If CRE brokers’ manual processes are automated, their monthly earnings can be boosted upwards of 20% or 50% (depending on how inefficient they currently are).
What do lawyers, doctors, engineers and CRE brokers all have in common? They are all knowledge workers. And, as knowledge workers:
All are answered with the economic principle of opportunity cost…
Opportunity cost is the reason why it doesn’t make sense (for the brokerage) to give Gmaven to a broker billing less than R12.9K per month ($806) on average. More on this below.
If I do action “admin”, I can’t do action “deals”.
Let’s say admin and deals both take an hour.
I earn 10 beans doing deals.
I earn 2 beans doing admin.
The opportunity cost of doing an hour of admin, for which I get 2 beans, instead of an hour of deals, is 10 beans.
If I can swap deals with admin, I will make 8 more beans for every hour worked.
Applying the concept of opportunity cost in practice only works if you have options. You can’t simply stop doing admin (because it’s part and parcel of deals). What about the option of swapping admin for money? If you can do this, the cornerstone of tech efficiency, you can effectively “buy time”.
All this is theoretical. So we tested this theory practically. We looked at CRE brokers, a vertical we now know quite well. We put a number to the opportunity cost of admin. We put a cost to tech. And then, to move to a practical solution, checked where it made sense to swap admin time with money.
We were surprised by what we found:
Wearing the hat of a brokerage, on clear assumptions (see below), our calculations: where brokers bill less than R12.9K per month ($806) on average, they are out of luck. Where low-earning brokers generate only R52.77 per productive hour for the brokerage, their opportunity cost of time is simply too low.
Doing the maths, Gmaven costs the brokerage R52.94 per removeable admin hour. Where a broker can earn the brokerage above R52.94 per hour (say R100), there is an opportunity for the brokerage to pay R52.94 for admin, but earn R100 in.
Earning R100, and using Gmaven gives a net gain to the brokerage of R47 / hour, for every admin hour that can possibly be swapped out.
(These sums are based on the productive and admin time (fixed and removed-able) assumptions, and the known Gmaven monthly cost of R1.5K)
What about a broker billing say an average of R60K / month ($3.75K)? Here their opportunity cost of productive time is way higher – at R545 / hour. This is way above the R53 / hour that outsourcing the admin costs (R52.94 rounded to R53).
Which means: for every hour they can swap admin time for the R53, they can bill an extra R492.
This is how their numbers stack up…
Additionally, the above conservatively assumes that brokers are not required to capture public stock vacancies. Where such brokers manually capture public stock vacancies, their current waste/inefficiency is higher, and their “now-with-technology” numbers will look better still (resulting in increases of 50% plus) **
The good news about technology
Gmaven calculates reducing a broker’s admin time by approximately 57%.
We calculate admin (without Gmaven) currently taking brokers 6 and a quarter days per month.
With the best CRE brokerages adding Gmaven, this reduces admin by just over 3 and a half days a month.
Further, once these deals are in play, the efficiency flywheel turns even harder. Brokers are able to execute on this greater volume of deals, at better levels of service, because their deal admin is largely automated.
*
(If you are interested, our assumption-driven workings in Excel – relevant to any brokerage – are in this link. This means you can download them, easily put your own business’s numbers in and see what gets spat out, and generally test our logic.
**
Where brokers spend time manually capturing public stock vacancies, a process which Gmaven automates, the improvement numbers look even better still. Please refer below:
Other
In short, we generate extra profits for our clients by reducing low value “admin”, releasing brokers to focus on the higher-opportunity-cost-of-time deal making activities.
The fact we have skilled white collar workers playing data capturer in the 2020s is one of the great tragedies of our industry today.
There are roughly 300 brokerages in SA, paying a minimum of say R5K each, every month (totalling R1.5M / month), to manually capture public stock vacancies. This is a very inefficient use of scarce CRE brokerage resources. (As outlined above, where deal makers (with a higher opportunity cost of time) are used to data capture stock, the opportunity cost is even greater than R5K / month)
These skilled back and front team members should be adding value to their front office team makers. Please see this link that explains what goes on in the best CRE brokerages. Here is what our sums tell us, about possible cost savings for brokerages relating to this inefficient part of the CRE industry
…can be used to actually do work that the organisation is not getting to, that is far more valuable.
Here is a breakdown of these monthly costs and cost savings:
In our opinion, to capture stock effectively, manually, the following is required
For reliable vacancies data, the above are non-negotiables for best CRE brokerages.
Hope you found these data points valuable, and enjoy the interactive Excel doc. This piece has taken time, but we needed to do things
We trust we have achieved both of these objectives
In a long-overdue industry first, PropTech is now delivering professionally-designed, automated vacancy schedules to the CRE industry. You time-starved CRE professionals can now get your vacancy schedules to work as hard as you do, giving your vacant space the best chance of finding the right tenant.
Good news – CRE professionals can now seamlessly get their stock for sale or to let onto the listing platforms. With one click of a button. These data flows are now automated, making CRE more efficient. Say goodbye to double capture.
The current soul-crushing admin that most highly skilled CRE professionals have to endure for at least 30% of their days. Is it a thing? How is our “now state” similar to pre-industrial revolution business? Is there hope of change?
