Nick Young (Trail Homes) and Justin Mastores (Rees Group) outline how to maintain business growth, make astute decisions and mitigate risk in a time of industry turbulence.
At a time of industry fluctuations, brokers increasingly need to be adaptive, invest in their business and be open to different strategies to ensure their longevity.
A lot of air time is given to the business’ setup and initial sustainability; however, once a company proves its viability, it’s easy to fall into the trap of ‘set and forget’ and assume that – because it’s worked so far – it’s the best way to continue.
As such, mature brokerages (usually at the four to seven year mark), can find themselves at a crossroads.
“At this point, the business will typically be entrenched in their offering, and be operating profitably, though often fairly similarly to its inception – with perhaps improved technology and more staff. It’s also common that the principal hasn’t come up for air and is so focused on generating sales that ensuring that the business is moving in a staged, considered direction to escalate its growth trajectory isn’t typically prioritised,” said Justin Mastores, partner at accounting and advisory firm Rees Group.
“The corresponding challenge is to make sure that the business is still evolving versus becoming stagnant in what can easily become antiquated and cumbersome operations. Ensuring that the firm is robust and resilient to market fluctuations is particularly important at a time when the market is so exposed to both the housing downturn and changing landscape driven by industry investigations,” added Nick Young, managing director at Trail Homes.
Mastores suggests that brokers consider the following to create a business that is not only successful, but stable:
Mature brokerages are encouraged to consider staged, versus organic growth, which often includes the acquisition of another firm. This strategy works particularly well when coupled with a broker looking to sell their trail book as part of their exit strategy. In this situation, Trail Homes stipulates that brokers must provide ongoing service to clients as part of the transaction.
“We want to make it clear that even though you might be selling your trail book, your ongoing obligation to service clients remains. If a broker is exiting the industry we also now insist that a new broker is appointed to look after the exiting broker’s clients’ ongoing financial needs. These measures have been implemented to formalise borrower support, as well as foster growth and sustain legacy within the broking community,” said Nick Young, Trail Homes.
The mandate is consistent with Trail Homes’ business model that the clients remain with the broker, and not on-sold as part of the trail book transaction.
“We believe that it’s critical to create environments that promote good customer outcomes whilst supporting the broking industry. This simply isn’t possible if clients are bundled into a trail book sale, which consequently severs client relationships and the broker’s ability to continue to write new loans or refinance old loans. It’s a much healthier ecosystem for all involved if the broker’s bloodline remains intact, and untouched,” Mr Young continued.
“Brokers are urged to be astute about growing their business and accelerate their trajectory by aligning with accountants, and other professionals, who can provide guidance on planning and growth measures,” Mr Young concluded.
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