What's the True Cost of Technology?

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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 will need a facelift and upgrades, to stay current with changes in technology on a regular basis and to keep the brand fresh and exciting. Given how fast technology is moving. this should be just an accepted fact.   I found it 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 don't 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? 

Size Matters

     

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 and agent population, to allow for a small “per agent” payment each month that includes everything including the company site upgrades, redesigns, agent sites or subdomains as well as the ongoing costs of MLS integration, service and hosting each month.  Under this approach the vendor looks at the total costs over time; say 36 months, and breaks down charges evenly over that time.  The vendor will receive less money in year one than their actual costs, 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/Redesigns Are Included

Upgrades and staying current are built right into this model, at least the way we configure it.  The idea is simple.  When we first bring on a larger Enterprise client the price they pay is based on creating a total system customized to their specific requirements.  This includes the overall company, office, team and agent site designs as well as any custom requirements in the backend system  The cost for these custom requirements is built right into the per agent fee.  This means that if commit to renewing in month 20 of their 36 month agreement we can start another full customization and system redesign as well as upgrading them to our latest and greatest release and all they do is just continue with their regular fee! The result is a company that looks forward to these ongoing changes and upgrades because it keeps them ahead of their competition without a huge capital expenditure!

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, for example,  can have company wide technology for a fee typically somewhere from $10 to $20 per agent, per month.  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 $10 to $20 a month per agent.  What would be included in this fee?

  •         Necessary hours for a custom site build now and over time– all design and programming
  •         Fully responsive site, front end and backend
  •         Hosting on Google Cloud servers
  •         Websites for all agents with a custom company design and full backend CMS/CRM system
  •         Latest and greatest tools on company  site like:

        -  CRM, CMS, Lead Management, Drip Marketing, Action Plans and more

  •          SaaS fees
  •     Support

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 get the latest and greatest modules available  because they are built 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 it makes sense to treat these costs like any other overhead in your business?  

One great idea is to charge or not charge a technology fee to each agent, each month, based on their split.  High agent splits pay the fee, while low agent splits have the technology fee covered!.

However you do it, the need is real and ongoing and technology costs are a reality of any business today.  Do the math, start treating it like a utility, and you'll keep your technology in front of your competition!

 

 

 

 

 

 

 

 

Michael Audet
Vice President, Business Development
Real Estate Webmasters
94 Harper Rd
Snyder, NY 1426
(716) 839-4628

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