BINESH BABU PANICKER IN CONVERSATION WITH GEORGE MATHEW, FOUNDER & CEO OF HUMLOG AND MUHAMMED SHAFEEKH, CEO OF FINANSHELS
In a market that appears to be thriving, we still see many real estate brokerages struggling and even shutting down. A common reason for this is a misconception that the industry is easy to enter and succeed in. Many newcomers, especially those from different sectors like hospitality, get carried away by the glamour and the success stories they see.
They assume their existing network will translate into real estate sales, but they quickly realize that expertise and a dedicated real estate background are essential for gaining clients’ trust. Beyond this, a lack of proper planning, expertise, and the right team are major contributing factors to failure.
What are the main HR-related reasons for a brokerage’s failure?
George Mathew: A primary issue is the misguided hiring strategy. Many brokerage owners refuse to pay salaries, expecting agents to work on a commission-only basis. While the top 10% of agents can thrive this way, the majority (the mid-level 70%) require a minimum salary to sustain themselves. Without a basic salary, it’s impossible to attract and retain the best talent.
Another critical mistake is the lack of investment in training. Brokerages expect agents to perform without providing the necessary skills and knowledge. To attract top talent, a brokerage must become an “employer of choice” by building a strong culture, providing professional development, and offering a fair compensation structure. Brokerages also make financial errors in HR, such as not understanding the right ratio of basic salary to total salary, which impacts gratuity and leave payments. They also bleed money on unnecessary perks like air tickets, which are not mandated by labor law, and can face huge fines from mishandling employee terminations.
Is it a good idea for brokerages to pay a salary to their agents?
George Mathew: From an HR perspective, I strongly believe in a combination of a basic salary and commission. A small fixed salary, perhaps around AED 2,000, provides agents with enough stability to cover living expenses, wear professional attire, and feel valued. This is a small investment compared to the large sums spent on marketing. Business owners must see their people as an investment, not just a cost. The money spent on salaries for the first few months can even be recovered from the agent’s first commission, ensuring the company’s financial stability while supporting its workforce.
Muhammed Shafeekh: While I appreciate the HR perspective, it is not always practical from a financial standpoint. The brokerage industry is fundamentally driven by a variable pay model. High-performing, confident agents prefer commission-based pay because they earn a higher percentage of the deal (e.g., 3%). If a company offers a fixed salary, it may end up attracting average or lazy talent, who are not confident enough to rely on commissions. This can lead to a team that generates low returns on investment, ultimately hindering the company’s growth. The market is already wired this way, and it’s challenging to change this without losing top talent.
Why is financial management such a major pain point for brokerages?
Muhammed Shafeekh: Many brokerage owners, who are often salespeople, lack a fundamental understanding of finance. They fail to track their unit economics, such as the cost of acquiring a customer or the return on investment (ROI) of their marketing spend. They invest heavily in marketing and branding without a clear strategy.
Cash flow is another massive issue. While developers may take 60 to 90 days to pay commissions, agents expect to be paid their share immediately. This creates a significant cash flow gap that many brokerages are not prepared to fund.
Additionally, many companies are non-compliant with basic financial and legal regulations. I have seen brokerages operating without a business bank account, running all transactions through personal accounts, and failing to register for VAT or AML (Anti-Money Laundering) compliance. This can lead to significant fines. Financial management should be a weekly or even daily activity, with a constant review of cash flow and a clear understanding of the company’s financial health to avoid running out of capital.
At what stage should a brokerage hire an HR consultant and a finance expert?
Muhammed Shafeekh: It is crucial to have these experts from the very beginning. Before even starting, a brokerage needs a clear financial plan. This includes determining the required capital, a dedicated budget for marketing and hiring, and modeling best and worst-case scenarios. Having a finance expert from day one ensures that you set up proper accounting systems and are fully compliant with all regulations. This can prevent costly mistakes down the line and save the company from “bleeding cash” on unnecessary expenses.
George Mathew: A brokerage should not hire a full-time, in-house HR or finance person immediately. For small companies, it is far more cost-effective to outsource these functions to specialists. Outsourcing provides access to experienced professionals who can implement refined processes and systems that would take a new company months to develop. An in-house HR person in a small company can become too focused on the employees’ side and neglect the owner’s interests. An outsourced HR consultant, in partnership with a finance expert, can save companies millions by optimizing hiring, ensuring compliance, and setting a strategic direction.
What are some critical legal and compliance mistakes brokerages often make?
Muhammed Shafeekh: Compliance is an area that is often overlooked and can lead to severe penalties. Many new brokerages are unaware of mandatory regulations like VAT registration and AML compliance. The UAE has strict anti-money laundering regulations, and every brokerage must register, have an AML policy in place, train employees, and screen clients. Failing to do so can result in fines of up to AED 50,000. These regulations are mandatory for every company, regardless of size or whether it is a single-owner operation.
George Mathew: On the HR side, a major compliance mistake is the mishandling of employee terminations. When an agent is fired without following proper legal procedures, it can lead to labor cases and fines. Many owners also risk their confidential data, as an in-house HR manager or accountant who leaves could take sensitive information to a competitor. Outsourcing these functions to a specialized firm mitigates this risk by keeping data secure and ensuring all legal processes are followed correctly.
How can a brokerage save money by using outsourced HR and finance services?
Muhammed Shafeekh: From a financial perspective, outsourcing finance is much cheaper than hiring an in-house team. Our packages start from as low as AED 2,000 per month. This is a fraction of the cost of a full-time accountant or CFO. Our service provides a “CFO lens,” a third-eye perspective that analyzes your financial health, identifies where you’re bleeding cash, and helps you make data-driven decisions. This proactive approach saves companies from failure, which is the biggest possible saving—100% of your business’s existence.
George Mathew: For HR, our services are also very cost-effective, with packages starting at around AED3,000 per month. This is more affordable than hiring an in-house HR manager. We have saved companies millions by conducting HR audits, optimizing their workforce, and ensuring legal compliance. We identify employees who are not adding value and help companies make tough, data-backed decisions. An outsourced expert can provide strategic direction and avoid common pitfalls, which an in-house employee with limited experience might miss.
