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Published on May 15, 2023

Are you carrying your brokerage ?

In many brokerages, the success of the brokerage is dependent on the owner being out in the field listing and selling  houses.

When the broker is leaving their commissions in the company, it is almost impossible to separate how much money the brokerage is making from how much money the owner is making in commissions. Alot of broker owners do not take their commissions because the commissions they earn need to stay in the company to pay bills.

For a brokerage to have a future, it is essential to know when the company will be able to “stand on its own two feet”. The goal should be that the company’s split of the agent commissions should be enough to pay the bills and make a profit - even with the owner taking their commission check on each closing.

Here is a simple way to separate the owner’s commission earnings from the brokerage profitability:

Step 1:

Decide on a commission split that make sense for the owner. The split percentage is not so important. Use 70/30 or 80/20. Whatever split is similar to other top producers in the company will work fine.

Step 2:

For each closing, calculate the commission check for the owner WOULD have been if the owner was taking all their commission checks.

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Step 3:

Put each commission check the owner own the books as a bill that needs to be paid. For the accountants reading this, you will be creating an open, unpaid Accounts Payable bill.

unpaid broker payables
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Step 4:

When the owner needs to take some cash out of the company, pay the owner by paying some of their unpaid commissions. At the end of the month, or quarter, or year - if you total up the commissions that were NOT paid to the owner, you will know exactly - to the penny - how much of the owners personal commission earnings that they giving up to keep the company afloat.

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