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REIQ Journal : July 2008
20 INDUSTRY PRACTICE For those dealing with employed agents who want a larger slice of the pie, having the knowledge that such a small group achieve these high income levels is important, especially given the enormous challenges faced by these agents and the support staff they must carry to write these volumes. The average top sales person in a real estate agency across the country earns $304,091 in gross commission. Putting aside for a moment the commission split numbers based on agency size, there are other important differences between agencies that affect the level of commission split with sales staff. The cost of sales support and other less tangible items – including marketing and brand presence – varies between agencies and needs to be factored into any remuneration and commission structure. The culture of an organisation and the work environment needs to be considered as part of commission split discussions. Sales staff need to understand what it is that you and your business bring to the table. For example, you may have been operating in your particular market for 25 years and have 30 per cent market share. Arguably, the brand and proven reputation you have built during those 25 years goes a long way to securing a listing. Know where the market is at Of course the type of market you’re in affects commission splits too. It’s worth knowing some of the numbers (for example, upto-date median property prices) so you can make your case with any sales staff when setting commission splits and key performance indicators. And if the argument goes along the lines of “the agency across the road pays 60 per cent split” you could argue that your brand gets more listings. After all, 60 per cent of a smaller pie is a smaller dollar amount. In terms of knowing the type of market you’re in, from the very start 2008 has been a very different property market than last year. Certainly, days on market are already lengthening and there is an increasing trend towards longer settlements. This has an obvious cash impact on the business which needs to be accounted for in any cash flow budget forecast. Rather than raising commissions to sales staff, consider alternative strategies to help staff obtain more listings. For example, invest in additional professional development or sales training, or consider advertising for the agent as well as the office. Incentivise the agent to get more listings rather than giving them a larger slice of what they are already writing. Understand your cost base When days on market lengthen, cash becomes tighter and some agencies may even try altering remuneration structures, such as moving sales staff to performancebased pay. When cash is tight, it’s vital to understand your cost base really well. When there is a lot of top line revenue coming in, many agencies don’t fully examine costs. It is not time to slash and burn, but you do need to understand where your spending is. For many, the last time they dove into the nitty gritty of their cost base was during the last downturn in 2004, or even earlier when the GST was introduced in 2000. REIQ Journal July 2008