I am asked frequently “Why don’t you start your own brokerage firm?” My answer is simple – I love what I do. I own (what I believe is) the best commercial real estate coaching company in the world, and am surrounded by great people. The better question would be “If you were to start a commercial real estate brokerage company, how would you do it?”
In my last blog, I outlined the critical interview questions to ask your recruits. Several of our readers emailed me and asked how I would compensate these recruits. My response is “it depends”. There are several compensation scenarios that we have seen work with our coaching clients and their organizations, there is no single right answer.
For new to business brokers, I would pay them a salary (not draw) ranging from $25,000 to $40,000 – based on the cost of living in a given market. This salary would be based on meeting predefined expectations of progress, with regular monitoring and reviewing of such progress. The objective is to ensure the new agents are quickly learning our systems and processes while also building their pipelines. Salaries would stay in place for no more than 12 months, and I would be quick to terminate any agents who did not meet the predefined expectations.
After the first year for the new to business agents, and applicable to all other agents – I would apply a defined, tiered commission structure. Commissions would start at 50% and escalate to as high as 75%, based on specific income thresholds. Again, this structure is based on the recruiting and screening criteria, as well as the key requirements I outlined earlier in this blog series.
This is where most brokerage firms make their greatest financial mistakes – the structuring of commissions. Time and time again, we see that “legacy” structures (those provided to once top producing agents) create financial strain to the broker, and conflict within the organization.
I firmly believe no brokerage owner should accept a net profit margin of less than 15%, and should strive for 20% or higher. There is significant risk in operating a brokerage firm, and your returns should reflect this risk. And yes, it is possible to create a commission structure that will attract and retain talent, while also securing a return for the brokerage owner.
In Part 5 of this series I will address what tools I would offer to attract and retain top talent.
As part of our continued pursuit to provide you channels to increase your personal commissions, we are announcing this week our next exclusive live event. Our last live event sold out quickly, and there are only 50 seats available – keep an eye out for more to come later this week! You can learn more at MassimoCRE.coach.
Interesting post, Rod. Thanks for sharing your thoughts on this.