Structuring Commission in Business Development Lisa Pentland.
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Transcript of Structuring Commission in Business Development Lisa Pentland.
Our ambitions• We want the business development manager role
to be a strategic growth• We want good agencies to dominate a market
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
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
1. Each market is different:
Different Potential:
• Market Size
• Landlord Rates
• Use of Property Managers
Different Characteristics:
• Competition
• Landlord types
• Are you prepared to do the things you need to do to hit your targets?
2. Be honest with your ambitions
• 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
• 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
• 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
3. The role of BDM
• It is a strategic role
• Must extend the agency’s client base
• Is a sales function
3. The role of BDM
• It is a strategic role
• Must extend the agency’s client base
• Is a sales function
• Is an investment
• Financial:o Average recurring management feeso Average letting, re-letting fees and other fees
4. Measure Everything
A Typical Market…
• 12,500 homes• 3,750 rental properties (@30%)• 2,500 professionally managed properties (@70%)• $1,400 – average total management fees per property• 3 x average multiple
$10 million value of all the rent rolls in the market.
The economics of a new management
UPFRONT YEAR 1 YEAR 2
YEAR 3
YEAR 4
YEAR 5
$1,400
40%
REVENUE
$500
The economics of a new management
UPFRONT YEAR 1 YEAR 2
YEAR 3
YEAR 4
YEAR 5
$1,400
40%
YEAR 6
REVENUE
$500
The economics of a new management
UPFRONT YEAR 1 YEAR 2
YEAR 3
YEAR 4
YEAR 5
$1,400
40%
YEAR 6
PROFIT
$500
The economics of a new management
UPFRONT YEAR 1 YEAR 2
YEAR 3
YEAR 4
YEAR 5
$1,400
40%
YEAR 6
PROFIT
$500
COSTS
• Consider:o A property at $500 p.w property at 7%o = approximately $2,000 in annual incomeo And is worth around $5000–6000
The economies of a new management
• 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
• A team dedicated to growth
• Run as a sales team
• Compensated as a sales team
We believe in growth
Why can’t my PM grow the rent roll?
Property Manager Salesperson
Great communication and conflict resolution skills
Great communication & negotiation skills
Task oriented People oriented
Time & task management ability Ability to build new relationships
Great attention to detail & accuracy Exude confidence, be convincing & persistent
Computer skills Networking skills
• 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
Traditional Model
Many ideas for commission options
Upfront Commission
Trail Model A small up-front payment and then a recurring payment each month
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
Some Scenarios
Low-growth 5PM (+-1)
Medium-growth 10PM (+-3)
Hyper-growth 20PM (+-5)
Traditional Model $65k $70k $75k
Trail Model $75k $130k $160k
Instalment Model $65k $110k $150k
In summary
• Growth prospects are real: enormous value potential
• The BDM is a sales role, and should have a package that reflects that
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