Training the agents: baked into the split or billed as a fee?

Whichever you pick, the independent contractor agreement is where it either holds or falls apart. I've read a few of these and the fee schedule is usually a separate exhibit that the ICA says can be amended on notice. That's fine, but the agent should be able to see it before signing, and you should be able to point to the clause when you raise it.

One thing to be careful about: how you charge and what you require can feed into whether an agent looks like a contractor or an employee, and that test varies by state and has been moving. Worth a licensed employment attorney in your state rather than a forum read.

On @keystone's actual question, the fee model gives you a document you can enforce. The split model gives you a number that only exists if someone closes.

Before the model, can I ask what the 22% fee income was made of? Monthly fees are predictable. Per file fees aren't, they move with production like the split does. If most of that 22% was per file, then the second owner's argument about slow quarters is weaker than it sounds.

@anchor asked the right thing. I'd add: get the fee schedule and read the line about what happens when an agent goes inactive but keeps the license hung with you. Some shops keep billing the monthly fee, some drop to a reduced hang fee, and a couple I've read just say nothing, which means the owner is making it up per agent and eventually somebody is going to be annoyed about it in writing.

The two models aren't really competing on price, they're competing on which risk you want to hold.

Split-heavy revenue moves with production. If an agent closes nothing, you earn nothing from them, and you also spent nothing except your own time. Your fixed costs sit exposed. Fee-heavy revenue is closer to a subscription, so it survives a slow quarter, and the price of that is that your high producers subsidize nothing and will eventually notice they can get a better split elsewhere.

Run both against your actual distribution rather than an average. Take seven agents where two do eight deals a year, three do three, and two do zero. At a $9,000 average gross commission, the 70/30 shop produces about $87,000 of company dollar off that group before any cap kicks in. The 90/10 plus $150 a month plus $95 a file produces roughly $29,000 of split, $12,600 of monthly fees, and $2,375 of file fees, so about $44,000. The split model wins badly on that distribution.

Flip it. Make it seven agents doing two deals each and the fee model closes most of the gap, because the monthly fees don't care.

The assumption doing all the work is your productivity spread. If you can recruit and keep producers, splits pay you more. If your headcount is going to be mostly low producers, fees are what you're actually selling, and you should be honest with yourself that you're running a license-hosting business with training attached.

The post-settlement context matters here too. Agents now need documented compliance support, written buyer agreements and compensation disclosure among them. Support you actually deliver is defensible at either price point. Support you promise and don't deliver is a retention problem in both models.

The per-program option in your poll is the one I'd push back on. I sell training in a different corner of this business and the people who need it most are the ones who won't buy it a la carte. They price-shop the course and skip it. If your compliance exposure runs through their files, you don't want their file review to be optional.

Dumb question from outside the brokerage side: does the agent even know what the split costs them in dollars? $150 a month is a number you feel. 30% of a commission you haven't earned yet feels like zero when you sign.

@wren that's not a dumb question, it's the whole marketing argument for the fee model and it's why flat-fee shops recruit so well.

@keystone, model it as two lines on the same chart with deals per agent per year on the x axis. There's a crossover point. For the numbers you gave, the crossover is somewhere around three to four deals a year per agent. Below it the fee model pays you more, above it the split model does. Then ask yourself which side of that line the agents you can actually recruit are going to land on, and build for that instead of for the shop you wish you had.

I'd want the churn number before I picked either. @keystone you said the split shop has better retention on paper. Over what window, and does he count agents who went inactive as retained? Retention measured badly is the most flattering statistic in this industry.

The thing I still can't square, after six months of reading, is why anyone offers free coaching to an agent who hasn't proven they'll show up. Doesn't the split model just mean your producers pay for the tire kickers?

@pike yes, and that's the design, same as any insurance pool. The question is whether the producers tolerate it. They mostly don't past a certain volume, which is why nearly every split shop ends up with a cap and then a lower post-cap fee. The cap is the pressure valve.

If I were doing this slowly I'd start fee-light and split-heavy, because a monthly fee is easy to add later with notice and very hard to remove once your revenue depends on it.

@quill that matches what I see on the rental side. Once I started charging a fee for something I'd been including, I could never go back without it reading as a concession. Adding is cheap, removing is expensive.

What breaks at scale here is the free contract review. At six agents you answer the phone. At eighteen you're answering it at 9pm on a Friday for somebody who does two deals a year, and you start resenting them. Price the thing that consumes your time, or hire for it, or cap how much of it any one agent gets.

The only structural thing I'd carry over from my five years running a service shop: charge an onboarding fee. Not big, a few hundred. It's not about revenue. The people who won't pay it also won't do the work, and you find that out in week one instead of month seven.

As the newest person here, $150 a month with no sales would have stopped me signing anywhere.

@rigging that's real and it's also selection. Some owners want exactly that filter. On job sites the subs who want everything paid up front are usually the ones with no float, and no float means they take the first thing that comes along and leave your schedule in pieces.

The scope creep in the split model is savage. You said everything is included, and "everything" grows. Six months in it's file review, then it's sitting in on their listing presentations, then it's driving to a difficult closing. Write down what included means, in the ICA, with a line for what falls outside it.

Coming in from another career with no book at all, I'd take the 70/30. I'd pay 30% to have someone answer the phone when a buyer agreement clause confuses me. What I couldn't have paid, in month two, is a monthly bill on top of the license fees and the association dues and the lockbox.

From the outside, the fee shop sounds like the more honest product. You're selling a place to hang a license and some tools, and you're pricing it. The split shop is selling a partnership and hoping the producers don't do the arithmetic.

I've hung a license at both kinds. The split shop earned it. The fee shop cashed my monthly and I never saw a person. Neither one is inherently better, the difference was whether the owner picked up when something went wrong on a file. @keystone, whatever you charge, that's the product.

Is there anything stopping you from running both at once? Two schedules, agent picks at signing, switch once a year on their anniversary. Or does that just mean everyone picks the one that's cheaper for them and your revenue gets the worst of both?