Billion Dollar Agent Profit Model – The Secret Formula, Part Two

Here is the rest of the secret formula to improving your net profit continued from my last blog. I have organized this in the order of focus, depending on your situation, and in my last blog I covered Marketing and Agent Commission mistakes. In this blog I’ll be covering the remaining mistakes in Brokerage Fees, Assistants, General and Administration and Revenue Extras.

Brokerage Fees

We like to see five percent spent on brokerage fees, or $50,000 on $1,000,000 in GCI. If you are spending 15 percent, that is way too much. You need to consider brokerage fees and office space. Typical problems include the following:

  • Agents - You should not be paying the brokerage fees, desk fees, or CAP of your buyer’s agents. They should pay those themselves.

  • Office Space - Having too much office space or paying extra for office space will be a fee above and beyond your brokeragefees.

Assistants

You should be spending ten percent on assistants.

General and Admin

You should be spending five percent on general and admin other thanthe above items. Remember, items like postage and printing should appear under marketing, not general.

Revenue Extra

Extra revenue usually comes from three main sources. These examples are all based on $1,000,000 in GCI:

Transaction Fees - Almost all top teams charge buyer and seller transaction fees of $395 to $695 per deal, or more. Ifyou have a $6,000 commission and get an average $500 transaction fee, that is more than an eight percent increase in profit margin.

  • Outbound Referrals - If managed well, you can generate $10,000 to $50,000 per year in outbound referrals for sellers moving to other cities and incoming buyer web leads that need to get their home sold before moving to your city.

  • Vendor Marketing Money - The largest brokerages and franchises focus on profits from RESPA-compliant mortgage and title business relationships. If you are a Billion Dollar Agent, you should be getting five percent of revenue from co-marketing efforts with mortgage, title, and other vendors. For other vendors, we like to see one vendor a month pay for your monthly mailed newsletter. With a combination of transaction fees, outbound referrals, and vendor marketing money, a Billion Dollar Agent may generate an additional $100,000 in revenue per year which is a ten percent increase in profit margin.

Summary – Growth or Profits

If you are at $100,000 to $200,000 in GCI, most of the previous material may not connect with you. You have not experienced going from yourself and an Assistant doing $200,000 to $400,000 to a team of five to ten people doing $1,000,000 in GCI. Your best bet is to share this with a top team and ask for their feedback on whether our analysis is correct.

If you are a future Billion Dollar Agent doing over $500,000 or aBillion Dollar Agent doing over $1,000,000, then it is likely that you are experiencing a variety of emotions after reading this analysis. You can now do one of the following:

  • Ignore reality and be a Big Ego Brad or remain a No Clue Carol.

  • Worry and Stress about your current reality.

  • Become a Billion Dollar Agent by making a commitment to improve your net profit and call me, email me, or reply to this blog to discuss how we can help.

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 0 commentsSteve Kantor • August 18 2014 04:46AM

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