It’s no secret that the competition for attracting and retaining top agent talent is fiercer than ever, with many brokerages ready to roll out the red carpet for the best performers. Perhaps the biggest thing agents look at when selecting a brokerage is the commission structure, so picking the right one is key. A variety of factors dictate how (and how much) you pay your agents, and both paid brokerage benefits and net commission income will factor heavily in their decision to join, and remain on, your team and stay. Let’s look at five factors that affect what kind of commission split you should be using.
Different agents have different financial and professional development goals. This means different commission structures will appeal to different types of agents depending on their experience:
Want to learn more about the different kinds of commissions splits brokerages can choose from? Read our blog post detailing the most common commissions plans.
Whether your brokerage is mature or newly established will have a major effect on what kind of commission structure you implement. Brand-new brokerages need cash. A fixed or graduated commission model means no income unless agents are closing deals, while a 100% model, revenue is guaranteed because agents will pay the fees they owe whether they are making sales or not.
The number of agents on your team will also impact your optimum commission structure. This number can be related to market maturity, but this isn’t always the case: while the largest brokerage in the US has over 50,000 agents, plenty of mature boutique brokerages operate with a team of just 10 to 20 agents. Keep in mind that the smaller your team, the more difficult it will be to have predictable, regular income from month to month using a fixed or graduated model, so a 100% model may work better but might also deter newer or less experienced agents, making it more difficult to grow.
If the average price for a home in your market is $100,000 versus a market where the average price is over $1,000,000, your predominant agent type, team size, and cash flow needs will vary widely. An agent would need to make 10 sales at $100,000 to earn the same commission income as one sale at $1,000,000. This means that a full-service model—with a fixed split covering marketing, professional development, admin, and other benefits—would appeal more to an agent in a market where they need to make smaller sales more frequently.
Most of the trouble brokers experience while deciding how to pay their agents is trying to come up with one model that works across their brokerage. We have news for you:
It’s not possible.
As your brokerage matures and grows, so will your team and its needs. The best way to please your agents, maintain profitability, and continue building your business is to be flexible. One way to do that is to offer the right kinds of plans that account for the above factors and your brokerage’s own goals.
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