12 Most Vital Facets of Being a Broker
I am amazed at the number and types of brokers in the world – ranging from stock brokers, real estate brokers, personal service brokers, business brokers, commodity brokers, investment brokers, marriage brokers, auto brokers, insurance broker, information broker, joint venture broker, office broker, etc. etc.
According to Wikipedia, a broker is a party that arranges transactions between a buyer and a seller, and gets a commission when the deal is executed. The prime responsibility of a broker is to bring sellers and buyers together. Therefore, a broker is the third-person facilitator between a buyer and a seller. [ Src: http://en.wikipedia.org/wiki/Broker]
A lot of individuals and enterprises make a livelihood by offering primarily brokerage services. It is probably a lucrative proposition, but definitely not without its share of risks. Here are some of my observations and insights on the important dimensions of any broker:
1. Understanding of the market / industry is key
Brokers facilitate the creation of a marketplace by connecting buyers and sellers. Hence, it is extremely important for brokers to understand the market dynamics, have a perspective of future trends, and recognize the requirements, preferences, strengths and weaknesses of both buyers and sellers. If this understanding is well-founded and well-grounded, the potential to prosper as a broker is significantly high.
2. Networking is vital
Personal and professional networking is vital for new business acquisition and growth. Networking with both suppliers and consumers is vital for a broker. What is essential is to identify the right set of connections that need to be made, to establish and continuously nurture these connections. Existing professional or personal relationships is probably one of the most important reasons for a buyer or seller to engage with a specific broker for potential business propositions.
3. Limited “capital” investments are required
In general, a broker has to make limited capital investments. The key investments are usually in terms of time and of course, basic capital and basic infrastructure. The capital and infrastructure investments are typically smaller than those made by a buyer or seller.
4. Clearly stated goals are imperative
It is important for a broker to have self-defined precise and measureable goals, primarily because the business model of a broker is significantly dependent on both buyers and sellers and hence there are many variables which will be outside the brokers purview of control. Therefore, it is all the more essential to have clearly stated goals and be cognizant of what is within and outside your own locus of control. Ideally, you should focus time and energy only on aspects which are within your control.
5. Clarity on values is key
Part of the job description of being a broker involves interactions with all types of individuals and enterprises. A broker has to deal with a diverse set of expectations, emotions, expressions and experiences – many of these will mandate the broker to introspect and act based on their inherent core value system.
It is necessary to be clear in your head and heart about your values, and to demonstrate this in action. This may require you to make some tough decisions along the way, and also probably lose some opportunities, but in the long run these decisions will strengthen your brand and ensure that you engage with the right set of buyer and sellers.
6. Identification of priorities
Another important aspect of a broker is to identify and list business priorities in line with the identified goals. Given that a broker plays the role of an interface between buyers and sellers, it is imperative to be clear on your top 3 priorities – on a daily, weekly, monthly, quarterly and yearly basis. This will help you to apportion your time in line with your stated goals.
7. Understanding the risks
Risks are inherent in the brokerage world – ranging from financial risks to business risks to operational risks, cost overrun, credit risk, interest rate risk, liquidity risk, market risk, legal risk, reputation risk, systemic risk, uncertainty, personal risk, etc.
Based on the kind of brokerage services being offered, it is important to understand the top risks in your specific context. Also, do take calculated risks. Of course, you will win in some cases and lose in others – but all of this will enrich your experience as a broker.
8. Plan and manage risks
Once you have an understanding of the risks in your context, it is vital to prioritize, plan and manage risks.
9. Clear understanding of broker’s position in the industry value chain
Another very important aspect of being a broker is an appreciation of the role and position of the broker in the end-to-end industry value chain. For example – the role, importance and value of an insurance broker is very different from a marriage broker.
10. Invest in your brand
A lot of times, buyers or sellers prefer a specific broker simply because of the brand image. The brand image is really dependent on whether you are an independent broker or a brokerage firm and is based on many different variables. If you intend to be a broker, it is important you make investments in building and enhancing your brand image. After all, branding is about managing perceptions.
11. Learn to negotiate
Negotiation skills are key to survive and succeed as a broker. One can learn how to negotiate through reading, experience, observation, practice, common sense and by making mistakes. Invest in strengthening negotiation skills if you plan on a career as a broker.
12. Exit when your time is up
There comes a time in the life cycle of a broker when it is prudent to quit being a broker and walk away from the deal. And at such a time (and it isn’t always an easy time to spot), just exit gracefully.
These are my observations on what it takes to be a good broker. If you are a broker, what additional items might you add to this list? Or if you’ve used a broker, what experiences have you had? Did you feel that they met or understood these aspects of being a successful broker?
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