For a leader starting a brokerage or a team, there are hundreds of ways to structure agent commissions. Here’s how one broker-owner approached the task and what he learned along the way.

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Often, when you first start a brokerage or team, you don’t know exactly what direction you’re going in, and your business will morph as time goes on.

One issue leaders face? Structuring agent commissions. As you move on, you realize that agent splits need to be adjusted to either service them more or to scale your business.

This is exactly what happened to me. I started out with a 75/25 split with a $20,000 cap. Honestly, I didn’t know what I was doing for the first five or six years of having a brokerage. I wasn’t really a broker or a team leader. I was a top-producing agent who happened to be a broker and who happened to sponsor six or seven agents.

So, in 2016, I started to get really serious about building the team and recruiting new talent. Part of having a shop that attracts agents is offering service to those agents.

Now, there are hundreds of ways to set up splits, but this is how our transition went and the lessons I learned from changing our splits.

1. Your caps and downline don’t matter to most good agents

One thing I figured out quickly was that offering the service that we wanted to offer to our agents is costly. We market their listings, we coach them regularly, and we offer tons of automation. 

Another epiphany I had was this — great agents aren’t concerned about splits and caps. They want an amazing environment and a place that services them. We want to be Nordstrom, not The Gap. And it was impossible to provide the technology, service and marketing at the high level that top producers expected. 

2. Set up your new structure for any incoming agents, and sign them all up on the new fee schedule

We decided to have a tiered system based on production. Twenty-five percent for the lower producers, then 20, then 15 and finally 10. And once they make the benchmark for the highest split (10 percent), then they are there indefinitely unless they start losing production.

3. Be upfront about changes

As far as the people you have on the old split go, let them know in advance that when their current employment agreement expires, you’re going to put them on the new one.

That means that if they’re on a cap, that will go away. Explain to them (again, way ahead of time) that you can’t offer the level of service, marketing and technology by having caps.  

The key to making these changes is about value. I tell my agents openly that my job is to continually earn my split of the commission, year after year, and I’m committed to making our shop the most innovative, forward-thinking and unique culture in our community. 

Ryan Rodenbeck is the broker-owner of Spyglass Realty and Investments in Austin. Connect with him on Instagram.

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