How to Survive When Net Commissions Drop

Level Up - From Agent to Entrepreneur

Real estate agents have been concerned about commission compression and the idea that they’ll eventually be replaced. If we stop listening and observe what is actually happening, we will see that the main concern lies in referral fees cutting into our net profit. Why don’t we have to worry about commission compression? What can we do to offset the shrinking effect referral fees have on our profit margins? How can a tool like Contact Junkie help us acquire our own leads?

In this episode, Greg Harrelson and Matt Johnson discuss ways in which we can increase our net profit margins when referrals are cutting into them.

While you’re accepting leads from someone else’s faucet, you must also create a faucet of your own. -Greg Harrelson

Takeaways + Tactics

• Agents need to increase some of their outbound lead generation strategies to make sure that they’re adding deals to the mix and netting a higher margin.
• By doing our own marketing and figuring out how others are generating leads and taking them in-house, we can start to generate leads at a lower cost than what we’re paying for them.
• We have to stop taking for granted that our center of influence loves us so much that they are going to be loyal to us forever. We must continuously give value to them.

It’s not commission compression that’s digging into our net profit. It’s the increasing amount we pay for referrals, and the increasing proportion of transactions done with a referral fee. In order to increase our net profit, we need to generate more of our own leads and pay less for them than what we pay in referral fees. Increasing outbound lead generation strategies, doing our own marketing, and consistently giving value to our existing database are ways we can grow our personal lead database and make more profit.