Expense Control Amid Fixed-Cost Structure

Definition

'Cutting the right expenses' was cited by 47% of brokerage leaders as a top-10 challenge in 2024. This reflects a dilemma: brokers must reduce costs to maintain profitability during transaction volume declines, yet must avoid cutting investments in technology, agent support, and recruiting that are necessary for future growth. The challenge is structural: broker operating costs are largely fixed (occupancy, staff, core technology) and don't scale down with transaction volume. During market contraction, brokers face forced choices: reduce staff (impacting service quality and competitive position), defer technology investments (creating long-term disadvantage), cut agent support (risking agent defection), or reduce marketing spend (losing deal flow). Additionally, brokers face rising costs in: compliance (NAR settlement, rule changes), technology (new systems for commission tracking, MLS integration), insurance (E&O, errors due to process changes). Unlike downturns brokers controlled, today's market decline coincides with industry rule changes that require new systems and processes—forcing expense increases during revenue decreases.

Why This Matters

Business process optimization, outsourcing services, shared services/co-location models, technology stack rationalization, variable cost restructuring

Affected Stakeholders

Broker-Owner, Managing Broker

Related Business Risks