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CompensationMaster Newsletter Article, August/September 2003 By David Cocks & Dennis Gould, Managing Partners
We recently completed an in-depth study of the results our
clients have achieved over the past seven years using our approach to
compensation plan design, and we wanted to share the results with you.
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Average profit before taxes is 6.2% |
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Company dollar averages 39.1% |
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Revenue increases 31.3% on average in the first year |
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Agent retention rates average 97.6% |
Only real estate firms were included, and only companies that
worked with us to design and implement our system.
These results are impressive... For those of you who are
outside the real estate industry, it's important to note that real estate
brokerages typically have a profit (on the real estate side) of 1.5 to 2%. Our
clients have more than tripled the industry average.
The results are more impressive when you consider that
ancillary income sources, such as mortgage, insurance, and escrow services,
were factored out. Had we included them, profit would have been much higher.
But we were most interested in how the core of our clients' businesses had
faired.
Interestingly, companies that have had the system in place for
three or more years achieved a higher average profit of 6.6%, showing that the
longer the system is in place, the stronger the company becomes.
The high agent retention rate is a result of several factors.
Our implementation methodology, which includes change management techniques, is
one of them. But the most important reason sales associates stay is that our
compensation structures do a better job of meeting their needs.
Designing very appealing compensation that motivates the sales
associates also drives the first year revenue increase, and helps improve
recruiting.
The study includes results from 59 firms, including franchise
and non-franchise businesses, as well as both traditional and 100%-concept
brokerages. The firms, which are located in the United States and Canada,
retain 20,985 agents and represent more than $890 million in annual revenue.
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