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Structuring Commission in Business Development Lisa Pentland.

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Presentation on theme: "Structuring Commission in Business Development Lisa Pentland."— Presentation transcript:

1 Structuring Commission in Business Development Lisa Pentland

2 Our Ambitions We want the business development manager role to be a strategic growth

3 Our ambitions We want the business development manager role to be a strategic growth We want good agencies to dominate a market

4 Our ambitions We want the business development manager role to be a strategic growth We want good agencies to dominate a market We want BDMs to aspire to earn $150k each year, and principals to be happy with that

5 But…

6 But… this requires new thinking

7 Requires new thinking New thinking about the role of a business development manager New thinking about how packages are developed New thinking about your ambitions

8 There are so many myths about rent roll growth

9 4 foundations for new thinking

10 You must understand your market and its potential

11 You must be honest about your ambitions

12 You need to understand what a Business Development Manager is

13 You need to measure your projects

14 1. Each market is different: Different Potential: Market Size Landlord Rates Use of Property Managers Different Characteristics: Competition Landlord types

15 Are you prepared to do the things you need to do to hit your targets? 2. Be honest with your ambitions

16 Are you prepared to do the things you need to do to hit your targets Are you prepared to invest in growth? 2. Be honest with your ambitions

17 Are you prepared to do the things you need to do to hit your targets? Are you prepared to invest in growth? Are you prepared to trade off profit for growth? 2. Be honest with your ambitions

18 Are you prepared to do the things you need to do to hit your targets Are you prepared to invest in growth? Are you prepared to trade off profit for growth? Do you have the capabilities for hyper-growth? 2. Be honest with your ambitions

19 3. The role of BDM It is a strategic role

20 3. The role of BDM It is a strategic role Must extend the agency’s client base

21 3. The role of BDM It is a strategic role Must extend the agency’s client base Is a sales function

22 3. The role of BDM It is a strategic role Must extend the agency’s client base Is a sales function Is an investment

23 Clear view of the sales function: o Engagement o Conversion rates 4. Measure everything

24 Performance: o Days on market o Vacancy rates o New managements 4. Measure everything

25 Financial: o Average recurring management fees o Average letting, re-letting fees and other fees 4. Measure Everything

26 So… How can you structure a BDM’s package?

27 Some Design Principles...

28 1.Package must be a low-base, high-commission

29 2. Everyone has to win

30 3. Don’t go broke in the process

31

32 vv A Typical Market

33 A Typical Market… 12,500 homes 3,750 rental properties 2,500 professionally managed properties $1,400 – average total management fees per property 3 x average multiple $10 million value of all the rent rolls in the market.

34 The economics of a new management UPFRONT $1,400 40% $500

35 The economics of a new management UPFRONT $1,400 40% REVENUE $500

36 The economics of a new management UPFRONT YEAR 1 $1,400 40% REVENUE $500

37 The economics of a new management UPFRONT YEAR 1YEAR 2YEAR 2 $1,400 40% REVENUE $500

38 The economics of a new management UPFRONT YEAR 1YEAR 2YEAR 2 YEAR 3YEAR 3 $1,400 40% REVENUE $500

39 The economics of a new management UPFRONT YEAR 1YEAR 2YEAR 2 YEAR 3YEAR 3 YEAR 4 YEAR 4 $1,400 40% REVENUE $500

40 The economics of a new management UPFRONT YEAR 1YEAR 2YEAR 2 YEAR 3YEAR 3 YEAR 4 YEAR 4 YEAR 5YEAR 5 $1,400 40% REVENUE $500

41 The economics of a new management UPFRONT YEAR 1YEAR 2YEAR 2 YEAR 3YEAR 3 YEAR 4 YEAR 4 YEAR 5YEAR 5 $1,400 40% YEAR 6YEAR 6 REVENUE $500

42 The economics of a new management UPFRONT YEAR 1YEAR 2YEAR 2 YEAR 3YEAR 3 YEAR 4 YEAR 4 YEAR 5YEAR 5 $1,400 40% YEAR 6YEAR 6 $500

43 The economics of a new management UPFRONT YEAR 1YEAR 2YEAR 2 YEAR 3YEAR 3 YEAR 4 YEAR 4 YEAR 5YEAR 5 $1,400 40% YEAR 6YEAR 6 PROFIT $500

44 The economics of a new management UPFRONT YEAR 1YEAR 2YEAR 2 YEAR 3YEAR 3 YEAR 4 YEAR 4 YEAR 5YEAR 5 $1,400 40% YEAR 6YEAR 6 PROFIT $500 COSTS

45 Consider: o A property at $500 p.w property at 7% o = approximately $2,000 in annual income o And is worth around $5000–6000 The economies of a new management

46 What would you pay for that? o Part of the leasing fee? o Borrow money and buy it from a competitor? o Employ someone? The economies of a new management

47 We believe in growth

48 A team dedicated to growth Run as a sales team Compensated as a sales team We believe in growth

49 Why can’t my PM grow the rent roll?

50 A “high” base Commission of 0.5 or 1 week of rent A “hurdle rate” to qualify Commission less than ¼ of package A traditional model

51 Traditional Model Many ideas for commission options  Upfront Commission

52 Traditional Model Many ideas for commission options  Upfront Commission Trail Model  A small up-front payment and then a recurring payment each month

53 Traditional Model Many ideas for commission options  Upfront Commission Trail Model  A small up-front payment and then a recurring payment each month Instalment Model  A large sum payment, paid in instalments over 2 years

54 Some Scenarios

55 Creative packages can be profitable

56 We have found models that do not send the agency broke

57 The scenarios are cheaper than buying rent rolls

58 Note: These models also show you can get it very wrong

59 In summary Growth prospects are real: enormous valve potential

60 In summary Growth prospects are real: enormous value potential The BDM is a sales role, and should have a package that reflects that

61 In summary Growth prospects are real: enormous valve potential The BDM is a sales role, and should have a package that reflects that There are creative ways to structure an aggressive commission package

62 Realising the value of growth to your business Being creative about growth Accepting passive growth


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