9 Common Mistakes New Broker-Owners Make (+ How to Avoid Them)

Launching a real estate brokerage is an exciting venture with lots of prospects for growth and success. However, as with any business endeavor, there are pitfalls that can trip us up. That’s why, as someone with extensive personal experience opening an independent brokerage, I’m excited to walk you through all the major mistakes new broker-owners make and how to avoid them. 

Establishing a solid foundation for your brokerage is not just a recommendation—it’s the key to ensuring long-term sustainability. By understanding these nine potential mistakes on the brokerage management side, you can position yourself as a trusted broker and ensure the growth and viability of your new business. 

1. Lack of Proper Market Research  

Do you understand your target market and how are you going to reach them? What is the demand for your services? Who is your competition? 

If you open a brokerage, these are all questions you need to answer in order to reach your target demographic and succeed. A great reputation as a Realtor doesn’t necessarily translate to a successful brokerage, especially in the beginning. I quickly learned that most people won’t hang their hat on a maybe!  

How to Avoid This Mistake 

Understanding your target market is the first step to success. Dive into thorough market research to identify your audience, assess demand, and comprehend your competition. Being a top producer in your area is an asset, but translating that into a successful brokerage requires a clear strategy tailored to your target demographic.  

When I opened my brokerage, I drove through town and did a thorough evaluation of my competition. At the time, there was nowhere that aligned with the way I wanted to do business. In essence, I created my own solution, and that allowed me to be different and stand out.

2. Poor Business Planning & Financial Management                                   

I don’t doubt that you understand that starting a brokerage takes a significant financial investment. But many new broker-owners still manage to underestimate how long it will take to start bringing in consistent income. It is crucial to have a contingency plan for slower-than-expected startup or even a market shift that could prolong your projected trajectory.  

How to Avoid This Mistake 

Secure your future. Never let yourself forget that launching a brokerage requires a significant financial investment, and success might not happen overnight. Develop a comprehensive business plan that not only factors in financial investments but also considers the time it takes to start generating consistent income. After you create your ideal business plan, create a secondary contingency plan that takes into account slow starts or market shifts.

3. Inadequate Legal Compliance 

No one needs a lawyer until they need a lawyer! Legal issues may seem distant, but having a legal partner who understands them on your side is crucial. Also, as a broker-owner, you’re taking on a lot more liability than you ever did as an agent.

A lawyer is your best business friend—mine literally is my best friend! My lawyer is also a real estate broker, and as both a lawyer and practitioner of real estate, we together were able to successfully navigate many difficult scenarios.

How to Avoid This Mistake 

Not all lawyers are created equal, so do your research and find a good partner in a real estate attorney to help you navigate legal issues as they arise—and they will. I suggest finding a lawyer who is also a practitioner of real estate and someone who understands your market along with your local boards and how they operate.

4. Failing to Expand Your Leadership & Management Skills   

Most broker-owners are the highest selling agents in their areas. But being a top producer is often a whole different skill set than running a real estate brokerage. If you are looking to truly grow the brokerage, you will likely need to step out of the top producer role and into a full-time broker management role. Be watching for when that shift starts to come. 

How to Avoid This Mistake 

Recognize the point at which you need to step into a full-time management role to truly grow your brokerage. For me, that point was about 3.5 years in, where I didn’t need my sales to support the brokerage functions. It is often a hard shift to make for yourself financially, so make sure you are ready to make that leap.

But before you make the leap, ensure you have what it takes. Transitioning with grace from being a top-producing agent to a broker-owner requires a shift in skills. Learning to balance leadership and management is key to fostering a thriving, collaborative environment.

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5. Not Mastering the Intricacies of Real Estate Contracts 

I know it seems like common sense, but alas, I run into brokers all the time who do not have a real understanding of the contracts underpinning their business. The majority of questions you will field from agents will be contract-related and it is important to be able to advise them correctly to avoid legal complications.

How to Avoid This Mistake 

I love contracts! As a continuing education instructor, my favorite class to teach is our three-hour contract class. I pride myself on the fact that seasoned agents walk away from my class with a new understanding of contracts that they didn’t have before. Let’s take it a step further: Get yourself certified as an instructor so you can keep your agents educated and keep yourself in front of your agents providing value. 

6. Failing to Prioritize Networking & Relationship Building   

Relationships—whether we’re talking clients, fellow brokers, or other professionals in the field—are the backbone of the real estate industry. For me, building trust with fellow brokers was something of utmost importance as I built my brokerage. It paved the way for my agents to have successful transactions. Upholding a high level of professionalism and integrity will build your reputation and foster trust with clients and colleagues.

How to Avoid This Mistake 

You will feel pulled in so many directions in the beginning. But if there’s one thing I attribute to my success, it’s jumping into anything I could to get involved in, community-wise. Follow your passions and do what you can to give back, and it will come back to your brokerage tenfold.

7. Not Devoting Enough Resources to Marketing & Branding 

Remember—branding isn’t just your brand colors and logos, but much more. It is the essence of your values and philosophies and how you do business. Your branding should tell a story about you!

How to Avoid This Mistake 

Develop a robust online presence through a professional website and social media platforms. Invest in marketing strategies to showcase your listings effectively and build that online resume for the future of your business.

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8. Neglecting Technology

Embracing technology is vital for real estate agents. They are drawn to technology that will help them do their jobs better and more efficiently and edge out their competitors. You can look at this as part of agent recruiting and retention.  

How to Avoid This Mistake 

You must be prepared with tools, software, and online platforms. And you may have to look to other teams and companies to see what you’re missing. As I transitioned out of brokerage ownership and took my team to a large brokerage, I realized that—while I had indeed invested in good tools and we were thriving—there was much we were missing. Now that my team has these new tools, I see that we have an even bigger edge today thanks to the great technology they have access to.

9. Failing to Adapt to Market Changes 

Real estate is dynamic and ever-changing. Markets fluctuate and challenges arise, but adaptability is your greatest asset. Develop resilience to navigate uncertainties and bounce back from setbacks. We are all feeling this a bit in our current market! 

How to Avoid This Mistake 

No one can predict the future. But you can be proactive about remaining relevant in your market and to your agents, ensuring your brokerage remains a dynamic force in the ever-evolving real estate landscape. Another element that can help you here is adopting the mindset of a lifelong learner. Stay updated with the latest trends, technologies, and legal changes through continuous education.

Cheers to You

Congrats on setting the stage for a successful, optimistic journey in the competitive world of real estate brokerage. Here’s to your thriving brokerage and a future filled with growth and success!