You might think agents will always maximise their commission -- after all it’s their commission and it’s in their interest to be paid as much as possible for their work. And it’s true, agents are responsible for their own commission.
But, that doesn’t mean you shouldn’t track their commission at all. Because, as a business owner it’s your responsibility to make sure your business keeps on growing. That’s why it’s great to have a system in place for this. It’ll generate reports on commission that you can use to make tactical and strategic business decisions.
Notice red flags
Agent commission is a great indicator for business growth. Ideally, you’d want commissions to grow over time -- or at the very least stay stable. The moment you see average commission go down, you’d need to look into the underlying reasons.
In some cases, lower commission is just down to an underperforming agent. But, it could also be a sign of something broader. Especially if you see a decrease in commissions for more than one agent. It could be that there’s something in your business that needs to be addressed. Perhaps there’s low morale or agents are not satisfied with their terms.
Conversely, if the housing market is slowing down, one of the first indicators will be your agents’ commissions. So tracking commissions is not just a way to follow up with your team, but also helps your understand your local market faster. This means you can change your strategy more quickly, giving you a competitive edge.
Invest in your agents
Most brokers will agree that investing in their teams of agents is likely to lead to business growth. But many don’t know how to quantify the benefit. If you track individual agents’ commissions, you’ll know how much each agent is making, but also how much you are making per agent.
This allows you to calculate what kind of return you’re likely to get when making an investment in your human capital. For instance, you can calculate how much more commission an additional agent is likely to bring to your business. This means you’ll be able to make hiring decisions based on increased profitability, not just increased demand.
Likewise, if you’re considering investing in training for your agents, you can calculate whether this makes business sense. For instance, say an investment in training of $1000 per agent has shown to lead to an average increase in commissions of 5%. You can then what effect an additional $1000 you’d expect to have.
Tracking agent commissions is something that can be done quite quickly and easily. There’s a variety of ways to do it, using spreadsheets or more bespoke tools. In any case, it’s always worth doing. Commission is one of the most important metrics to track, because it gives you insights in your agents, your team and ultimately in your business.