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Realigning your relationship with agents for fun and profit
When you started your business, you had a vision for
your firm—you offered your agents a good split, provided them with the services
they needed to succeed, and grew your company on a solid foundation.
Then, over time, things changed. New competitors entered your market, new
technology became available, the industry itself evolved, and mergers and
acquisitions took their toll. You added new services for your agents, introduced
some new fees, patched commission plans here and there, and altered your
benefits package to fit new circumstances.
That vision which was once so clear is now a bit muddy. You’re growing
rapidly, but profitability isn’t what it once was. And sometimes it feels like
you and the agents aren’t on the same team anymore.
- You add ancillary services like mortgage brokerage, title companies,
concierge services and warranty products, some of which are now more profitable
than your core real estate business. But agents won’t always make the referrals.
- You invest in technology to make your agents more productive and then try
to introduce a technology fee to help cover the cost, but agents see a 30%
increase in revenue and think you must be raking in the bucks.
- You introduce a transaction fee to help cover increasing administrative
costs and agents say you’re making it harder for them to get listings.
Across the industry, commission structures have become so complicated that
incentives don’t always work properly. Agents, and even managers, don’t
understand how they’re getting paid. Productivity is lost because agents waste
time trying to figure out commissions when they should be out selling.
The complexity of running the business makes it impossible to give managers
in the field the authority to make important decisions. Everything has to come
back to corporate, so the company is much less nimble than it used to be.
What’s the answer?
Go back to where you started and re-examine your vision. Does it still work?
What is your brand? Think about your brand not in terms of how prospects see
your company, but in terms of how agents see it.
You compete for agents every bit as much as you compete for listings and
sales. You need to provide a strong and easy-to-understand value proposition to
your agents, one that shows them why they should work for you rather than the
company down the street.
What is a value proposition?
Fundamentally, a value proposition is the bundle of goods and services that you
provide to agents. Those goods and services include traditional benefits, such
as health insurance and dental care, but also extend to training, administrative
support, and the amount of lead generation you do. Even the work environment you
cultivate is part of your value proposition.
When compensation, benefits, and all goods and services provided to your
sales force are included, it can add up to 80% of the cost of running the
business. In fact, if you think about it, virtually all of your expenses are
involved in one way or another. So if you update your value proposition and
streamline your offering, the effect on the bottom line can be significant.
How do you come up with a new value proposition?
Start by listening to your agents the way you listen to your customers. They may
value some of the services you offer highly but be very willing to dispense with
others. For example, if all of your agents are experienced, there may be little
need for training.
Similarly, some benefits are expensive and may not be highly valued. If
virtually all of your agents are married and have health insurance through a
spouse’s plan, they may not appreciate the value of the coverage you provide.
Of course, there may be benefits with a high perceived value that would cost
relatively little to add, such as daycare reimbursement or college tuition
grants.
Start by asking the agents what they like and don’t like about your company,
as well as about the competition: policies and procedures, compensation,
benefits, services, etc. Most agents will be very honest with you. Even if you
think you already know what you will hear, ask. I guarantee you will be
surprised by some of the answers.
Then analyze your cost structure to see what you can afford. In many cases
you can find a cost-effective way to deliver what the agents want. By carefully
balancing what agents want with what you can afford, taking into account
competitive pressures, you can provide a stronger value proposition to your
sales force that also enhances corporate profitability.
When you do a better job of meeting their needs and solving their
problems—providing greater value—agents will accept a lower split in return.
Offer different value propositions
Don’t restrict yourself to things everyone in your company wants. Unless you
have a very small firm, you’ll do better to group agents into categories and
then develop an offering for each group.
It’s easier for a new company, of course. The managers can start from scratch
and develop a value proposition specifically designed towards the type of agents
they want to attract. A 100% plan designed for top producers is a good example.
But you probably have a variety of different types of agents, which can make
introducing new value propositions more complicated.
However, there are ways to handle it. Say you have 500 agents. Of that 500,
only 200 might be interested in paying for support services. The other 300
aren’t producing enough to justify paying for it. Yet you want to offer this
extra support to the agents who really need it.
One approach is to create a club or special group inside your organization.
Perhaps you charge agents a fee to join. Then, as members, they can obtain
administrative support at $15 per hour. Everyone else has to pay $50 per hour.
Or you could do it with compensation. If they pay a certain fee to join the
group, they receive a higher split.
Get more aggressive
You can also take this a step further and re-examine your business at its most
fundamental level. Maybe it’s time for a more comprehensive change. Get
creative! Thousands of options are available, depending on your market.
Become a virtual broker
Do you really need all the office space you have given the level of technology
available today? With the Internet, voice mail, e-mail and text messaging, maybe
agents only need to come into the office for certain types of client meetings or
to do high-quality printing. If you can cut out the costs associated with your
office space (rent, utilities, furniture, etc.) you can share that gain with
your agents. You can offer higher splits or aggressive plans positioned to
recruit and retain people who are willing to work from home.
Provide high levels of support
Most agents complain that they lack the level of support they need to get the
job done. You could significantly increase the administrative support ratio in
exchange for a lower split. One of our clients has, on average, one
administrative person serving three agents (one to twelve is more typical).
Their support people do virtually all the non-sales work. They handle closings,
do marketing, make cold calls, put up and take down signs, and more. Freedom
from this kind of work is highly valued; agents are often very willing to give
up some of their split in return for a high level of support.
Refocus the company
One of our clients had 150 agents, of whom only about 75 were really productive.
They decided to keep only the most productive agents, cutting the size of the
firm in half. However, they were able to reduce the number of offices and
managers, since good people need less management, and provide quality support.
Today the company is smaller, but they are focused on quality and have seen an
increase in profitability.
Provide unique benefits
One company we know that specializes in resort property provides boats to their
agents instead of company cars. As a result, agents can travel from one property
to another across the lake, taking 15 minutes instead of what would be 1-1/2
hours by car. Another company pays for college tuition for their agents’
children. Still others provide daycare or retirement plans.
Every single item on your profit and loss statement is part of your value
proposition. Look at it as if it were a new expense or investment. Do you really
need it? Can you get rid of it without the agents caring? Or should you spend
even more on it because your agents really want it?
Figure out what it would take for agents to line up around the block because
they want what you are offering so desperately.
The risk is that anyone can copy a good idea. The best value propositions are
sustainable—and difficult for the competition to copy. For example, hiring
additional support staff increases the barrier to entry while having people work
from home lowers it.
The main uniqueness in the real estate industry is quality of service, and
that comes from the agents. We need to provide agents what they need, so they
can deliver the highest possible levels of service.
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