Which single number tells you a brokerage is actually working?

Question

I've been handed the books on two small shops by a friend who's thinking about buying one, and the numbers argue with each other.

Shop A: 22 agents, $310k of gross commission income to the brokerage, 71 closings. Shop B: 7 agents, $284k to the brokerage, 58 closings. Almost the same revenue. Shop A looks bigger in every marketing sentence and worse in every per-agent line.

For anyone new to the vocabulary, company dollar is the piece of the commission the brokerage keeps after the agent's split is paid, before overhead. Gross commission income is everything that comes in the door before splits. People use them loosely and it makes comparisons useless.

My problem is that I don't know which single metric I'd trust if someone would only let me see one. Company dollar per agent looks clean, and it punishes a shop that carries new people who might be productive in year two. Count of agents above some production floor tells you the bench is real, and it ignores what the splits actually are. Retention at two years tells you people want to stay, and people stay at bad brokerages for comfortable reasons.

So, one number only. Which one, and what does it miss.

tylerbrooks9 · Answer

Company dollar per agent, and what it misses is time. A shop that hired eight people in October looks terrible in December and fine in June. I'd want the same number for three years before I believed any of it. One year of anything is a story rather than a trend.

chriswalton8 · Answer

I went with company dollar as a percent of GCI because it tells you what the brokerage is actually selling. If you keep 8% of what comes through the door, you're a compliance service with a mailbox, and your revenue is fragile because anyone offering 6% takes your people. If you keep 28%, agents are paying that for something and you should be able to name what it is.

ledger, on your two shops, I'd want that percentage on both before I compared anything else. Shop A might be keeping a thin slice of a lot of volume, which is a different business from Shop B keeping a fat slice of less. Those two get valued differently and they break differently.

ryanmck27 · Answer

Working through licensing right now and this thread is the first time company dollar has made sense to me, thank you. Question though. Doesn't the answer depend on how the shop charges? A couple of the offices I interviewed with take a flat fee per file plus a small split, so their company dollar per agent would look low even though the fee income is steady. Is fee revenue counted in company dollar or somewhere else?

derekj19 · Answer

halyard, it depends who's doing the accounting, which is exactly why ledger's friend needs to see the general ledger and not a summary. Transaction fees, desk fees and monthly technology charges often sit in a separate revenue line, and a flat fee shop that ignores them looks unprofitable on paper while collecting steady money every month.

I voted for the production floor count. Retention tempted me, but I've watched people stay somewhere for four years and close two houses a year the whole time, and that shows up as loyalty in a spreadsheet. The count of agents doing six or more deals is the number that survives the settlement changes, because those are the people who can actually explain a buyer agreement to a client and get it signed. Everyone below that line is going to get pushed out of the business by the new paperwork whether the brokerage cuts them or not.

What it misses is your splits. Twelve productive agents on a 95/5 pay you almost nothing.

Which single number tells you a brokerage is actually working?

4 replies