Top Ten Real Estate Business Killers

Man laying head on desk

It is news to no one that many small businesses (including real estate professionals) will fail. According to Bloomberg, the average failure rate is about eighty percent. And yet, every day in this country, real estate professionals strike out on their own and create businesses. What is it that sets the success stories apart from the multitudes of failures? Is there a formula for success or a blueprint that should be followed?

Sadly, there isn’t a perfect formula to guarantee success for all real estate businesses. There is, however, knowledge. And with that, the average small business will have a better fighting chance from the onset. Read on for the top ten real estate business killers that you should be wary of when starting your own business.

  1. Lack of Available Credit: It should go without saying, but this important item is still a common killer of small businesses. Interest rates go up, investors pull out or run dry, and cash reserves can dwindle to nothing in just a single bad quarter. Get ahead of this by building a financing contingency plan into your original real estate business plan before even opening your doors.
  2. Management Breakdown: If you are starting or running your real estate business with a partner, you will need to treat the relationship with as much care and respect as a marriage. If the founders cannot effectively lead and manage their company, the whole thing will crumble from the top down. Be on the lookout for imbalances in your management style or relationship early. Let nothing fester, and take the time necessary to maintain and support the relationship with your business partner. If the DIY approach doesn’t work, seek third-party counsel.
  3. Poor Employee Performance: You may think your employees are functioning at 100% and know what is expected of them, but you could be wrong. Don’t get so caught up in your side of the business that you let your employees function autonomously. Follow up on their work when you can, be available to answer questions and give direction, and be sure to schedule quarterly check ins to evaluate their performance and goals.
  4. Not Keeping an Eye on the Profit Margin: The goal should be 60% profit margin for the typical small business. This is not necessarily the case in the real estate sector, but the same mentality should be applied. Money in versus money out needs to be constantly measured and compared against financial goals.
  5. Communication, Appearance, and Perception: Some entrepreneurs make the mistake of ignoring their own performance. They end up leading and working with clients completely unaware to how they are being perceived, and how they are communicating. Ask for feedback from clients, coworkers, and business partners on a regular basis.   Read more about first impressions here.
  6. No Idea Who the Clients Really Are: You cannot take the shotgun approach when it comes to seeking out real estate clients. Know who you want your target audience to be and then learn everything you can about them. This leads us to…
  7. Unique Value Proposition: If nothing sets you apart from the crowd, your target clients will have absolutely no reason to pick you to work with. Find out what your strengths are, what sets you apart from the rest, and broadcast it loud and clear. This, of course segues into…
  8. Marketing Failure: Is your message that communicates your unique value proposition reaching your target clients? Is it effective or off-putting? How does your website look? Lack of marketing—effective marketing—can kill a business in no time. Unless you have a flair for it, seek out a reputable, proven marketing firm to give this crucial aspect of your business the effort it needs.
  9. Complacency: Some businesses get in a groove, and not in a good way. One or two good quarters can lead some real estate businesses or professionals to let their guard down and become complacent. Set goals, keep yourself accountable, and do whatever you can to keep the motivation going.
  10. Lack of Protection: E&O Insurance is essential when it comes to a small business. For the real estate industry, this is especially true. Just one claim—even the first claim—can be enough to shutter a real estate business for good. A good insurance provider that is focused on protecting real estate businesses can provide guidance and the right coverage.  At CRES, our E&O + ClaimPrevent® includes access to our Legal Hotline — to help you prevent claims before they ever happen.

What areas of your real estate business do you watch closely to ensure continued growth and success? Tell us in the comments below.

To learn how CRES Insurance Services can help grow and protect your small business, go to

This blog/website is made available by CRES Insurance Services for educational purposes to give you general information and understanding of legal risks and insurance options, not to provide specific legal advice. This blog/website should not be used as a substitute for competent legal advice from a licensed professional attorney in your state. Claims examples are for illustrative purposes only. Read your policy for a complete description of what is covered and excluded.

Originally Published February 3, 2016

Category: , ,

"What's the latest on short sales? We have tips for managing short sales in your real estate business.… Give your real estate sellers up to $50,000 in Seller's E&O with a CRES Qualified Home Warranty from Old Republic.…