providing these services to agents why shouldn’t you be treating these costs like any other overhead in your business?
Exploring Ways to Pay For Technology
During the REW Summit in Nashville I am going to share some different approaches being used by companies to manage their technology costs. There are a lot of very creative approaches being used successfully today so hopefully I can give you some food for thought in your own business. No matter what approach you may take, all of these need to start with an honest assessment of true costs over time. If you have any questions or need help figuring this out for your company reach out to me and I will be happy to help you go though the process. You can reply to this blog or email me at email@example.com.