• Agent’s choice of Commission split model – Revenue or Profit Share?

    Commission split models may vary from agency to agency however most agencies choose the Revenue Share model. We shall for the purposes of this article focus on some of the reasons why Profit share models exist and work.

    Profit share models, focus on expense item deductions, such as the following:

    • Business cards, boards
    • Royalty fees
    • Marketing on websites etc

    The model effectively has large benefits for the top tier mega agents at the top of the profit pyramid but does not yield significant profit VALUE benefit, that is, actual Rands and Cents in pocket for the agent lower in the hierarchy. This model is purely capitalistic by nature (similar to the Donald Trump campaign claim, requiring increasing taxation on the middle income individual earners and slashing company taxes significantly to levels of approx. 15%), effectively the profit share acting as a taxation model that needs to be paid out of the pocket of the taxpayer, that is, the Real Estate Agent in this case. The level of profit ‘taxation’ is also in effect ambiguous creating uncertainty for short or medium term income to be earned by the agent; if full up and down swings in consumer cycles in the economy overlap within the same wavelength of the company profit sharing cycle, these turbulence effects of the economy can tend to cripple the activities of average performing agents in the field (only 20% of agents by Pareto’s principle can ideally be classified as mega performing agents). The cash is king, revenue model wins in this case.

    luckpacket

    The bottom line is that profit sharing in any uncertain economy is like buying a lucky packet – the lure of finding out what’s inside is exciting but once its opened, and you find a toy ring that you cannot propose to anyone with, you quickly lose the need to buy another lucky packet.

     

     

     

     

     

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