The Profitability Equation

by | Dec 7, 2018

by Ben Hess, Managing Director, ThirdPool Recruiting

Steve Murray at Real Trends does a great job of boiling down the metrics that effect a real estate company’s profitability.

The average gross margin of a brokerage firm (the percent of gross commissions after paying agent commissions and franchise fees) has fallen to about 18%.

Like any low margin business, a real estate company has to increase volume to make more money.

In a recent article, Steve points out that increasing volume has become increasingly difficult because the average gross margin per agent has plummeted in recent years:

2012 Per Agent Gross Margin: $16,087

2016 Per Agent Gross Margin: $8,382 (-48%)

To maintain profitability, this new reality only leaves one option for most brokerage firms–significantly increase the number of agents in their offices.

More than ever, recruiting is the key component to the real estate profitability equation.

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