The Essential Survival Strategy for Real Estate Brokers: The Recruiting Budget

Blog December 6, 2023
In the ever-evolving world of real estate, survival as a real estate organization depends on your ability to adapt, grow, and thrive in a competitive market. While most real estate brokers have financial budgets in place to manage expenses and revenue, many often overlook a crucial aspect of their business strategy – the recruiting budget. […]
The Essential Survival Strategy for Real Estate Brokers: The Recruiting Budget

In the ever-evolving world of real estate, survival as a real estate organization depends on your ability to adapt, grow, and thrive in a competitive market. While most real estate brokers have financial budgets in place to manage expenses and revenue, many often overlook a crucial aspect of their business strategy – the recruiting budget. In this blog post, I’ll explore why having a recruiting budget for the coming year is essential for the survival and success of your real estate organization.

The Average Sales Price and the Power of Recruitment

Let’s begin by considering an average sales price of $225,000. This number may vary depending on your specific market, but for the sake of our discussion, we’ll use this figure as a reference point.  We will also use a commission rate of 5% (remember, commissions are NEGOTIABLE.  I teach this to my students at www.GlobalRealEstateSchool.com.  Negotiable between companies, negotiable between clients, and negotiable between the agents you pay in your office!  One more time for the class action lawsuit attorneys; commissions have always been NEGOTIABLE!  I have taught this concept during my 45 years as a real estate licensee.  Okay, maybe one more time, since I want to make sure no one interprets this paragraph, commissions are NEGOTITABLE, and in this example, I am using 5%).

Imagine the impact of recruiting five new agents to your organization. Each of these agents has the potential to contribute significantly to your bottom line by closing real estate transactions.

The Financial Increase to Your Bottom Line

To demonstrate the financial impact of recruiting new agents, let’s assume that each agent you recruit can help close six new transactions in a year. Additionally, suppose you receive a standard commission of 25% for each transaction.  (Yes, commission splits among your agents are NEGOTIABLE.  That was just for the class action lawyers who may be reading this blog post).

Here’s a breakdown of the potential financial increase to your bottom line:

Agent 1:

Your Share (25%) $225,000 x 5% = $11,250 – Your share = 25% or $2,812.50

Transactions Closed: 6 x $2,812.50 = $16,875.00

Agent 2:

Your Share (25%) $225,000 x 5% = $11,250 – Your share = 25% or $2,812.50

Transactions Closed: 10 x $2,812.50 = $28,125.00

Agent 3:

Your Share (25%): $225,000 x 5% = $11,250 – Your share = 25% or $2,812.50

Transactions Closed: 7 x $2,812.50 = $19,687.50

Agent 4:

Your Share (25%) $225,000 x 5% = $11,250 – Your share = 25% or $2,812.50

Transactions Closed: 6 x $2,812.50 = $16,875.00

Agent 5: (Joined late in the year)

Your Share (25%): $225,000 x 5% = $11,250 – Your share = 25% or $2,812.50

Transactions Closed: 1 x $2,812.50 = $2,812.50

Total Increase to Your Bottom Line: $84,375.00

As you can see, recruiting just five new agents who each close various transactions a year could potentially increase your bottom line by $84,375.00. Your goal is to be more than this number or less, but as you can see, strategically having a recruiting budget can significantly affect your organization’s profitability and sustainability.  Sadly, most brokers don’t even think about a recruiting budget, fail to recruit effectively, and leave $80,000 or more on the table.

The Importance of a Recruiting Budget

Now, let’s tie it all together. Your financial budget helps you plan for expenses, revenue, and profitability targets. Similarly, a recruiting budget is essential to ensure you have the right number of agents to help you achieve those targets.  It also helps you look at who is producing and who is not.  Surround yourself with good-quality people!  By the way, that is part of my book, “21 Mistakes Real Estate Brokers Make and How to Avoid Them,” available for FREE (pay a small shipping and handling fee) by clicking here.

Here are key reasons why having a recruiting budget is crucial for your real estate organization’s survival:

Meeting Growth Targets: A recruiting budget allows you to set clear goals for agent recruitment, ensuring you have the manpower to meet your growth targets.

Staying Competitive: In the competitive real estate industry, you need a steady influx of new talent to stay ahead of the competition and adapt to changing market conditions.

Maximizing Revenue Potential: As demonstrated earlier, recruiting new agents can significantly boost your bottom line. A recruiting budget ensures you allocate resources to tap into this potential.

Mitigating Turnover: Agents come and go in the real estate industry. A recruiting budget helps you proactively address turnover by consistently bringing in fresh talent.

Building a Strong Team: Your team of agents is the backbone of your organization. A recruiting budget allows you to select and nurture top talent, creating a stronger, more effective team.

Conclusion

In conclusion, while financial budgets are crucial for managing your organization’s finances, a recruiting budget is equally important for ensuring your real estate organization’s survival and growth. By recognizing the financial impact of recruiting new agents and allocating resources accordingly, you can position your organization for success in the competitive real estate market. Make recruiting a strategic priority, and watch your bottom line and long-term viability soar.

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