Billion Dollar Agent Profit Model – The Secret Formula

Here is the secret formula to improving your net profit. We have organized this in the order of focus, depending on your situation. In this blog, I’ll be covering Marketing and Agent Commissions, then will continue on with the rest in the next blog.

  • Marketing

  • Agent Commissions

  • Brokerage Fees

  • Assistants

  • General and Admin

  • Revenue Extra

Marketing

  • You should be spending ten percent on marketing. If you are spending 15 to 25 percent, you are likely spending too much.

  • Stop wasting leads. What percentage of leads do you think you are wasting? Most teams spend too much on marketing and too little on calling. If you are spending 20 percent on marketing and wasting 50 percent of leads, that is a quick 10 percent improvement in net profit to reduce marketing until you stop wasting leads.

  • If you reduce marketing from 20 percent to 10 percent to stop wasting leads, this improves your net profit by 10 percent ASAP. That is a simple, huge jump.

  • If you feel bad about getting fewer leads, remember that once you get your business balanced, you can increase marketing again.

  • Marketing is often a five to ten percent improvement in net profit.

Agent Commissions 

  • The buyer’s agent model is broken. It does not work for the majority of large teams.

  • Best Agent Business invented the showing agent model in our first Billion Dollar Agent book in 2007. We have been testing and developing the model with a few top agents over the last few years.

  • Many teams pay their buyers’ agent a 50/50 split. If an average buyer deal takes 20 hours for $6,000 commission, the buyers’ agent is making $150/hour to make that $3,000 commission. How many times have you given your buyers’ agent a lead that is ready to go, such as referral or sign call you personally converted, they work for 20 hours and make $3,000?

  • The showing agent model involves splitting the buyers’ agent role into three roles of callers, showing agents, and closing assistants. You can hire unlimited callers or showing agents at $20/hour. Best Agent Business can call your backlogged leads or you can hire in-house callers. Showing agents paid $20/hour will end up costing about $500/deal including the 50 percent of buyer showings that fail to result in a closed sale. In a typical brokerage office of 100 agents, there are easily 5 to 20 agents who would be great as showing agents and happily work part-time for $20/hour.

  • Instead of paying $3,000 in agent commissions for a buyer deal, you may be paying out $500 to $1,000 for callers/showing agents. Instead of paying out 50 percent, you may be paying out 20 percent. This is a huge difference which has a positive impact of 10 to 15 percent in net profit change for the overall business.

  • Shifting from a buyer’s agent model to a showing agent model for your buyer business can increase your net profit by a solid 10 percent from 30 to 40 percent or 40 to 50 percent.

  • As your business grows, you may start thinking of handing off some of the listing agent work from yourself to someone else. Do not do this too soon and do not overpay. Remember, you are making $1,000/hour or more on listing appointments. Running your business makes you $50/hour at best. You could hire someone more capable than yourself to be the chief operating officer at $50/hour which is $100,000/year. When you hire Best Agent Business, you actually get those services for even less.

  • We have seen agents who make a terrible mistake and pay their agents a 50 percent commission on the listing side and 50 percent on the buyer side. You may as well run a brokerage and reduce your net profit to ten percent. That model is a disaster and you will end up with a brokerage, not a team.

  • So what should you pay for a listing agent? Depending on the price range of your homes and the tasks you need done, we have seen people pay 10 to 25 percent. That is too much. Everything that can be done by an assistant, should be done by an assistant. Some tasks are unlicensed and some are licensed. You can hire very experienced, part-time agents to help with listing assistant work such as gathering information, drafting a CMA, first walk-throughs, photos and details on the property. To get a more specific CMA, have them come with you on the listing appointment. Get them to stay and gather MLS details after you win the listing. If you paid someone 20 percent of the $6,000 commission or $1,200 for tasks which took ten hours, you would be paying $120/hour. This makes no sense. You can have that done for $20/hour or $200.

  • A big mistake of agents over $1,000,000 in GCI is handing off listing agent work too soon, handing over too much, and overpaying the agent commission split. This will destroy your net profit. Real estate is a profitable business when done correctly. No one does $500,000 net profit on a $1,000,000 business. It all relates to making $1,000/hour or more on listing appointments. If you let yourself get burned out on listing appointments and you move from doing ten per week to one per week, your business will suffer. It is much better to pace yourself and keep doing three to five per week.

Are you making any of these mistakes in your business? Call me, email me, reply to this blog.

Like this blog? Do us a favor and “like” us on Facebook. Would you like help identifying ways you can improve your Staffing or Time Management Strategies? Reply to this blog and we can get started. For more information on how Best Agent Business can help you streamline your marketing, time management and many other aspects of your Real Estate Business, subscribe to our videos, visit us at www.bestagentbusiness.com, call (202) 297-2393, or e-mail us at: sales@bestagentbusiness.com.

 

 

 

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Comment balloon 2 commentsSteve Kantor • August 14 2014 04:46AM

Comments

Great information, thanks for sharing.  I will pass this on to others in our office.

Posted by Richard Weeks, REALTOR®, Broker almost 4 years ago

It makes us happy when we get comments like yours. Thanks!!

Posted by Steve Kantor, Best Agent Business - Virtual Assistance (BEST AGENT BUSINESS) almost 4 years ago

Participate