In commercial real estate brokerage, the members of the sales team are a big part of creating the considerable income for the business from clients and listings. So, how do you find the best people for working in sales, how do you encourage them, and how do you keep them? They are big questions that need answers. (NB – you can get more salesperson reward and encouragement ideas in our Snapshot program right here – its free)
Commissions and brokerage income can, of course, be generated in a variety of ways including specialist services, sales transactions, leasing, and property management. So, there are some linkages to make between the sales team and the rest of the brokerage business.
One good client comprehensively serviced can bring in plenty of income opportunities across the brokerage; it is critical that the sales team understands the broader value of each client and then works that opportunity.
Cross Selling for More Commissions
One client and or property can be escalated into and moved through several property services over time. That then forms the basics of ‘cross-selling’ of services in commercial real estate. Sales, leasing and property management are all linked. The process of ‘cross-selling’ is so important in our industry and within brokerage teams. A cohesive brokerage team will very likely generate more commissions and income than a fragmented team.
It should be said that any introduction from a salesperson for new and associated business in the same brokerage should be rewarded. If that salesperson brings in an opportunity be it for commercial or retail property management, leasing, redevelopment, or project marketing, then the rewards should be available and paid to the salesperson for the opportunity created. Salespeople like to be rewarded; it is a formula that cannot be ignored if you are looking for progress and growth in your brokerage business.
Reward and Remuneration
Here are some ideas to help you structure a rewards program for the sales people within your team:
- Base salary – For ‘top end’ salespeople, the base salary strategy is not all that important given that they are already bringing in sizeable commissions in a consistent way. Base salary is something that typically appeals only to those just starting out in the industry. If you get a base salary paid as part of a remuneration package, then the commissions paid from transactions will be lower.
- Commission – There are many types of commissions paid per transaction, be it in sales, leasing, or property management. Importantly the commission share paid to the sales agent should be appropriate for the work undertaken and result achieved. The commission shares paid to individual salespeople for a completed sales transaction are in the broad range of 35% of gross commissions at the lower end, through to 60% to 70% at the top end. At the top end of the scale, you would have highly performing salespeople that are very experienced and are working on larger transactions most of the time. So why aren’t they paid the entire full commission if they are so good at what they do? There are administrative costs to pay and provide within the brokerage; those costs must be paid for. A top agent will need some support in the office; the busier an agent in listings and transactions, the greater the support required from the administration team.
- Property management introductions – Typically a ‘trailer’ commission from a new property management should be paid to the introducing salesperson over a period (say each month for 6 months) if they were instrumental in introducing that property management lead.
- Leasing transaction introductions – A salesperson should get approximately 40% of the leasing commission if they were instrumental in creating the lease arrangement between a landlord and tenant. That percentage will then vary depending on the amount of work undertaken by the introducing agent in the lease negotiation and momentum.
- Milestones in marketing monies – Vendor paid advertising funds (VPA) are something that should be encouraged by all members of a sales team. There is a direct ratio between VPA and market share. The advertising spend will always help an agent grow their business, get more enquiry, and attract local listings. A good agent will be monitoring the VPA fees converted each month and then used in property campaigns.
- Administrative support – Every top agent needs some form of administrative support back in the office. There is a cost to that process and that cost should be allowed for as part of the remuneration package. There will also be franchise fees paid if the brokerage is part of a franchise model.
- Growth of commission per transaction – In each financial year, you want the ratio of commission per transaction per agent to improve. In other words, agents are doing less completed transactions but for more commissions. That then means that their work results are improving and their commissions are growing with better quality listing stock. Through a financial year, if an agent is earning more gross commissions, then they deserve to increase their percentage split; that can be a staged process.
There are plenty of things to be done here with clients, listings, and commissions. Encourage the improved performance of salespeople in your team through reward and incentive programs.