What Does Value-Based Commission Structure Look Like?



I want to quickly cover value-based commissions.  Before you start building a team, you've got to decide what the model looks like.  We're doing a little bit more than 60 percent of our volume from listings, so this is dependent on where your business is coming from.  

But essentially, you've got to have a target for how much you want to pay out on the listing side and how much you want to pay out on the buyer side to agents and what the split between listing and buyer business is going to be so you can figure out your gross margin, and a very simple gross margin:  what you bring in versus what you pay the agents.  Right?  
To me, I want to be in the 65 to 68 percent range gross margin.  So after I pay my agents, there's 65 to 68 percent left over for the team to make decisions on how to spend.  

And this is how it happens.  We do 10 percent off the top.  It ends up being 30/40/50/60 on the buy side, it's 27/36/45/54, and it blends out at 45 percent for us.

And on the listing side, it's 25 and 35, which ends up being 22.5 and 31.5.  And that's it.  That's value-based commission structure.  

And if someone asks, you know, we provide a clear path to 100k on our team.  There are very few agents in our market that take home more than 100k.  Three of my four buyer agents, who are less than two years in the business, make between, I think, 110, 120, probably on the low side bridge, to upwards of 140, 150, the other two.  

One of my senior buyer agents is struggling with some personal issues, and that's why he's not hitting his goals.  But he's made six figures before, and we have two new agents which, once we get them ramped up, their goal next year will be to hit six figures.  Then we've got three listing agents. 

So that's it.  That's value-based commission structure. 

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