First, you must hold a Massachusetts Real Estate Broker’s License in order to be a principal in a real estate firm in Massachusetts. Starting a business can sometimes seem like an uphill climb. You must plan each step before you take it. Once a business plan is developed, you must consider more than production, marketing, and accounting. You must also consider the legal environment and government regulation of business and the related forms necessary to comply with regulation.
This is just a guideline and is not a substitute for the professional advice of your attorney, accountant, insurance agent or business manager / coach. It is simply a mechanism to help you to start thinking of the many facets that go into opening a successful real estate business in our region.
There are many links to more information for your convenience, and we have tried to organize it to be an effective planning tool. Other wonderful resources are the Small Business Administration’s Starting a Business Guide and Start-up Nations 10 Steps to Business.
Get Ready – Research Stage
- Thoroughly research the real estate market – View trends and economic forecasts to help determine business feasibility. To be successful, you must have a clear understanding of the market, your competitors and your strengths in order to figure out what areas you should target, what skills you should market, and if there are resources that would help you penetrate that market better. This research will allow you to learn how to compete successfully and meet your financial objectives. Are you wondering what business cycle we presently experiencing and what economic forecasts you can use to realistically project income and growth? Berkshire Market Watch Reports and Statistics
- Determine type of business structure – How you initially set up your firm will have a big impact on your legal requirements, financial filings and business setup. You need to look various business structures to determine what is right for your company. Sole Proprietorship, Partnership, Corporation, S Corp, Limited liability Partnership or Firm, etc. Details about your Business Structure Options
- Determine office location – Choosing to have an individual physical office location or a home office will depend on your short and long-term plans for your business. Consider the obvious logistical questions; where will you meet with clients initially or to draft P&S agreements; how will you market your business without signage; do you plan to affiliate with other licensees, and if so how will they interact; do you have space and equipment for phone lines, faxes, email high speed internet etc? Then consider the intangible issues, such as will you be able to separate ‘home life and work life’ appropriately, will your real estate business become round the clock with it in your home, or will your presence at home distract you from your real estate commitments? Will leasing space impact your financial situation and require you to stretch your goals too far? ABC News: Pros and Cons of Working from Home and Quiz to see if it is right for you. Also consider accessibility of the office, janitorial and maintenance needs, space for additional salespersons/administrative staff, storage/work room needs, furnishings office supplies and equipment – all need lead time to acquire.
- Determine if start-up financing is needed, and research options – Your personal financial resources may be enough to begin your real estate business, or you may decide to secure a line of credit or small business loan. Most lenders require a written business plan before committing funds to a business, and before you commit your own funds, you should do the same. Not only must you budget for exactly how much you “need” to start your business, you should also forecast and create a contingency plan for various market cycles in case your start-up is not as prosperous as expected. Review personal finances and determine level of investment, level of income required and determine personal financial expectations. Ask an Affiliate Lender for Assistance
- Research Business Models – Do you plan to offer exclusive seller representation? Exclusive buyer representation? Representation for both buyers and sellers? If so, consider how your firm will uphold your fiduciary duties if a conflict of interest occurs. You should review both Dual Agency and Designated Agency guidelines, to see what will work best for your firm. From there, determine if your firm will offer full service to your clients and what exactly that will entail, or alternately, limited service and what that will and will not include. From there, compensation issues should be considered. Detailed Agency Assistance
- Consider Possible Business Names – When you set out to name your business, remember that this identity will be a brand for your services. Does it speak to the services you provide and create an image of who you are? Can it help your marketing campaign, and increase brand and name recognition of your company? You will also want to make sure that the name is not similar to that of another business, that may prove confusing to the consumer. Think about the big picture when naming your firm – narrow your ‘best of’ list to a handful and check to see if these names are trademarked. Massachusetts Trademark Search. Also check to see of those names are already registered as DBA’s by your city or town. Check out the availability of the business domain name on-line Domain Name Search. Get clever friends or family to brainstorm names and possible visual and aural connections to your clients. More information on Trademarks & Names
- Consult the Pros: Once you have some research under your belt and are serious about creating a new real estate firm, begin by making sure you have all of the best advice and guidance in the development stage. You will find that many of the “to-do” items shown in the next step of development can and should be handled by professionals equipped with the paperwork necessary to handle the matters quickly and efficiently.
- Determine which Attorney would be the best to advise you in this process, and obtain estimates of cost. An attorney can be consulted regarding the legal requirements of setting up and operating your business.
- Determine which Accountant would be best to advise you in the process of understanding the financial and tax requirements of setting up and operating your business.
- Determine which Insurance Provider would be able to assist you in securing the appropriate insurance to protect your business assets.
- Determine if you need professional assistance, personal assistance or help with the small details. Consider local, paid help or take advantage of Real Estate Virtual Assistants. These assistants work from their own home and provide real estate companies with support services on an as needed basis.
- Research to find outstanding graphic designers to hire for the creation of your business logo and materials. Also research web site developers who have easy, affordable, professional looking web sites. Chose a photographer that will provide you outstanding self promotion images. Computer technicians will also come in very, very handy setting up a new office.
Formulate Your Exit Strategy from your Current Firm: Remember that all previous listings belong to your previous company. You may not “take” your listings with you. You also do not “take” your buyer clients with you. Consult your independent contractor agreement to determine how leads or prospecting information is turned over, if you have a non-compete clause and cannot operate in a certain market area for a time period mutually agreed upon, and how your current transactions will be handled. All of those details that need to be handled professionally before you depart your current company. If you do not have an independent contractor agreement or have questions about any item, speak to your broker of record for more information or consult legal counsel for advice. Any inquiries through the association will be kept confidential and you should use your own professional discretion what to reveal to others. If you are currently employed in a brokerage firm – prepare for potential bitterness when you leave and start your own business.
- Research Office & Production Technology (computers, faxes, telephones, software) – Now is a good time to figure out what technology you will use to make your work most productive. Is there new equipment or software that is required? Consider how you plan to work and interact with your clients and other brokers. this will lead to an understanding of your business needs. All of your daily activities can and should be preplanned so that you can assess what products are best for you. Make sure to use your REALTOR Discounts before purchasing to save money.
Get Set – Development Stage
- Create a Business Plan: After the research above, you are now more prepared to create your business plan, including: detailed financial goals and method of achieving them, business structure and marketing strategies. As said by Stefan Swanepoel, “Often, though, business planning is the last thing we want to do, because it’s sometimes a painful process. But there’s little value to your dreams if they stay only in your head. Daily actions need to echo the written word of the business plan, which in turn echoes the dream. In the daily competition for sales and markets, the race is to the company that knows what its goals are and how to achieve them. As the modern axiom goes, If you fail to plan, you plan to fail. Success is attainable if your plan has been well thought out, written down, researched, debated, and shared with your team. Whether you’re a one-person operation, a midsize company, or a megacompany, your business plan requires continuity, dedication, focus, and follow-through.” Business Planning Tools
- Obtain Financing and Create Budgets based on Business Plan. Create a budget to make sure you have more money coming in the front door than going out the back. Not only are you in business for yourself in an industry without any form of compensation until total success is achieved, you also may be responsible for others affiliated with your firm, or are relied upon by your family. Without a budget, your marketing dollars could be eaten up in a month or periods of low sales can be disastrous. This is an important step. Research also shows that those who set financial goals have higher income and productivity – makes sense that you have to strive for a goal in order to achieve it, right? Great Tips on Building a Budget
- Save the Name! You’ve finally narrowed down your search and selected the perfect firm name! Don’t let all that hard work slip away – register the name of the business with the city/town clerk if DBA, single proprietorship or partnership – or – register the name of the business with the state if LLC or corporation. Consider trademarking the new firm name. Now is also the time to reserve your domain name and consider different variations for example, we own BerkshireRealtors.org, .com, .net, and also BerkshireMLS.org, .com and BerkshireRealEstate.org. Buy Domain Names
- Get Licensed – Make appropriate applications for licenses to operate in desired states. All Massachusetts Real Estate companies must be licensed in one way or another. Sole Proprietors may open a real estate company with an active, valid brokers license. Corporations, Limited Liability Companies, and Partnerships must apply for a separate company license before doing business in Massachusetts. More License Information and Fees. Also don’t forget to apply for local business licenses, permits, certificates of occupancy and adhere to any local ordinates that affect a business (even if home based) You can find out exactly what you need by calling the City or Town Hall. Business Real Estate License
- Taxes, Taxes, Taxes – First, if your business is a partnership or corporation (with or without employees), or a sole proprietorship with employees, the first thing you must do is obtain a federal identification number for federal and Massachusetts tax purposes. To obtain a federal identification number, you must file Form SS-4, Application for Employer Identification Number, with the Internal Revenue Service. The State of Massachusetts also has online forms to register your business – The Department of Revenue’s Online Guide to Business Taxes. Also, if you employ one or more permanent, temporary or part-time workers in Massachusetts you must register with the Division of Unemployment Assistance. Other items for consideration are: Determine applicable job safety and health regulations (OSHA) or Determine applicable environmental regulations.
- Brand your Business – Hire a professional to create a custom logo, brand and or tag line, create signs, business cards, stationery, and an introduction letter letting people know that you’ve advancing to owning your own business. This is not the time to use the kid down the street – unless you want a really homespun look. Your logo and business materials will project the mind-set of your company and should represent your philosophy. Is it cleaver, elegant, whimsical, classic, professional, quaint, ….? This is the time that you begin to define yourself to the public and this marketing stage is incredibly important. As the old adage goes, you don’t get a second change to make a first impression. Are your materials making the very best first impression possible? Effective marketing is essential to the success of your brokerage business.
- Independent Agents or Employees? – It is very important to consider the role of agents working on your behalf, and how you plan to compensate and supervise them to meet with your licensing requirements, without overstepping Independent Contractor laws that limit oversight. Independent Contractor Issues
- Create an Office Policy Manual – Your brokerage office’s policy manual provides a road map for your company, its goals, and what is expected of each person to succeed. It also helps to protect your firm from risk, since they address clearly thought out scenarios to help you can consistently deal with issues in the same manner every time. We have a list of 25 things every office policy needs and more resources to help you draft this important business tool.
Secure Appropriate Insurance – Now is the time to establish Errors and Omission Insurance, General Business Insurance, Health Insurance, verify your bond is in place and file Homestead Act. This is an important step in securing the future viability of your business. Click here for more information on Insurance Coverage Available
- Establish a Backup – Interview candidates for office work, or review how administrative tasks will be handled for your company on a day-to-day basis. Also plan for how your company is going to work in your absence (vacation, illness) or in the near future. Working hard all day—sometimes seven days a week—may seem like the perfect script to please your customers and ramp up earnings. But it’s an impossible story line to follow all the time. Planning is the perfect solution to avoid burnout or business collapse if you are out of commission, literally, for a short while. NAR Work-Life Advice
- Create Client Material and Service Outline – Is your listing presentation and buying presentation pulled together? This is a segment of your marketing that represents not only your company image, but also philosophy. Using your logos, brand and company philosophy, create your business documents, packets and client materials that reflect your new firm. Now is a great time to prepare templates of farming letters, presentations, postcards and to use in your marketing efforts. It is also nice to have the materials you need to achieve your business plan easily accessible and quickly updated. When launching your new business, there will be a flurry of actively that will demand your attention – it will be an incredible time saver to be able to have a seller presentation partially prepared so that pulling a customized packet together will be quick work. It will also enhance your professionalism and Consider service standards to raise yourself above others.
- Build a website – As we noted above, your image is important to your business success and your web presence is another important facet of your overall impression. Use the web to extend your marketing reach and provide information and services about your company, yourself and your services. This is an opportunity to showcase your services even before meeting with prospective clients, and can make a big difference. Build a Better Website Article.
- Get out the wallet, It’s time to place your order – Now that your company designs, photos, and materials have been created, now is the time to begin ordering your start-up stock of materials. Some of these include:
- Lawn Signs and Riders
- Business Signs
- Buy and Setup Office Technology (computers, faxes, telephones)
- Business Cards
- Contracts and Forms
- Fair Housing Poster
- Car Decals
Go! Implementation Stage – Launch your New Business
- Familiarize Yourself with the Rules Governing your Business – There are many laws, regulations and rules that must be followed in order to run your business according to Massachusetts Real Estate Law, REALTOR Code of Ethics and Procuring Cause, MLS Polices and more. Please spend some time reviewing this documents in order to best serve your clients and reduce your risk.
- Notify the appropriate parties – It is time to shout it from the roof tops – Doors are Open!! Your business needs a nice kick-off and this is a time you can secure some free press and can launch your company to the public. In addition, there are a few final notifications you need to process to officially open your doors:
The Board of Registration
239 Causeway Street, Suite 500
Boston, MA 02114
Board of Registration Web site
LLC & Inc. Business Real Estate License Information
- The Board of REALTORS/Make Application to the MLS– The Berkshire, Massachusetts and National Associations are notified jointly when making a change in the Berkshire Board of REALTORS records. Therefore, please notify the Board office by sending your new application for DR status / new office via e-mail or fax (413) 448-2852. You can submit this form in advance of the date of change and it will be verified and attended to, but not activated until the date indicated. Application for REALTOR® & MLS Membership
- Launch Introductory Marketing Plan of New Business – You can send press releases to our local and regional papers, but you may also want to consider sending announcements to any membership organization you hold (rotary, chamber of commerce, etc.) and don’t forget about those weekly or monthly publications that are read by a variety of audiences.
- Press Releases
- Secure advertising space
- E-mail Lists
- Person to person contacts
- Direct mailings
- Newspaper advertising
- Radio and Television spots
- Office open house