Why Tech Debt Is Something Your Brokerage Can't Afford to Pay
Tech debt is an often overlooked, but business-critical, concept that affects real estate brokerages around the country. In this post, we explain what tech debt is, how it affects real estate brokers' bottom lines, and tips for not just overcoming tech debt, but turning it into an asset. Read on to learn more. What is tech debt in real estate? The term technology debt or tech debt was originally coined in the 1990s to refer to cutting corners during the software development process. Today, tech debt has evolved to also refer to investments (or lack thereof) in technology maintenance and upgrades. In simple terms, tech debt means not investing in technological upgrades to save money. Over time, this starts accumulating into a debt that includes the higher cost of upgrading your technology if and when it breaks down as well as associated opportunity cost, any losses associated with down time if your systems stop working, and the long-term cost of customer dissatisfaction, reputational damage, staff turnover, and more. Why are brokers susceptible to tech debt? Real estate in general is an industry that skews older. Real estate agents and brokers, on average, are all over 50 years old. Older generations generally (though not always) tend to be less familiar with technology. Generation X is the last generation that reached adulthood without widespread computers at home or the internet. The result is increased comfort with the "old" way of doing things, and thus less emphasis and less focus on technology, which is exactly how tech debt starts to grow. Picture this: It's 2010. You've finally revamped and rebranded your brokerage's first website, which you've hosted on your own server since the late 90s. The new look and functionality are a big hit, and you're proud of your new look. It displays your listings and has a contact form that goes directly to your email. The problem: It isn't 2010 anymore. Search engine optimization has taken off and changed dramatically. Cloud computing is the way to go to reduce infrastructure costs and operational challenges. APIs and integrations are much more common. What few organic leads you get through your website these days you have to add to an Excel sheet by hand and follow up with manually. Your business is doing OK, but your competitors are doing better. See what we mean? You've accumulated website tech debt, and overcoming the obstacles to tackling it can be hard. Is tech debt always bad? Like any debt, brokerages like yours can leverage tech debt strategically. Maybe you postponed getting rid of your on-site server for a year because your office needs new carpet, or delayed purchasing a company-wide CRM because you had to relocate to a new space. All business owners have to make tough decisions. But all debts have to be paid—one way or another. Tech debt can be particularly painful, too, so it's important not to put it off for too long. The cost of your brokerage's tech debt Most brokerages have some level of tech debt. This is normal, especially since tech debt can be a way to leverage your other assets in strategic ways when it suits your business. But it's safe to say that if you've gone more than five years without making ongoing investments in your tech, your business is potentially at risk. Since every brokerage is different, it's impossible to put out an exact dollar figure, but ask yourself the following questions: If my systems went down today and were inaccessible for three business days: How much money would I need to spend to diagnose and fix the root cause? How much money would I lose from delays or canceled deals? What would be the long-term impact on my customer base? Would I lose referrals from my affected clients? What would be the long-term impact on my sales team? Would my best performers decide to go elsewhere or renegotiate their commissions splits? Perhaps even more importantly, your tech debt also has an opportunity cost: the amount of money you could be making if you had invested in technology that helps you work better, more efficiently, and seize more opportunities. This cost is potentially even higher, but also more difficult to quantify. How to start paying off your tech debt Technological advancements are only going to keep accelerating as time goes on. Every moment you delay will make it harder to catch up. Tech debt feels free. When your systems are working well, upgrading or improving them isn't top of mind because busy brokers have a lot of other important things to think about. But a word to the wise: it's much, much better to start paying off your tech debt now, rather than waiting for the proverbial debt collector. But how? The first step is to perform a tech stack audit. A tech stack audit will help you identify crucial aspects about your tech: Your powerful and useful tools: These are the tools that are currently offsetting your tech debt. They are the solutions that are well maintained and contributing to your business goals. Your redundant solutions: These tools aren't contributing to your tech debt but aren't offsetting it, either. However, you would benefit financially from offboarding them because you're paying for things you don't need. These dollars would be better spent on solutions in the category above. Your pain points: These are the tools that are actively adding to your tech debt. These include any obsolete software or hardware that is burdening your business as well as any solutions that require a significant amount of upkeep. It also includes anything that poses an operational risk to your brokerage, such as data breaches. And finally, it's an opportunity to identify gaps in your processes or workflows where technology would be a significant asset to your team. Would you benefit from an electronic signature solution, better lead management, a transaction management platform, customer-facing apps, more modern marketing tools, or something else? You often don't know what you're missing out on until someone else points it out. How to turn brokerage tech debt into a tech surplus Whether you have a little tech debt or a lot, there are effective ways for your brokerage to minimize it: Regular tech stack audits: As we mentioned already, technology is changing all the time. Staying on top of what you're doing well and where you can improve will help you make informed decisions in the future about what to buy and what to get rid of. Follow industry trends and best practices: Did we mention technology is changing really fast? It's impossible to stay on top of everything, and almost by definition, whatever technology you onboard now will be obsolete before you know it. It's important to stay informed about technological trends and shifts affecting real estate, the latest proptech innovations, and where and how your brokerage, whatever its size, can get the biggest bang for its technology buck. Attend the technology sessions at industry conferences: There's more to real estate industry conferences than cocktail parties and sales presentations! Yes, the technology presentations at the NAR Broker Summit and Conference, Inman Connect, T3 Sixty, RISMedia, and the other unmissable industry events are extremely informative and will give you an idea about the latest trends and all the great products available on the market. Read industry ratings: Do you know what providers and tools are the most trusted in the industry? Industry lists like T3 Sixty's Tech 200 are a great resource for finding reliable solutions that will turn your debt into a surplus. Dedicate a percentage of revenue to tech: Brokerages are facing tightening margins like never before. Tech investments provide measurable ROI that can help you with shrinking margins, so putting a certain percentage aside every month to invest in your tech is a fail-proof strategy to get ahead. Why the ideal technology partner is the best defense against tech debt Perhaps the best way to minimize tech debt is to work with a partner who cares about your success just as much as its own. At Constellation1, we are firmly committed to and heavily invested in our customers' success. You don't have to take our word for it, either, because our customers aren't shy about giving praise. If you want to tackle tech debt at your brokerage and set yourself up for long-term success, request a FREE tech stack audit today. To view the original article, visit the Constellation1 blog.