Real Estate Team 2.0: Teamwork Compensation
Sunday, June 1, 2008 at 09:04AM I won't pretend to have worked out the compensation model for the team, but I believe it can be worked out equitably. There's nothing wrong with starting with the present system of compensation with a few tweaks to take into account contributions of team players to each transaction. The marketing person and the assistant will have to be paid, but how is this set up? Each agent could be charged a fee from each transaction based on the value of the contribtions of marketing and assistance. If the agent is free to deal mainly with real estate, this should allow them to handle more transactions.
Although the agents will be expected to contribute to marketing, the marketing person will be taking most of that load. The agent's responsibility with marketing will be networking and information gathering and with the right system, time management and tools this part of their responsibility should be efficiently handled so as not to eat up time. Writing a couple of blog posts a week, setting aside an hour each day to input information and participating in a few online forums shouldn't be overwhelming. The SEO and marketing campaigns will behandled by the marketing person.
Managing the closing process will be guided and monitored by the assistant. So the team will have to decide what portion of the commisions are paid for support. It will also be necessary to decide how to pay other agents for co-operative assistance. By working together in a team effort where everyone on the team has all the information about listings and clients at their fingertips, a busy agent might farm out responsibilities to a less busy agent and pay them according to a system of payment that is pre-set -- like attending an inspection, showing a listing, inputing information, etc.
If everyone is licensed, including the assistant and the marketing person, there will be even more opportunities to create creative compensation arrangements, because they could be included in the farm-out work of busy agents, IF they have time to do it.
Another compensation arrangement would be to draw on a base salary each month with a percentage of each transaction going to a team pool to be divided at the end of the year according to performance and revenue generation. This could be a somewhat complicated system based on points earned during the year for specific acts that generate paying business or it could be more subjective and decided by the leader.
If the team is successful and is able to handle more volume through team effort and if expenses can be kept as low as I predict, there should be enough revenue to devise a compensation plan that is fair to everyone. My preference would be for the team to work out the details of the plan and have specific meetings once a quarter to assess how well it's working.
Let's say the team is functioning at moderately high co-operative levels, marketing has generated buzz, clients are amazed at the service, leads are coming in through online efforts and offline efforts and producing 30 transactions a month. Whoops, is that too high? How about 20 a month (I think it will be higher). The average transaction is $250,000. The average commission percentage is .03. You can figure out the rest. The point is not so much the compensation arrangements as it is producing income. You'll be amazed at how easy it will become to create a compensation plan when you have high net profit. You could split everything equally if the team is functioning correctly and everyone believes the team system is creating the income even if one agent can claim more direct transactions for one year. This would require a radical mindset and each player would have to decide if they can duplicate the revenue on their own or with another company.
If you decide to forego walk-in business, then I see no reason for an office. One of the hiring requirements for the team will be the capacity to have a home office that is set up to be amenable for clients if you HAVE to have a physical place to meet. This will be important for the team I envision because technology is too advanced to justify the expense of an office. I personally would not use print ads, but each team member would be free to use it if they choose and if it produces income have a way to petition the team for reimbursement. All marketing efforts will be monitored closely, so if it works, it works.
The real cost of doing business will be minimal, because most of the marketing efforts will be networking and lead generation through search. The main cost of marketing will be in the marketing person's salary and time spent by each member on networking.
Each team will have to keep a reserve, so they must decide how much goes into a reserve account.
But who is the owner and how will the owner get richer than everyone else? There really won't be an "owner". More later.
Reader Comments (2)
Mike; I would be careful about making commission representations on your blog - You might want to note that for pruposes of an example, you might use a theoretical number that could not beaccurate because FTC forbids real estate brokers to discuss commission amounts except within their own company, fearing that there might be some form of price fixing. That suggested immediate edit aside. What you're looking at here is economies of scale, which is the reason that companies can sometimes achieve greater results at a lower cost per worked then an individual might. I would suggest respectfully that someone has ot be incharge however, and that person might deserve compensation for their managerial efforts - See, I do read the commnets on the post, so I ran over to make a comment - Hope it feels a little less lonely over here ;-)
Yes, these are just examples and not intended to be used for price fixing or any other nefarious purposes -- they are possible scenarios.
Thanks.