Small Business Owners – Want to Retire?

Can you still set up a retirement plan for 2009 if you are a small business owner?
If you own a small business or are just an independent contractor, there may still be …

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2010 Mileage Rates!

As each year changes, so do the deductions we can take every year as it relates to mileage with business, charitable, and medical mileage. I often find that people I …

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Using A Quota System In The Real Estate Brokerage

It has been talked about in the industry that agents should be on salary and not on commission. This salary for agents would be paid by the brokerages and then the brokerages would be forced to hire better people and train them. In other words, the brokerages would carry the risk of someone else’s actions, they would pay taxes on this person and they would spend thousands of dollars training these folks in hopes that these people who work outside the office, in their own homes and cars, would actually have the ability of self-motivating themselves and perform under any circumstance just because they are on salary.

I feel that this is too much risk for the brokerage. The risk is two-fold. The buyer and seller’s motives are not clear to the upper management and the real estate contracts are based on time, not really on payment from the buyer and seller, and the agents can get too loose in their thinking and not be motivated to work at all.

Back to the real estate agreements. If all of the contracts between the consumer and the brokerage was based on payment up-front, then the model of salaried agents makes sense. Then the brokerage is only responsible for advertising to get such and that is a similar model to other retail businesses.

But the bigger issue is the attitude and ongoing skill set of an agent that works in a business where buyers and sellers are fickle. It is easy to get sucked into the media and buyer and seller thinking and be in a fog that no one around the agent recognizes. And, the skill set needed to take a buyer from A to Z in the transaction is often missing a few letters.

So, the model that makes the most sense to me is one where the agent is an independent contractor and is on a 6-month quota. The quota is based on how much money they make the brokerage. Some brokerages have elected to have the agent pay a desk fee instead. This too is quota but is run a different way. The brokerage is not worried about the business that the agent is doing; they are worried only about collecting their monthly fee.

The quota paid based on transactions and revenue to the brokerage is best though when you are a lead-producing machine. How many buyers are being sold is important to know when the brokerage is spending money to advertise.