You work hard to comply with the rules and regulations that govern your activities as a license holder and a REALTOR®, but there are other risks to your livelihood beyond legal ones. Make sure your brokerage can survive these threats.

Employee fraud

Employee theft can happen to anyone—even you. It could be someone submitting fake expenses for reimbursement, tampering with checks, falsifying bills, or many other schemes. Can your business withstand a $200,000 cash drain? That was the median amount lost in 2016 per real estate fraud case inquiry according to the Association of Certified Fraud Examiners.

Acknowledge that fraud can happen in your brokerage, and establish hiring procedures that screen potential applicants. Put systems in place to detect problems like embezzlement. Also, periodically review financial information, such as credit card and bank statements, to verify the trust you’ve placed in your employees.

Changes to the market

Is it a buyer’s or seller’s market? An up market or a down market? Real estate is cyclical and affected by global forces as well as by your local economy. An easy way to prepare for the risk of a sales drought is to stay on top of what’s happening in your market and avoid becoming complacent. Diversify your offerings, focus on a niche, or find a specialty specific to your community. If your luxury-home clients disappear in an economic downturn, you can fall back on your senior clients or property management business.

Severe Weather

Allison, Rita, Ike, and Harvey. These devastating storms are etched into the memories of Texans, but it doesn’t take a 100-year storm to disrupt your business. Even localized severe weather can damage your property, displace your clients and prospects, and otherwise make it difficult or impossible to conduct business. You need a plan to protect your data and property, and maintain or restore communication.

Make digital copies of essential documents, and create photo records and lists of your business assets. Back up these files along with your client and business data in the cloud or offsite. Talk to your agents and any employees about procedures to follow in the event of a business disruption.

Any discussion of damage from weather must include insurance. While you have errors and omissions insurance to protect your business from lawsuits, it may not help if your office suffers damage during a break-in or as a result of a natural disaster. Preparing for such a situation could mean the difference between a temporary disruption of your services and the end of your business. Many types of insurance can protect your brokerage—and you should consult with an insurance professional—but here are a few types to consider:

• Business property insurance helps protect physical assets, such as your office building, equipment, furniture, and computers.
• Business income insurance can replace lost revenue so you can cover expenses while you restart your brokerage.
• Flood insurance can cover flood-related losses to your business resulting from hurricanes and other natural events.

Cybercrime

Every day in the United States, 30,000 people are victims of digital crimes. Small businesses are big targets for hackers, and real estate brokerages are some of the most attractive because the transactions involve multiple parties and large sums of money. There are thousands of ways hackers try to gain access to your information—ransomware, worms, keyboard loggers, social engineering attacks, and many more. You don’t need to understand all these methods; however, you do need to take steps to protect yourself.

Install virus protections on all your devices and keep your hardware and software updated. But a very effective way to combat many attacks is to slow down and pay attention.

A big risk to you and your clients is wire fraud: A criminal hacks your email account or your agent’s, sends the buyer fraudulent wiring instructions, and vanishes with the money. What’s an easy way to deal with the threat of wire fraud? “We have to learn to use the phone again,” says Ronnie Matthews, chairman of the Great American Title Company in Spring. “If something looks odd, don’t click on it. Call the person.”

Taxes

Running your own business means being a jack of all trades—sales, marketing, human resources, accounting, facilities, technology, and anything else your business requires. You may be stronger in some areas than others, but one discipline you need to get right is accounting.

Follow sound financial practices and you’ll spend more time on real estate than with the IRS. That means:

• Don’t commingle funds.
• Know which deductions are allowed.
• Track and document your deductions according to IRS rules.
• Correctly calculate your quarterly payments.
• Pay your taxes on time.

If you’re not comfortable handling the accounting aspect of your business, use an expert who is.