4

31 March 2010

Effective Management of Average Broker Commission Rate (ABCR)

Relatively small changes to ABCR can result in significant changes to GCI and profit.  In the example below, please note that the increase to ABCR is only .2{0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c}, yet the impact upon profit is an increase of $80,000. All other drivers (sides, Average Sales Price [ASP], {0a8e414e4f0423ce9f97e7209435b0fa449e6cffaf599cce0c556757c159a30c} Retained etc.) have remained constant in the model, so the only characteristic that has been manipulated is ABCR.

It may be difficult to find the data required to measure ABCR against your competition, however your sales agents effectiveness in explaining your company’s value proposition greatly impacts your ability to maintain margin.  Highlight all products and tools that differentiate your company as well as all listing statistics that show where you outperform the competition (e.g., closed sales price versus original asking price, average days on market, etc.).  This will allow your clients hard data with which to compare your fee structures to that of your competitors.

Although each company must independently establish its own policies, one effective technique may be to require management approval to list homes at or above a predetermined commission rate. It is very important to establish listing parameters that maintain the integrity of compensation structures while holding agents accountable to perform at those standards.

Focusing on the following measurements (with special focus on listing-side transactions) will help maximize ABCR:

  1. Study ABCR differences between branch offices (Multi-office companies). Barring no other specific explanations, this could highlight managers and agents who are effectively communicating the company’s value proposition.  Then, help other offices and agents to deliver the value proposition with similar effectiveness.
  2. Rank sales agents by ABCR. Ranking by ABCR will highlight whether your ABCR is driven up or down by only a few agents and allow you to focus appropriately.  For those that fall below your expectations, coach them in the effective delivery of the companies value proposition. In most cases, the differential is connected to this skill set.
  3. Analyze your listing data to measure ABCR performance (measure with and without certain outliers such as one-time exceptions, new construction, referrals and the like).  Also compare ASP, units, and absorption rates and establish changes to performance parameters based upon those results.

4 thoughts on “Effective Management of Average Broker Commission Rate (ABCR)

    1. Robert,
      Can you provide a little more explanation around your point here? I can see where you are heading, but would like to get more detail from you, if possible. Are you a broker or a sales professional? Is this an idea that you could see yourself implementing?

      Regards, Bob

Leave a Reply

Your email address will not be published. Required fields are marked *