LEARNING CURVE: OPTION ONE DISCOUNT COMMERCIAL BROKERAGE : Slash and Earn : Brokerage Cuts Costs, Shares the Wealth
After nearly 17 years of working for large commercial real estate brokerages, Gary Marquis decided he could cut costs and operate more efficiently on his own. Since founding Option One Discount Commercial Brokerage last year, he has learned that lower fees provide a significant marketing advantage and that his profit-sharing system enhances company loyalty. Marquis was interviewed by Karen Kaplan.
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If you look throughout the business world, you’ll find discount retailers in almost every category. There’s Clothestime and Price Club, Home Depot and Charles Schwab. Option One brings that to the commercial real estate brokerage business.
I openly and aggressively promote our discounted brokerage fee. Depending on the type and scope of the transaction, the discount can be anywhere from 10% to 50% compared to a traditional brokerage fee. Being able to promote your discount gives you a competitive advantage.
We can offer a discounted fee because we have cut costs dramatically. In a typical firm, for each dollar a broker brings in, about 45 cents are funneled into overhead. We’ve eliminated 30 cents of that overhead that is unnecessary and doesn’t help produce revenue.
There are lots of ways to cut costs. We don’t have a layer of management. I am the only management person, and I don’t take a management fee. Our offices are smaller and less fancy, and we don’t do things like spend tens of thousands of dollars a year to get brochures printed up in color.
When the fee is smaller, that means the commission the broker gets is also smaller, but we make up for that with a profit-sharing system. We pool all the profits, and approximately two-thirds of it is split among the employees.
As a small-business owner, I am willing to share the profits in order to create company loyalty. When a broker works only on commission, he has no inclination to try to be efficient about the way that resources and money are spent. Our system creates an incentive to produce more and spend less. It also gives people a reason to care about the company.
You have to have a certain level of experience to start a discount company. It gives you credibility. I can walk into a business meeting and say, “I was a managing partner of a major brokerage and I started a discount brokerage because I know how it works and where we can save clients money.”
When I make presentations to clients, I show them pictures of the Mercedes-Benzes and BMWs that belong to the executives at the other brokerages. You can see the expression on their faces change as they ask themselves, “Why do I need to pay for all those cars?” And it’s not just the cars. Each of those executives has a staff. Our clients don’t have to pay for that.
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On marketing discount services . . .
“I openly and aggressively promote our discounted brokerage fee. . . . Being able to promote your discount gives you a competitive advantage.”
On the advantages of profit-sharing . . .
It “creates an incentive to produce more and spend less. It also gives people a reason to care about the company.”
On the importance of work experience . . .
“I can walk into a business meeting and say, ‘I was a managing partner of a major brokerage and I started a discount brokerage because I know how it works and where we can save clients money.’ ”
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AT A GLANCE
Company: Option One Discount Commercial Brokerage
Owner: Gary L. Marquis
Nature of business: Commercial real estate brokerage
Location: Costa Mesa
Number of employees: 8
Annual revenue: $1 million
