Brokers can boost revenue through planning: Vow
Mortgage brokers can potentially boost their business values to more than three times annual revenue if they diversify into services such as financial planning, according to Vow Financial chief executive Tim Brown.
Using the example of a broker who had attended Vow's national conference last year, he said "broker A" had seen his business stand still in the past financial year because it had remained focused solely on mortgage broking.
According to Brown, this particular broker also lacked business or succession planning, did most of their administration work, relied heavily on the practice's trail book and had systems and processes that were not integrated for efficiency.
As a result, broker A continued to settle about $1.5 million a month for an upfront annual commission of $108,890, he said.
Meanwhile, broker B, who also settled $1.5 million a month for the same annual upfront commission, had other business streams generating an extra $41,263.90 at the end of the last financial year.
The income generated was made up of leasing ($13,745.50), wealth ($5740), legal ($5040), property ($14,690) and insurance ($2,048).
"The real impact of this income generation, however, is better seen in what it does to the value of their businesses," Brown said.
"For broker A, it's probably about 1.5 times annual revenue, but broker B now has a business worth about 3.5 times annual revenue, and is virtually recession-proof."
While he said broker A still had a viable business, the broker of the future would lean towards the broker B model, "knowing they can build a business that will be more recession-proof and have a higher price tag when they want to sell".
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