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As we head into the second quarter of 2010 the vast majority of Brokers still find themselves in uncertain circumstances.  Some are beginning to see light at the end of the tunnel, while others continue to struggle to hang on.  Regardless of where you find yourself, now is the time to ask the right questions and revisit some basic business rules.

One of the most fundamental business tactics is a good financial forecast . . . not a projection of “what ifs”, but what you truly believe will happen.  Create a forecast with a balance sheet, income statement and, most importantly, a statement of cash flows, on a monthly basis for the next few years. 

Most businesses fail, regardless of profitability, because of cash flow issues.  The banks that used to “love” to lend you money are now shutting off your credit lines, even if you were never late on a payment.  You must ensure you have the cash on hand to balance out the ups and downs of your business.

Although most brokers have long stopped frivolous spending (does it even exist anymore, anywhere?), here are a couple of things to consider for additional cost-cutting.

1.  Is your insurance protection appropriate for your situation?  If your sales and payroll are down and if you have equipment that you are no longer using, it’s a worthwhile exercise to review your insurance coverage and make adjustments to reflect your current situation and save money on your premium.

2.  Are you providing health insurance for your employees?  Why not ensure you are getting the most out of your policy by reviewing alternative options for structuring employee costs or learning if other changes will decrease premiums.

3.  Are you still overstaffed?  An avoidance to downsize may lead to unhealthy financial situations for everyone.  If your staff is not busy and effective you will have to make some tough decisions.  Go through the exercise of reviewing everything you are doing and then decide which of those things are no longer important to do.  It is better to cut a few people than for everyone to be out of a job (including you).

As is the case with any good advice, preparing a financial forecast is always relevant and important, and allows you to make business decisions from a position of strength.

Outsourcing can be a very smart move for some real estate brokerages and should be considered to some degree in all our business strategies.

We are already accustomed to having sales functions performed by independent contractors. Perhaps thinking creatively how other independent contractors can handle some of the customer service, front and back office operations is a good exercise.

Does corporate relocation, leads management, payroll administration, accounting, data input, etc. etc. need to be done by employees in your offices? Perhaps it’s worthwhile to spend some time researching outsourcing alternatives and their impact on your bottom line.

Some obvious advantages are (1) independent contractor vs employee cost, (2) can more easily handle peaks and valleys in revenue, (3) avoid paying workers who will have to be paid whether or not there is enough work to do year-round, (4) the use of office space for more productive pursuits, and more.

The disadvantages may be the possibility of loss of quality and schedule control. These potential weaknesses can usually be overcome with strong management involvement.

In today’s economic environment, all options should be examined. There are small one-person home-based businesses springing up all over the place. People with excellent skills are offering them on a contractural basis, which may be a better, more efficient and more cost effective alternative for your business than maintaining your current employees.

Are you outsourcing some of your operations? What impact is it having on your company, your employees, and your bottom line?