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Business Approach vs. Business Model

 | 33 Comments

Thumbnail image for dreamstimeextrasmall_13642095.jpgThe REALTOR® community is flush with agents who call themselves REAL ESTATE CONSULTANTS but only know and understand the commission model. Some of these truly are consultants. They have the experience, knowledge, proven methods and a business approach whereby they are giving their clients the best advice and produce justification, evidence and work products to back up their opinions. How they charge for services is irrelevant except for the fact that it may not be very transparent. They know real estate and practice consulting but only grasp one business model.

A Consulting Approach Is About Process

 | 4 Comments
One of the articles I presented some time ago is "Why developing fees is so hard to do" and is filed in Best practices and Setting rates and fees. One of the important concepts introduced is about process. Here's an important excerpt ...

Signature By-Line

 | 10 Comments
Just discovered this signature by-line on a Ron Stuart email: “You can have better outcomes and financial advantage by engaging a fee-paid advisor, instead of a commission salesperson, to assist with property transactions. Activity-based service fees, instead of a percentage of the property price, favour your equity and encourage full disclosure, transparency and harmonized interests!” Could not have said it better!

Activity Based Pricing - A Primer

 | 2 Comments

I began using Consumer Choice models when I established my relationship with RE/MAX way back in August 1, 2004. Over time, we accumulated significant experience with different approaches and what works and what doesn't; the pitfalls, potholes, roadblocks and agent/broker scourge as well as documented successes. This stuff works! I believe it IS the future for the real professionals in this business.

Where did the models come from? They were developed based on a service/consulting fee model I used for over 25 years as an executive with EDS, an IT and Business Process services provider. In fact, it is a business model I have been familiar with for longer than my career with EDS. It is based on Activity Based Costing. Here's the simple explanation:

Jim Rohn: Brainy Quotes

 | 1 Comment
"You don't get paid for the hour. You get paid for the value you bring to the hour." http://www.brainyquote.com/quotes/quotes/j/jimrohn109882.html

Transaction Life Cycle

 | 0 Comments  | 0 TrackBacks

One of the articles I recently posted is Business Approach vs. Business Model. One of the important concepts introduced is about process. Here's an important excerpt:

How many times have we taken a listing at a great (or not so great) commission rate, spent many hours getting the listing set up, taking classy pictures, adding a virtual tour, getting the sign, lock box and fancy color brochures and running repeating ads in the local print media only to have a listing sit on the market too long because the seller is reluctant to get competitive on price, becomes impatient and then fires us and finds another agent? All that expense (including your time) with absolutely no return. Also irritating is when the seller lists with the next agent at a price we were telling them to lower to in the first place!

As an agent we are taking all the risk in every transaction. With SmartPlan™, we can offer risk alternatives:

  • In the standard commission model the agent is taking all the risk.
  • If we were to be paid on time and materials (like a lawyer), the client takes all the risk
  • Sharing risk - an alternative approach used to get paid for what you do and at the same time share some risk with the seller:
This is a new post on these important issues and how they relate to alternative business models. There were many great comments off subject on the recent Ambassador Program Brainstorming Session Announcement which I will attempt to collect and move to here. To do this I have to manually modify the data base (literally) that supports the Exchange. This will be a time consuming process but, the comments are valuable enough to attempt to do this. It will take a while. In the mean time, if you have thoughts on these subjects comment on this post.

The current SmartPlan™ is built using Microsoft Excel spreadsheets and are interactive/formula driven. There are several sheets organized into a Workbook. You will need Excel on your PC and you should have a good working knowledge of Excel.

All of the standard activities are available as well as several optional activities. All you need to supply are the average number of hours for each based on your experience.

No. It enhances your client relationship by providing transparency to your cost of doing business. You can offer your client different ways to pay and they will appreciate having choices.

What is Activity Based Pricing?

 | 0 Comments  | 0 TrackBacks

The short answer: it was developed as an accounting tool for manufacturing to price products. It was also adapted to the service business. Now there is a simple version to price real estate services. Here's the long answer:

What is SmartPlan™?

 | 0 Comments  | 0 TrackBacks

An interactive tool based on Activity Based Pricing principles containing all the major activities performed for buyers and sellers. You control the actvity pricing.

If you are easily offended, do not read any further. If you value an honest opinion, read on. I'm warning you ... this is not sugar coated.

Charging what you're worth

 | 0 Comments

Once in a while I run across an obscure article that seems to be relevant to what we are all about. Here is one such article: Charging what you're worth (see Contents: Page 11: FreshViews) This comes from the Costco Connection magazine in the FreshViews section. Also on the same page is an article Hip marketing tips to attract new customers. Both are excellent and timely. Costco caters to the small business entrepreneur. We are all small businesses entrepreneurs... aren't we? PS: This is not my main business read but sometimes they have some juicy nuggets!

The Joys of a Satisfied Client

 | 0 Comments

Focusing on the highest professionalism in everything we do and using the SmartPlan to make our fee transparent is priceless. By the way, this client chose the Shared Risk approach and paid me $2,200 in the first 30 days of the engagement with the balance at closing. Here's a note I received from a recent listing client that settled on their sale October 1st:

Consult and refer

 | 0 Comments

Here is an example of the consult and refer approach: A few weeks ago I received a call from a potential client who asked if I would do a property evaluation in preparation for listing their home. I replied that I worked as a consultant, it would take two hours of my time at $175 per hour. They agreed, I did a bit of comparable research, met them at their home (they had the check in hand for $350), gave them some verbal advice, took notes and subsequently sent them a written report (Property Evaluation Report.pdf). I also sent them a proposal for the listing using my Shared Risk approach being paid up front for my marketing. Because of cash flow issues, they were not able to accept my proposal although they were impressed with my professional approach and thoroughness in presenting my analysis and wanted to hire me. As a result, I declined the listing and referred it to a friend with another broker. He took the listing with a traditional commission approach and is willing to pay me a 20% referral fee if and when it sells. It is a $1,000,000 property in an upscale Northern Virginia neighborhood. There is more than one way to earn a living using consulting.

Activity Based Pricing

 | 0 Comments

As I continually ponder this business model it occurred to me that what I really do is "activity based pricing" of real estate services. This is a much better description of what I do and what my clients love. Fee schedules are out. Activity based pricing is in! Look at my spreadsheet in the document library (in the fee schedules category). I described "activity based costing" in this article I wrote almost a year ago. Now I have a new way to present my fees: Activity Based Pricing. What better way to say it?

Filling the Choice Gap

 | 1 Comment  | 0 TrackBacks
Every seller is a "For Sale by Owner." Every buyer is a "do it yourselfer." It is simply a matter of how much of the work in a real estate transaction is contracted to a real estate professional. From none to the entire transaction. Or in industry speak, from the stereotypical FSBO for a seller to a "full service" listing.

If the only thing we change about our business is implementing a different way to charge clients for real estate and real estate related services we have missed the point. You just become another real estate agent with a different business model. So, lets take a look at what "consulting" and "consultant" really means:

Perspective on commissions

 | 1 Comment  | 0 TrackBacks
MoneyInHand.jpg Note: Republished from the Northern Virginia Real Estate Guide October 17, 2006 The traditional commission model has no relationship to effort and expense across a wide spectrum of property types, markets and price ranges. We (Pam and I) began using consumer Choice models when I established our relationship with RE/MAX on August 1, 2004. We have accumulated significant experience with different approaches and what works and what doesn't; the pitfalls, potholes, roadblocks and agent/broker scourge as well as documented successes. This stuff works! I believe it IS the future for the real professionals in this business.

Wonders never cease! I received an email from one of my Blog (the Northern Virginia Real Estate Guide) followers asking for clarification on our business model. I set up an "on-line" appointment with him with a password protected website I built that has a link to my fee schedule. The conference occurred this morning at 8:30. I spent about an hour with him explaining the consulting approach and walking through my fee schedule (literally designing a listing program with him on-the-fly). He was impressed with how transparent it is is (full disclosure on what I will do and what it will cost. Net: The resulting fixed fee I will charge is equivalent to a 5% listing on a $425,000 property (3% to a coop broker and the equivalent of 2% to me). I asked if he wanted to talk it over with his wife and his response was "No, I like this approach, I know what I will be paying for...when can we sign an agreement!" We will sign the listing Tuesday night. This is about the fifth time in the last 12 months I get a call and literally take the listing over the phone. It pays to be a consultant and it pays big time to get on-line exposure. In my case, the Blog.

A Consulting Approach Is About Process

 | 4 Comments
One of the articles I presented some time ago is "Why developing fees is so hard to do" and is filed in Best practices and Setting rates and fees. One of the important concepts introduced is about process. Here's an important excerpt ...

Wonders never cease! I received an email from one of my Blog (the Northern Virginia Real Estate Guide) followers asking for clarification on our business model. I set up an "on-line" appointment with him with a password protected website I built that has a link to my fee schedule. The conference occurred this morning at 8:30. I spent about an hour with him explaining the consulting approach and walking through my fee schedule (literally designing a listing program with him on-the-fly). He was impressed with how transparent it is is (full disclosure on what I will do and what it will cost. Net: The resulting fixed fee I will charge is equivalent to a 5% listing on a $425,000 property (3% to a coop broker and the equivalent of 2% to me). I asked if he wanted to talk it over with his wife and his response was "No, I like this approach, I know what I will be paying for...when can we sign an agreement!" We will sign the listing Tuesday night. This is about the fifth time in the last 12 months I get a call and literally take the listing over the phone. It pays to be a consultant and it pays big time to get on-line exposure. In my case, the Blog.

Activity Based Pricing

 | 0 Comments

As I continually ponder this business model it occurred to me that what I really do is "activity based pricing" of real estate services. This is a much better description of what I do and what my clients love. Fee schedules are out. Activity based pricing is in! Look at my spreadsheet in the document library (in the fee schedules category). I described "activity based costing" in this article I wrote almost a year ago. Now I have a new way to present my fees: Activity Based Pricing. What better way to say it?

Activity Based Pricing - A Primer

 | 2 Comments

I began using Consumer Choice models when I established my relationship with RE/MAX way back in August 1, 2004. Over time, we accumulated significant experience with different approaches and what works and what doesn't; the pitfalls, potholes, roadblocks and agent/broker scourge as well as documented successes. This stuff works! I believe it IS the future for the real professionals in this business.

Where did the models come from? They were developed based on a service/consulting fee model I used for over 25 years as an executive with EDS, an IT and Business Process services provider. In fact, it is a business model I have been familiar with for longer than my career with EDS. It is based on Activity Based Costing. Here's the simple explanation:

Business Approach vs. Business Model

 | 33 Comments

Thumbnail image for dreamstimeextrasmall_13642095.jpgThe REALTOR® community is flush with agents who call themselves REAL ESTATE CONSULTANTS but only know and understand the commission model. Some of these truly are consultants. They have the experience, knowledge, proven methods and a business approach whereby they are giving their clients the best advice and produce justification, evidence and work products to back up their opinions. How they charge for services is irrelevant except for the fact that it may not be very transparent. They know real estate and practice consulting but only grasp one business model.

Charging what you're worth

 | 0 Comments

Once in a while I run across an obscure article that seems to be relevant to what we are all about. Here is one such article: Charging what you're worth (see Contents: Page 11: FreshViews) This comes from the Costco Connection magazine in the FreshViews section. Also on the same page is an article Hip marketing tips to attract new customers. Both are excellent and timely. Costco caters to the small business entrepreneur. We are all small businesses entrepreneurs... aren't we? PS: This is not my main business read but sometimes they have some juicy nuggets!

Consult and refer

 | 0 Comments

Here is an example of the consult and refer approach: A few weeks ago I received a call from a potential client who asked if I would do a property evaluation in preparation for listing their home. I replied that I worked as a consultant, it would take two hours of my time at $175 per hour. They agreed, I did a bit of comparable research, met them at their home (they had the check in hand for $350), gave them some verbal advice, took notes and subsequently sent them a written report (Property Evaluation Report.pdf). I also sent them a proposal for the listing using my Shared Risk approach being paid up front for my marketing. Because of cash flow issues, they were not able to accept my proposal although they were impressed with my professional approach and thoroughness in presenting my analysis and wanted to hire me. As a result, I declined the listing and referred it to a friend with another broker. He took the listing with a traditional commission approach and is willing to pay me a 20% referral fee if and when it sells. It is a $1,000,000 property in an upscale Northern Virginia neighborhood. There is more than one way to earn a living using consulting.

If the only thing we change about our business is implementing a different way to charge clients for real estate and real estate related services we have missed the point. You just become another real estate agent with a different business model. So, lets take a look at what "consulting" and "consultant" really means:

This is a new post on these important issues and how they relate to alternative business models. There were many great comments off subject on the recent Ambassador Program Brainstorming Session Announcement which I will attempt to collect and move to here. To do this I have to manually modify the data base (literally) that supports the Exchange. This will be a time consuming process but, the comments are valuable enough to attempt to do this. It will take a while. In the mean time, if you have thoughts on these subjects comment on this post.

No. It enhances your client relationship by providing transparency to your cost of doing business. You can offer your client different ways to pay and they will appreciate having choices.

Filling the Choice Gap

 | 1 Comment  | 0 TrackBacks
Every seller is a "For Sale by Owner." Every buyer is a "do it yourselfer." It is simply a matter of how much of the work in a real estate transaction is contracted to a real estate professional. From none to the entire transaction. Or in industry speak, from the stereotypical FSBO for a seller to a "full service" listing.

If you are easily offended, do not read any further. If you value an honest opinion, read on. I'm warning you ... this is not sugar coated.

Jim Rohn: Brainy Quotes

 | 1 Comment
"You don't get paid for the hour. You get paid for the value you bring to the hour." http://www.brainyquote.com/quotes/quotes/j/jimrohn109882.html

Perspective on commissions

 | 1 Comment  | 0 TrackBacks
MoneyInHand.jpg Note: Republished from the Northern Virginia Real Estate Guide October 17, 2006 The traditional commission model has no relationship to effort and expense across a wide spectrum of property types, markets and price ranges. We (Pam and I) began using consumer Choice models when I established our relationship with RE/MAX on August 1, 2004. We have accumulated significant experience with different approaches and what works and what doesn't; the pitfalls, potholes, roadblocks and agent/broker scourge as well as documented successes. This stuff works! I believe it IS the future for the real professionals in this business.

How many times have we taken a listing at a great (or not so great) commission rate, spent many hours getting the listing set up, taking classy pictures, adding a virtual tour, getting the sign, lock box and fancy color brochures and running repeating ads in the local print media only to have a listing sit on the market too long because the seller is reluctant to get competitive on price, becomes impatient and then fires us and finds another agent? All that expense (including your time) with absolutely no return. Also irritating is when the seller lists with the next agent at a price we were telling them to lower to in the first place!

As an agent we are taking all the risk in every transaction. With SmartPlan™, we can offer risk alternatives:

  • In the standard commission model the agent is taking all the risk.
  • If we were to be paid on time and materials (like a lawyer), the client takes all the risk
  • Sharing risk - an alternative approach used to get paid for what you do and at the same time share some risk with the seller:

Signature By-Line

 | 10 Comments
Just discovered this signature by-line on a Ron Stuart email: “You can have better outcomes and financial advantage by engaging a fee-paid advisor, instead of a commission salesperson, to assist with property transactions. Activity-based service fees, instead of a percentage of the property price, favour your equity and encourage full disclosure, transparency and harmonized interests!” Could not have said it better!

The Joys of a Satisfied Client

 | 0 Comments

Focusing on the highest professionalism in everything we do and using the SmartPlan to make our fee transparent is priceless. By the way, this client chose the Shared Risk approach and paid me $2,200 in the first 30 days of the engagement with the balance at closing. Here's a note I received from a recent listing client that settled on their sale October 1st:

Transaction Life Cycle

 | 0 Comments  | 0 TrackBacks

One of the articles I recently posted is Business Approach vs. Business Model. One of the important concepts introduced is about process. Here's an important excerpt:

The current SmartPlan™ is built using Microsoft Excel spreadsheets and are interactive/formula driven. There are several sheets organized into a Workbook. You will need Excel on your PC and you should have a good working knowledge of Excel.

All of the standard activities are available as well as several optional activities. All you need to supply are the average number of hours for each based on your experience.

What is Activity Based Pricing?

 | 0 Comments  | 0 TrackBacks

The short answer: it was developed as an accounting tool for manufacturing to price products. It was also adapted to the service business. Now there is a simple version to price real estate services. Here's the long answer:

What is SmartPlan™?

 | 0 Comments  | 0 TrackBacks

An interactive tool based on Activity Based Pricing principles containing all the major activities performed for buyers and sellers. You control the actvity pricing.

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