5 Forces Against Real Estate Brokers

Every brokerage has a fundamental challenge: you want to grow your profits. What are the obstacles to overcome to dominate your market and increase your revenue and profit? 

One of the biggest threats to a real estate broker – new or established – is competition. Who is your competition? How are their actions in the marketplace going to affect your current bottom line and future planning? 

To answer those questions, you must analyze and understand your competition. One way to do that is by using Porter's Five Forces model to break them down into five distinct categories. 

Below are the five forces you are currently losing profit to: 

1. Rivals: your direct competition 

As most real estate brokers, the first person you're losing profit to is rival companies - companies and brokers that do what you do and compete with you directly. You know who they are. How do you prevent an owner from listing his property with another brokerage, how can you reach out to a qualified active buyer before your competition does? How can you make sure that one of your past clients will reach out to you if/when they go back on the market? When rivalry competition is high, advertising and price wars can ensue, which can hurt a business's bottom line. 

2. Sellers/Buyer bargaining power: 

The third thing that you're losing to is consumer bargaining power: powerful customers. Powerful owners and buyers always negotiate to lower your commissions; they ask for more value, increasing your cost. Both of those reduce your profit. Profit equals price minus cost. Your commission always gets squeezed. How can you prevent it? 

3. Threat of new entrants: your new competition 

There is a constant flow of new agents and new real estate brokerage companies using better and smart technology and with great inventory. How do you stay competitive? The easier it is for a competitor to join the marketplace, the higher the risk of a business's market share being depleted. 

4. Powerful supplier and their bargaining power 

The fourth thing is a powerful supplier: supplier bargaining power. There are a lot of different types of suppliers; we're going to talk about your marketing suppliers; companies like Google and Facebook that you typically use for your PPC and online advertising. If they change their terms or increase their cost, raise their prices, they're going to grow your cost, and therefore, lower your profit. How do you protect yourself against it? 

5. Substitutes 

How easy it is for customers to switch from your service to that of a competitor or companies that do something similar, close enough that they could be considered a solution. For sale by owner, individuals not using brokers, property management companies. 

Those are the five forces that you compete against you for profits. Do you have a strategy to beat the five forces and to grow your profit? 

If you're interested in a strategy that can deliver against all five of those, while bringing on new clients in an affordable acquisition cost, you have to look into a different type of strategy to expand your competitive advantage. To that end, Brandora uses data-driven insight technology to help brokers market solely to prospects who are ready to buy now (active buyers) or looking to sell their property (real sellers). 

Brandora eliminates wasteful ad spend, drives down the cost per client acquisition and increases real estate brokers’ profits. 

Related Article: If you are interested in finding out how to grow your profit and how to beat these five forces, click here.