Battling the commission squeeze: 5 tips to make your indie brokerage more profitable

Our industry is in a boom cycle, but every day we are forced to walk the tightrope of an aggressive compensation plan to attract and retain agents. Most call this the commission squeeze. With all these 100% commission franchises along with already aggressive compensation plans offering large checks to acquire agents, how can we compete? 

The answer is simple. You must have other sources of income to allow you to have the most aggressive compensation plan possible, all while making a profit.

Title companies

The first thing I did when starting my brokerage was to find a good partner with title experience and start a title company. In most states, the title company rakes in cash with low overhead. In my state, title fees are controlled by the state. We make 85% profit plus closing fees which is a no-brainer for anyone with their own brokerage, but especially for indie brokers. 

Even if you have trouble finding someone to partner with, your existing title relationship would more than likely be willing to form a joint venture with you. Most months, my title company is as profitable or more profitable than my brokerage.

Affiliates

Leverage relationships with local lenders, insurance providers, home inspectors, structural engineers and any other affiliates that you and your team refer business to. These folks should be willing to contribute marketing dollars, or rent space in the office to drive more income into the brokerage. 

In addition, you get the added benefit of always having a team of professionals around for your team to lean on for advice. The fewer issues you have to deal with the better.

Home warranty companies

If you are not partnered with a home warranty company, you should be. Most E&O insurance forces us to offer a home warranty to our clients. Shop around and see what the home warranty companies are offering for you to sell their home warranties. Some of them will give you marketing dollars, and others will pay you commission for each home warranty you bring them. 

In-house lead generation

Probably my favorite on the list, if you are not already, you should be providing leads to your team. In fact, it’s so critical right now that Inman contributor and founder and CEO of Kris Lindahl Real Estate, Kris Lindahl, posits that if your brokerage depends on bought leads, your business will be kaput by 2024. 

But these leads don’t come for free, therefore, you should have a separate split for company-generated leads. The more experienced agents probably won’t take many, but your newer agents will absolutely want leads at a reduced commission. 

Most of us in our previous positions, before starting a company, were the rainmakers. Keep being the rainmaker for the entire brokerage, and make an extra 10-50% per lead closed. 

Reduce expenses

The biggest tip I have is to always keep an eye on your expenses. For instance, maybe you don’t need such a large office or maybe you have too much staff. Knowing what you are paying out each month is vital in any business, but it is even more vital in our business. 

Reducing expenses by 10 percent can drastically increase your bottom line. Create a budget, stick to the budget and have monthly meetings to go over the P&L. After all, we are running a business, right?

It is easy to get lost in the business. Use these ideas and brainstorm on other ideas that will help your indie brokerage stay profitable and competitive in today’s ever-changing world.