Why are $100M real estate teams merging with expansion teams?
Recently, we have seen more and more teams (large, successful and profitable teams) join forces, specifically with real estate businesses that offer a platform of services. Heres why. This June, Inmans editorial theme is Teams  were going to go deep on what it takes to grow your team amid this intense sellers market. And if youre not already a subscriber to our Teams Beat email newsletter, sent every Thursday, sign up now. As Jim Dalrymple wrote in his recent Inman article, The New Normal: What if the brokerage of the future isnt a brokerage at all? real estate teams are continuing to grow and emerge as the dominant force in the real estate industry. The past 15 years have seen an explosion in teams, with some brokerages (such as Keller Williams) emerging as a significant advocate for teams, even providing a roadmap for getting there. I see there being three main types of teams emerging: real estate teams, expansion teams and real estate platforms. Lets start out by agreeing on a few definitions that will help us frame the rest of this conversation. 1. Real estate team  This is your traditional team model. The team is usually led by a mega agent or CEO who has a team of buyer specialists, administrative and operational support staff, and perhaps a showing assistant or a listing specialist. This team operates in one market. Example: The majority of real estate teams at brokerages such as Keller Williams, eXp, Compass, etc. 2. Expansion team  Expansion teams are similar to what Russ Cofano, president and COO of NexTile, calls interjurisdictional teams. They are real estate teams without borders, though usually theyre still tied to one brokerage. They operate much like a traditional real estate team, focused on sales and customers, they just happen to operate with agents in multiple markets or even multiple states. Their suite of services usually center around increasing real estate sales and creating a more streamlined process for their clients. Example: Real estate teams that operate in multiple locations, often in multiple states. 3. Real estate platform  The real estate platform of services takes expansion teams to the next level. In addition to real estate sales systems and support, a platform includes things like human resources, title, mortgage, property management, productivity coaching, technology, leadership training, wealth management, health coaching, insurance, moving services and more. Real estate platforms can include one or several entities working together to serve the client and agent. The real estate platform of services creates a consumer-facing business that offers a streamlined experience for the agents and their clients no matter where they are. Such examples of real estate platforms would include: Redfin, our company, and Place. All slightly different models but still real estate platforms. Think: The Starbucks franchise model or the Capital One Cafes, but for real estate. These real estate platforms very often still operate within a brokerage. Example: Expansion teams that have moved beyond the real estate transaction to offer a suite of services for both agents and clients, often through new business divisions or complementary companies. Recently, we have seen more and more teams (large, successful and profitable teams) join forces  specifically with real estate businesses that offer a platform of services. There are several factors at play here: platform of services, financial responsibility, culture and lifestyle. Although these large teams are successful and profitable, many are ultimately not set up to provide a seamless experience to consumers, as well as for their agents and employees. When running a $100 million team, you face the complexities of managing staff, handling customer service and human resources, leveraging technology solutions, building a culture and brand  and more. It took our company 12 years of iteration, innovation and failing forward to achieve a platform of services. The competition is fierce. Rather than reinvent the wheel, these large teams are looking to merge, so they can continue to grow faster and more effectively, often with less financial risk and a more considerable potential upside. Joining a real estate company with this platform of services allows these large teams to plug into an ecosystem and start seeing results immediately. And yeah, one of those results is that the teams profitability increases dramatically too. Although all expansion teams and real estate platforms run a little bit differently, most take on the bulk of the financial responsibility. Post-merger, these large teams no longer have to worry about cash flow, making payroll, tax credits, leveraging assets or expense management. The real estate platform will handle most of these items or work hand in hand with the individual team leader to guide these decisions backed by years of expertise and experience. Culture is much more than ping-pong tables and pizza parties. Although those are nice perks, authentic culture is a set of beliefs and values that the individuals in your company subscribe to and embody. Creating a viable and sustainable culture is no easy feat. We believe that business is a conduit for personal growth. We believe in productivity, being hungry and humble, learning, playing, and working every day, and being open-minded and growth-oriented. Having a preestablished culture founded on prescriptive models and systems that individual teams can plug into is highly attractive to these $100 million-plus teams. It allows them to become a part of something bigger than themselves, and it ultimately helps them attract and retain agents and employees, which is excellent for the team and the end consumer. Ultimately, what I have found by building our real estate platform over the past 10 years or so is this: Leadership and business-building are lonely. Team leaders are carrying the weight of being responsible for other peoples livelihoods on their shoulders. They are sacrificing the quality of their life, their health and time with their families. And they dont always have the right people around them to share this burden or the ability to get advice from someone who truly understands. I think a big part of why these $100 million teams are looking to join expansion teams and real estate platforms is that they want to be a part of something bigger than themselves, and they want to do it with other like-minded leaders. Its way more fun to build massive businesses when youre doing it with other great people. A real estate platform of services gives these team leaders just that  a platform that allows them to maximize their time, work in their strength zones, increase their quality of life, and compete fiercely in their market with a national real estate platform of services backing them. In addition, it provides larger leadership opportunities, not only for the team leader, but also for their team members. Opportunities that they may not have been able to provide without partnering with an expansion team or real estate platform. The downsides of joining a larger real estate platform  Now, joining an expansion team or real estate platform isnt for everyone  and thats OK. There are certainly downsides, as there are with any merger or major business decision. The team that joins an expansion team or real estate platform may have to give up their branding and marketing. Very often, that team leader will no longer be the final decision-maker. They could have less discretion on choosing where to spend their teams money or resources. Ultimately, the biggest reason I think teams would choose not to join a larger real estate team or business is that they would be giving up some, or in some cases all, control. That is the nature of the beast and would simply need to be weighed against what they would be gaining by doing so. For teams that are looking for that comradery, culture and sharing the burden of building a business, there are other options other than expansion teams or real estate platforms. For example, two teams could partner together in a co-CEO model. A team could partner with an investor. Or they could set up an informal board of directors to help guide their business. The team could also hire an outside leader and simply become an owner/investor in their own business depending on their long-term plans and goals. That being said, while I have long believed that teams are the future of real estate, I have since revised that belief to this: Real estate platforms of services are the future of real estate. Because it is what customers and agents want. Streamlined, seamless, end-to-end experiences to run their businesses and to engage in all things real-estate. This year alone, we are bringing on more than $150 million in volume per month and expect it to be around $300 million per month in growth by the end of the year. These numbers dont lie. We are going to continue to see large teams merging together, with expansion teams, or with real estate platforms of services. A consumer-facing real estate platform of services that supports the agents and provides the most comprehensive consumer experience is why large teams are attracted to expansion teams and real estate platforms. I think this will only continue to grow faster over the next 18-24 months. And Im here for it. For the latest news, insight and trends on teams, subscribe here. Adam Hergenrother is the founder and CEO of Adam Hergenrother Companies , the author of The Founder & The Force Multiplier, and the host of the podcast, Business Meets Spirituality. Learn more about Adams holistic approach to business here.