Oversubscribed - A Broker's Nightmare That's Slowly Becoming A Reality.

I’m going to start this off by saying in no way shape or form am I am claiming to be some guru, wizard, or ninja in the real estate industry since I’ve only been in it for 3 years.

What I will say is that coming into the industry from other legacy industries has allowed me to look at it from a different perspective.

From residential to commercial, I am excited to share information about the current landscape of the industry, how it has grown with technology, and how that has affected brokers.

**Also to caveat – I am terrible with punctuation, grammar, and most of the time spelling, so no judgment since I gave you the forewarning.

In a time where all eyes are on prop-tech, what we are speaking about today matters more than ever. Let’s start out by getting a couple of facts out there.

Did you know that over the past 5 years, more service providers have entered the space than in the entire history of the industry?

Did you know that the real estate industry is larger than the US Stock Market?

Did you know that the real estate industry has more external service providers on a subscription model than any other legacy industry?

Now, let’s talk about what that means for the CRE industry. Is it good for the broker or bad for the broker? Good for the industry or bad for the industry? It all has happened so fast that no one has ever stopped to think about what the end result is going to be. Are we too late? Or are we oversubscribed?

Here’s the big question we’re addressing today: is the CRE industry saturated with niche platforms, necessitating users to have multiple subscriptions?

The big question we have to address is: 

In other words. Is there too much out there right now to even know what to do with? 

If we take a look at this image, I would say that it’s pretty clear what the answer is. Even with every single vendor out there ( and I’m sure that we are missing some here), you can barely see each individual company, let alone know what each one of them does. Before we can completely answer the question, we should take a look at the history of what got us here.

So where did we go wrong??

The image on the left is a visual of where we were - the one to one relationship. With one provider, or more simply put a monopoly. Think high prices, sole reliance, and the inability to make a change if you wanted to. We all know one or two of these within any industry, but specifically in the commercial real estate industry, there is one that always comes to mind.

What is the result of this? Yes, you might only be logging into one place for your business, but it stunts growth and new ideas because it nurtures a non-competitive environment.

The most detrimental outcome of this scenario is that your individual success as a broker is tied to this entity. This simple image is a great representation of how the user is fully encompassed by the entity’s presence where they feel trapped inside of its ecosystem.

Now, let’s think about the opposite. (Image on the right) What happens when there are hundreds of competitors that make up a full suite as opposed to one large entity. If you look at that image on the right, it looks difficult to navigate with the overwhelming amount of entities you’re subscribed to. If all of these entities are offering different value adds to your business, you have to deal with much more than just the navigation; you have to deal with subscription costs, logging in and out of every system, or how to use or train your broker team on the system to list, just to list a few of the issues.

Keep in mind that with all of those complications, many early-stage competitors are still building their foundations. The quality and the value that you’re getting is typically early-stage and has runway for further more robust development. 

One thing to consider is why there are so many competitors within the space right now. The world is flush with capital and the accessibility of money is at an all-time high. In addition to these two factors there is an immense focus on the propetech industry right now. Everyone is trying to get a slice of the pie and investor capital is happy to fuel the fire.

When thinking back to our question earlier with this context, it’s clear there’s someone who loses in both scenarios: the broker. 

Like with most things in life, it requires balance. All of the times that I can remember hearing too much of one thing is typically never a good thing. Keeps coming back in different ways.

There’s no one thing that’s at fault. We can blame technology, the economic environment that allowed this reliance on multiple platforms, or the consumer for feeding into the idea that it was necessary. 

I’m not here to discuss the reasons why or point fingers. I’m here to dig into the cost of being on the receiving end of it is and what we can do going forward. 

To figure out how much is being spent and what kind of value is being created, I went and spoke with several brokers. These brokers were at all different stages of their career, have been in the industry for a varying amount of time, utilized different tech stacks, and with different take-home incomes. I like to call it “What’s your stack?”

Let’s explore our first broker. This is the institutional broker who has been in the business for 20 years, is resilient to change but stays in the know, and the vast majority of the time, he is dealing with larger assets and co-oped deals.

What I heard from our interviews more than anything else is that their split covers everything that they need. Now, I haven’t done the assessment of what that cost is assuming your split is typically smaller on an institutional level than on a boutique level, or if you owned your own brokerage, but what I did want to understand is what the company actually provides.

We found that other than subscriptions to services like Co-Star and Loop-Net the only thing that is being provided, at best, just discounts to all other services. 

And while these brokers have an institutional name behind them, the resources they have are name brands of brokerages and access to these large teams that have been put together over a long period of time. 

With all that being said, there has been a phenomenal willingness to adopt new platforms and resources on the brokerage level, despite the fact that it’s been difficult to drive top-down broker adoption.

Now for the second round, we look at a principal owner of a boutique brokerage. 

This is someone who has been in the industry for 10+ years and is primarily doing everything themselves. These entrepreneurs typically are the ones who think of technology like a buffet and try one of everything to see what they like the most. But we all know how it can feel after we visit a buffet. (not great) 

So, what’s in their stack? Just about everything. They are in multiple places at once, trying to get every inch that they can on their competitors. Visualize their tech stack in the exact same way we showed the saturation of platforms in our earlier slide: CRM, Listing Platforms, Marketing Tools, Prospecting Tools, Assistants, etc.

Though this can provide some advantages in winning and closing deals, it’s not as much as you would imagine. Typically, early adopters to technology run circles around laggards in the industry. Here, we do see a slight uptick in business growth (a credit to all of the services out there), but still not a drastic one.

What I gathered from our conversations with these brokers was that they were spending too much time in too many different places, which ultimately takes them away from their core revenue-generating activities, let alone manage their boutique brokerage.

Now for our last stack, we have our independent broker, newer to the business, typically younger, with a fresh perspective on technology in the industry. These brokers also tend to be younger and more influenceable. The profile includes “resi-mercial” brokers too, who are doing the occasional commercial deal, but not their primary business focus.

With these brokers, we see the desire to adopt technology, but they lack the capital. Just like any business that is 100% commission based, the beginning is always the toughest part, especially when it comes to what to spend your money on. 

For these brokers, all deal sizes are on the table and any edge they can get to catch up to those more senior must be capitalized on. That said, in our conversations, I found that these brokers were the most clever in how they utilized the services. Free trials are the name of the game (think about how we love to use other people’s Netflix accounts) and outsourcing to independent contractor sites such as Fiverr and Upwork is commonplace. 

These brokers are focused on spending towards lead generation sites which are fairly expensive. Although occasional users of older systems when they absolutely had to be we still found there was a substantial cost in running their business.

So where do we end up on the cost?

 Based on the sample size of brokers we had from our conversations, we determined that the average cost of their subscriptions was over the price of a new car of $25K a year. Stop and think about that for a moment. $25 thousand dollars.

If you put that check in front of brokers at the beginning of every year, I think there would be a much different approach to what systems were being used and how effectively they were being utilized.

One very interesting takeaway we had was, that the nature of the industry is that of one of resiliency to change and when you keep adding options to chose from brokers typically stick with what they know, even though they might claim to hate it.

Going back to what we originally spoke about when you compare the historical monopoly it is very similar to the “market share at all cost” strategy that has become notorious in the VC world today which very recently we have started to see that fail (think WeWork) because everyone is trying to do too much and most importantly the strategy is closed source.

What we gathered was that if you had a way to facilitate the data, transactions, and the ability to search listings, comps, etc. all being in one place, that would be the most ideal outcome. That being said, every one of these things would have to be of proven quality to warrant any cost or in our today case a subscription.

In building Biproxi, we listened and considered the most important aspects to every broker. Since brokers are at the core of everything we do, we figured there was no better way to build a company than with them in mind. We realized that there was a better way to serve brokers without oversubscribing them.

Our twist? Being open-sourced. At our core, we built the listing platform that brokers need, but most importantly, one that they should not be charged for. Our model is to make money upon delivering value and results, not relying on subscriptions that are more frequently than not underutilized by brokers. We have partnered with the absolute best vendors across the industry to give brokers the experience they need all in one place.

I’ve had a lot of fun sharing our small, but insightful experiment which we are continuing to run on larger scales as more brokers participate in the platform.

Come visit us at biproxi.com

See what types of vendors and products we have to make your life easier at: https://biproximarketplace.com/

We look forward to hearing from you guys about ways we can improve your business.