This article arrived in my inbox this morning and it really got me thinking.
With all, the talk and noise surrounding the ever-evolving recruiting game we play in this industry, it occurred to me that in many ways we set ourselves up for such attacks.
Consider this thought.
Everyone that owns a business needs to see into the future for the time there is an event that causes them to realize the rewards for many years of hard work. In real estate, such events are primarily realized by those that own the brokerage companies, and not agents. And here is the crazy dynamic of all that for you to consider.
What would the multiples of your business be if your agents did not exist? Or if they left, and transferred their proportionate contribution to your company’s multiple to another broker?
This happens everyday in our business but it is the single greatest factor that can make that event a very different experience for the broker / owner. And in most cases, we only look at the immediate impact of losing the agent’s sales volume or gross commission. Yes, this is true but no, this is not the biggest loss a company suffers when a top producer walks.
The biggest loss is in what they do to create the very valuation of your company. What it is worth now and in the future.
It’s a war out there. The fact is that there are a multiple of companies in the market today that are targeting your business and stealing your future by recruiting your agents. They are using signing bonuses, equity, technology, profit haring and a myriad of other “lures" to shift gross income and profit away and out of your company.
New market fact, These fierce competitors are after your valuation - not your gross income! And dealing with that is a formidable challenge.
So I ask you this. What are you willing to do today to proactively stop this valuation leakage - the loss of production before you sell your business - from happening to your company?
For the past 20 plus years, I have asked why there is this thing called “breakage” - the loss of agents and managers - in brokerage companies that are purchased or merged.? And I think I have the answer.
Brokerage companies have been remiss in not including the top producing agents - those people who contribute the majority of the company’s measured value in equity participation. Agents too appreciate a reward for their hard work one day beyond their annual incomes so why haven’t we as an industry enjoined them in the value realization as a major component of our value creation?
If you really want to stop the revenue leakage caused by competitive recruiting, change up your cap table and add those that will one day create the most - if not everything - to your company’s valuation. Yes, they would need to vest their equity over time and yes, they would need to remain with your company during that vesting period and yes, you would likely sleep better at night when companies like eXp, Compass and others come knocking on the doors of your top producers!
If you own your company or you work for someone that does I highly suggest that you need to have this conversation about equity redistribution now. Not after your top producers walk out for someone else's offer to do exactly what you should have already done.
And when and if the debate commences around how you cannot afford to allocate this equity, I hope you will quickly realize that you simply cannot afford not to do this now.
Have a great day and here’s to a much more rewarding event for you and for those who continue each day to contribute to your company’s success now and into the future.