Shelling Peanuts or Pocketing Profits?

Profitability tactics are essential in any organization but in the real estate industry remaining profitable is primarily determined by the market, compensation plans, expenses and productivity of the agents in the brokerage. How do you balance competitive compensation plans and offerings and still retain generous profits? How do you build a market-proof compensation strategy and feel more in control of your destiny? There are 3 questions you must ask yourself before you can even begin the evaluation process of your company.

1. How much does it cost per agent per year to house and support them? What is your break-even and how fast can you recoup it?

2. What production level per agent is necessary for the brokerage/office to reap a profit?

3. Are your compensation plans in-tuned with this new emerging market?

You would be surprised how many brokers/owners can't answer those questions accurately. They may have a ball park figure based on what their initial calculation of their overhead is but I have found they are consistently undercutting (some by many thousands) what it costs per agent. The old way of looking at this is to take a broad look at the brokerage and/or office and see, at the end of the day, do you still have money in the bank? This will drive you crazy and will not give you a true picture of your company. This way of doing business also creates a very unfair situation where agents are subsidizing other agents.

Stop looking at the company/offices as profit centers and look at each individual agent as a profit center! This is imperative to survival in this new market and will give you a better focus than looking at entire offices or the company as a whole. If an agent can't turn you a profit, why do you keep them? If an office was costing you money month after month wouldn't you shut it down?