Commission structures can be very complex, making it a less transparent part of your business. Often, brokers just don’t really know what’s going on.
Here are three things you can do to gain a better understanding of real estate commissions.
1. Understand and analyze your commission plan
Most brokers tend to have a lot of different compensation plans. They may have started out with one or two but over time compensation plans are updated and amended.
This means their compensation plans tend to be a complex web with varying commission levels and systems. So it’s worth digging through your compensation plans to really understand what is going on.
Start by making an overview of your compensation plans, thinking about:
How are commissions calculated?
Who calculates them?
How and when are they paid?
To what extent are commissions eating into your profits?
Based on this information, you can ask yourself this: “Is my commission structure achieving what I want it to? Does it further my overall business goals?”
For instance, if one of your main goals is to increase profits, your commission plan should be geared towards this goal. It should be clear what you and your agents need to achieve to increase profits and what over what time frame this should happen.
2. Understand current and future market conditions
3. Create transparency by using systems and tools
In order to help you gain insight into your commissions - how much are you paying out, who are you paying it to, what effect does your commissions structure have on your business - tools can help.
This could be a simple spreadsheet where you track transactions and calculate commissions. For larger businesses, however, it’s better to use a tool that’s tailored to real estate brokers. The best systems help you manage everything that’s related to commissions. You’ll be able to track agent commissions, calculate commissions, approve commissions and pay them out.
Want to know more about tools? Check out our 2020 Real Estate Back Office Systems Guide.
Become a commissions expert
Do these three things and you’ll be well underway to becoming an expert on the commissions in your business.
Why is this important?
Having clarity on your commissions will help your agents - their livelihood depends on it and they’ll be all the more motivated when they have a clear and straightforward compensation plan to work with.
As a real estate broker, commissions play a central role in your business - use them well and they’ll help you build a hugely successful business.