To Be or Not to Be: Profit Center versus Service Center
When I ask Relocation Directors if their department is a profit center or a service center, they always seem embarrassed to tell me when they are a service center. A Relocation Director may have inherited that model, or their broker may have specifically structured it that way in the beginning. It’s nothing to be embarrassed about, but it is something to consider changing. While business is in a holding pattern, now is the time to take a look at how you have your department structured.
When we are a service center, it means we are either operating at a loss or at a break even. This, of course, doesn’t account for the money that we are putting in the pockets of the agents or the branch office, which can be substantial. But is does mean that we have nothing to show in our financials, but expenses. We are lumped into the cost center category along with IT, HR and marketing.
While the value of what a relocation department brings to a real estate firm may be unfair to only measure in profits, it’s the dollars that matter when budgets are being established. When brokers are challenged with downward pressure on retained dollar and markets become shaky, it is critical that a relocation department can tell a financial story as powerful as any branch office in the organization. If your broker is resistant to change your model, run various scenarios using historical department sales data to show the impact of what switching to a profitable model would have earned on those transactions. Numbers don’t lie.
It may seem overwhelming to think about how a relocation department would make the shift to a profitable model, but it really isn’t that complicated. It is just a matter of taking a hard look at all of the revenue streams and where they can be adjusted or increased. It might also mean focusing on new company generated business lines. It may be a give-and-take situation that ends up with everyone giving and taking a bit, so it doesn’t rest solely on the shoulders of the agents who service the business.
Business has paused for the moment. But the real estate industry will pick up again once we are past this pandemic and there will be a pent up demand that will need to be met. Relocations will move forward and we need to be ready. Today is the time to plan for tomorrow.
Use this pause in the action to examine how your business model is structured. I can help you tell the story of what a profitable relocation model can mean to a brokerage, particularly as our industry reboots once we are through this crisis. By being a profit center and taking on more lines of business, we can lock in a spot as a valuable contributor to the bottom line, not a perceived drain on it.
