Key Takeaways
- A 40% transaction volume decline can swing a profitable brokerage to a $300K loss if fixed costs are not managed.
- No agent or team should represent more than 15% of total company dollar to limit departure concentration risk.
- Regulatory investigations cost $10K-$50K in legal fees and require preparation through self-audits and pre-existing attorney relationships.
- Brokerages that survive downturns have low fixed cost ratios, cash reserves, and diversified revenue.
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Test Your Knowledge
1.What is the most significant financial risk facing a brokerage during a market correction?
2.What types of legal exposure are unique to brokerage operations compared to solo agent practice?
3.What is the recommended minimum errors and omissions (E&O) insurance coverage for a brokerage?