Grow Your Commission Margin & Escape the Volume Trap | Episode 114

Find out what is best for you. Stop listening to these people. Listen, these brokerages are saying volume, volume, volume. Know why? Because it's best for them. Best for them. Best for them.

Yep. 100%.

At the end of the day, the important question is really simple. Well, tell me. How much money are you putting in your pocket?

Correct.

That's it. That's it. Who cares about acrylic? Yeah. Who cares about a stage in front of other people? What if it was brass? I mean, brass. It might be a different story.

Welcome to the podcast dedicated to real estate, insurance, and building your business. Join us as we take you along our own business building journeys with additional wisdom from our network of local and national experts. Welcome to Bricks and Risk.

This episode is brought to you by Property Management Redefined. PMR is not just managing properties, we're creating partnerships that build long-term success for property owners. John and his team can be reached at manage at gopmr.com or by phone 267-753-6005. Tim.

Yes, Sean. Who's a good client for PMR? Property management redefined is looking for property owners who value three things accountability, reliability, and a results-driven approach. I want to maximize returns, but still provide client and tenant satisfaction.

There's a lot of property managers out there.

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If they want more information, how do they find PMR? Right here, guys. Reach out to John Sachs and his team at Property Management Redefine. We'll take good care of you. And I'm Sean Mooney. I would say today, Sean, we're nah, here's what we're doing. Let's talk about these bricks and risk, laptop stickers, bumper stickers, garage fridge stickers. My kids would put these on the water bottles. That's where they would go. Water bottle stickers. Send us an email, DM, comment on YouTube, and what are we gonna do? Subscribe, leave a review on Apple. What are we gonna do if we do that?

We're gonna mail you out a sticker, and you can be part of the tribe.

And just know as long as I have your first name and your last name and I kind of know who you are, I will find your address on public record. Scary. And I will mail it to you. Handwritten envelope, too.

A little scary. All right. What are we talking about today? Today we're gonna be talking about maximizing profits for real estate professionals and insurance professionals.

We're talking about stop compressing your margin or your commission and start increasing by being smarter about your business.

Uh be thoughtful about it, be intentional about it, and we're gonna talk about trying to make you some more money.

This one's gonna be fun because we love to talk about the ins and outs of our industries, what people shout from the rooftops all day, the big massive teams, the influencers, the coaches, the big brokerages. One thing in my industry, let's start from a real estate standpoint. We've talked about this before, is that a lot of people talk about volume as a measure of success. Volume. Volume. I talk about it too. As the number one indicator, the number one driver. Yeah, as volume is the be-all end all if you're a successful residential real estate agent or maybe not so successful. That's I mean, that's what it feels like. And I've said on many episodes, I said volume is great and volume helps, but volume doesn't necessarily put dollars in your bank account. So we wanted to do an episode today where we're talking about instead of always thinking about volume and like let's say you're a team member and you're getting leads through the team, and then you also work at a brokerage. I mean, basically, three other people need to be paid before you're paid. Brokerage needs to be paid, that lead gen source needs to be paid, and your team leader needs to be paid. Uncle Sam? They ain't gotta pay Uncle Sam. So sometimes I see a lot of times people are just talking about their volume and they're not really taking into account the compression that's happening on how that volume comes to be. I'm gonna name this uh episode Stop It with the Volume. Yo, that's a good one.

Stop it with the volume.

All right, so let's do this. So I talked about a little bit from a real estate standpoint. What do you experience, if anything, in your industry from like, let's call it, I guess, like a premium standpoint.

Yeah, so same kind of thing. Uh so if you're a licensed insurance sales producer, you're out there on the street, you're writing accounts, you're getting paid, you're getting paid a percentage, typically, on um whatever business you write. Um the the the carrier's gonna you know collect the premium, they're gonna pay the commission, commission goes to the agency, agency takes their cut, and then pays, you know, whatever commission split you have with your agents. Pays the rep. Yep. Got it. So that's kind of how it works. So similar. It's similar to like a team. Yeah, similar. Probably less layers, but um, in general, that's kind of the the the way it would work.

Okay. Um talking about premium itself, you know, if you work for like a state farmer in Allstate or one of the big box insurance companies, as we've called them, yeah, they just have a standard split, I'm guessing. Um does that vary.

You mean from carrier to agent?

Yes. Yes. So if you if I own a state farm office, I have probably like a standard, you know, uh commission structure. Yeah. Just like the person the next town over who also has a state farm. Correct. So that's gonna be the same. Yep. But when you're with an insurance brokerage like Mooney Insurance Brokers, when you run that, you have dozens of carriers that you do home and auto through. With those dozens of carriers, how is like commission like handled? I mean, same format.

Yeah, same format, right? But it's going to vary wildly. You know, um home and auto here versus home and auto down the shore, right? State by state. Oh, really? Oh, yeah. That even varies. Yeah. Then you get into like flood insurance and what you're getting paid on flood, you know, here versus there. Really? There's it, I wouldn't say there's different levels to it. So it's what almost the state has a say on like what that structure is. No, it's what the carrier decides what they want to pay.

Okay.

Yeah. Interesting. But it can change, you know, it can be a 5% commission to a 15 or a 20%. Wow, can it go that high? Yeah. It could be 6% or 7%.

Right. You know? So it just depends. Yeah. Now, all right. So also on that side, because you have all these carriers, and we've talked about this on past episodes, where I remember I asked you like in the beginning, I'm like, was the goal to get like as many carriers as possible? Yeah. In the beginning, you're like, yeah, that's kind of what I thought. Like, the more carriers I have, the more options I have for my clients. And then you learned over time that wasn't really a good thing because every carrier you picked up, it's some sort of expectation as to like how much business you should be writing with that carrier. Yeah. So when you kind of like started realizing, okay, maybe not having as many carriers as possible is is the best thing for my um, you know, my brokerage and my clients.

Well, initially, when you have nothing, right? Right. You're like looking at the scenario and sizing it up to say, well, I've gotten nothing. I I want to try, and and you start calling carriers to get appointed, and they say no, you know, then it becomes all right, let me try every angle to see who I can contract with. And then after a while, you the thinking is just more. More carriers equal more premium, more premium equals more revenue, and so forth. Right. But after time, you you start to see, you know, how this whole thing is structured, and the most carriers with the most business spread across the most carriers is not the best way to be most profitable for your agency.

Yep.

So there's there's a learning curve with that. And when you have an established book of business, then you can start to like maneuver your book around, you know, if if one carrier is better over here, you can start to maybe funnel more business. Oh, interesting. Like, like move accounts to these carriers. Okay.

Okay. Um, all right. So here's a question on that, real quick. Does it matter to like sometimes again? So, like, let's say I'm a client, I'm with this carrier, carrier A, let's call it. But carrier B has has let's call it a better margin. Yeah. Okay. Better commission. Yep. Obviously, the first step I'm guessing would be like, let's make sure everything is identical. Yeah. And if everything's identical, I mean, who's it really matter who I'm with? Really? Because I'm working with you. I'm not sure.

Well, it does. Yeah. I mean, that's every car, you know, not every carrier is the same. So different different clients are going to require different carriers that are going to give them different levels of service and you know, right. Work with them with claims and and different things. So the there's a knowledge on our end is to say, all right, is this client a good fit for this carrier? Oh, wow. Yeah. That's a perspective. There's some clients that I will not. Yeah, you're like, they're not gonna like them.

Right. For whatever reason, doesn't matter.

Yeah. Yeah. So um there's there's part of that. Um, we're going through right now, one of our carriers is leaving personal lines. So we have a small book of business with a carrier, and they're like, hey, we're gonna be done, so you need to go find a home for these accounts. Wow. So then we have to remarket them. Um, they do offer like an off-ramp with another carrier that we uh write with. And in this particular um circumstance, they'll actually do kind of like a price match. So just by way of like the state saying there's some latitude there because the state doesn't want these abandoned clients to just now try to go get insurance and can't find it or like premiums are like way off. Okay. So if they can contract with another carrier to say, hey, we're leaving, you write personal lines in Pennsylvania. Would you be open to um absorbing some of these accounts? Yep. And then there's some between the carriers, there's probably some handshake or some deal or some you know contractual thing. And then for us, it's hey, the these clients are approved. Here's the price, here's what the price matching, what it's gonna be as an end result. Do you want to like place that account? Interesting. So it makes it a little bit easier in those circumstances to um have those clients move. Cool. And sometimes it's a better fit.

So that's a good start to get a little sense of how your industry works. Let's jump back into real estate and let's let's go where the topic was, which is like stop compressing and start increasing your margin. So I'm gonna I'm gonna put two examples out there of kind of where the margin gets compressed. So in residential real estate, in general, again, I'm gonna put it at the bottom rolling text. Tim is not an attorney. Uh, and I don't want to act like I am.

Don't you have to put in, didn't you have to disclose that you're uh work for real?

And I do work for real broker. Okay, just so you know. So the two, let's talk about the two things that can affect your margin. Number one is are you solo or are you like on a team, let's say? Let's just call it practicing agent. You're either a solo agent or let's say a team member. I'm gonna leave team leaders out of this. Leave it out. Okay. So that's number one. The second one is did the lead come from you and your network, or did the lead come from, you know, let's say your brokerages or your team's network? Because all those things come into play in real estate. There are some teams that just say, here's your split as a team member. Like, doesn't matter where you get that lead, whether you get it from me, I give it to you, or you get it, it's your cousin. Like, this is your split. Well, doesn't that get gray?

Isn't there a gray area that too? Because obviously your cousin buys a house that's pretty black and white as to where that is. Um, if they provide the lead, that's pretty, you know. But what if you're like sitting at their open house or those scenarios that's like, well, I was doing it, I was working and I was out there meeting people, right? But it was someone else. It was your listing or something.

Like, yeah, so that that's a really good point. A lot of times, what uh brokerages or teams will do is they'll like let's say they were almost the procuring cause of that lead opportunity. Yeah. If you even if you met the person and you gelled and they want to work with you and you go out and help them buy or sell and they close, that agent might want like a referral fee. Could be like a flat dollar fee, could be a percentage. So so that plays into it. Some gray area there without trying to get like too complicated.

No, I just want to bring up that there's other, you know, it's it's not uh as black and white. Right. There are scenarios where and if you don't know that going in, you could, you know, work an open house, meet someone, get a deal, close, and you're like, wait, I owe you what? Yeah, exactly.

Hey everyone, this is Tim, your favorite bricks and risk co-host. But don't tell Sean. I hope you're enjoying this episode, and I'll get right back to it in a moment. Our audience grows through word of mouth, so if you would please take a moment of your time and give us a review on the platform you're on, that would be fantastic. Please also help spread the BR word by sharing your favorite episode with a friend. We greatly appreciate your time and trust. Now, back to the show. It's true. Yeah. All right, so let's look at the two scenarios. Let's look at your solo or team. You're a team member. Yep. So when I close a deal, let's say it's whoever, the brokerage gets paid, and then I get paid. Okay, that's solo. When you're a team member, the brokerage gets paid, the team leader gets paid, and then you get paid. So it's two people versus three people. So the moral there is if you're a team member, you're probably gonna make a little less than you would if you were solo purely for the fact that the team leader has to get paid. Let's just take all that other nonsense aside. Make it simple. Then let's talk about where the lead comes from. So let's say I'm a solo agent and the lead comes from like my efforts, my marketing, social media, networking, shaking hands, kissing, kissing babies, as I've said, whatever it is. The brokerage gets paid, and guess what? I get paid. So nothing really changes. Yeah. So with me doing what I'm doing, running my business, even if I'm a team of one, brokerage gets paid, I get paid. If it's, let's say um, I'm solo and I sign up for uh a lead gen source, like you can get tons of lead gen sources online. I don't even need to name them. Someone's feeding you opportunities. If someone feeds you opportunities, then it's going to be the brokerage gets paid, that lead opportunity gets paid, and then you get paid. So again, it's not to say one versus the other is not correct, but that's how the margin is figured out. Then if you're a team member, okay, team member scenario that we said before, someone came from my network. It's going to be the brokerage, the team leader, and then you. But again, if you're a team member and you're working on a team, a lot of these teams, not my team, and no bias, a lot of these teams are built on online lean generation. The big teams, the 20 person, the 200 person.

Yeah, because you can only you your network can only be so big.

Correct. Yeah. So in those teams, it's gonna be from that lead gen source, the brokerage gets paid, the lead gen source, the team leader, and then you. So it's back to the fork. So here's some advice on on that. If you're looking to make the most margin from your business as an agent, you want to figure out the best way to generate your own leads. And that there's so many different ways to do that. But that I would say would be step one. I also feel like in our industry, and and I fall victim to this too, the industry is constantly pumping out there and recognizing people, not on margin or profit, but on volume. Like, volume is what gets you the acrylic, volumes what is what gets you on the stage at the annual real estate conference to talk to the other 100, 5,000 agents in the crowd about how you're a superstar. Like that's what the industry pitches. They don't say, oh, this was a this person had the best margin. You know, uh, Sean is our all-star agent, and his margin was unbelievable. It was 82%. Like, they don't talk about that. So, part of this too is the industry puts way too little emphasis on actual profit, someone running their business and making good money. I know you want to say something.

I like this is crazy to me. This this whole thing is crazy. New realtor person that's just getting in the business. I'm talking to you. Do your homework, find out what's out there and find out what is best for you. Stop listening to these people. Listen, these brokerages are saying volume, volume, volume. Know why? Because it's best for them. Best for them. Best for them. Yep, 100%. At the end of the day, the important question is really simple. How much money are you putting in your pocket? That's it. That's it. Who cares about acrylic? Yeah. Who cares about a stage in front of other people? What if it was brass? I mean, brass, it might be a different story. Very shiny. But this is your business. This is your career. The only metric, the only form of measurement that you should be looking at is how much money at the end of the year am I putting in my pocket? That's it. Throw everything else away. Start acting like a business person. Stop listening to these people that don't have your best interest in mind. If you do eight million dollars of sales this year and you make X, and next year you sell 10 million and you make less, doesn't that make you start to think that hmm, what am I doing? Maybe there's maybe there's something wrong. Maybe there's a better way of doing it. Maybe I should stop listening to the people that are telling me that I can get my name on an acrylic. It's just come on, people.

Well, all right. So let's now that we talked a little bit about residential real estate, let's talk about insurance. And I had one point. Here, like whether I don't know if this is relevant or not, like big box versus independent.

Yeah. It's a little different in that I think, and this is going back always, but there was um okay. Let me give you a good example.

Yes, please.

So when I worked for Allstate, Allstate would pay their agents 10%. So you whatever you sold, home, auto, it was very simple. 10%. Easy goes to the agency. The agent gets paid for that policy that was sold. Yep. Now ready for this? Yeah. If you had an independent contract with all states, so they would have their exclusive agents. Okay. And they would have agents that were not exclusive but would have access to similar products. Yes.

Interesting.

But all under the all-state name. Yes.

Okay.

Guess who got paid more?

The independents. Yep. Why? Uh is it okay. I'll let you explain.

No, I'm going to ask you a question. If you if I told you you're an all-state agent and you're exclusive to me, it was always my expectation that you would pay me more.

Right, because I'm providing all my loyalty, credibility. I'm like saying I believe in you and you only. So therefore I'm gonna I'm gonna reward you for not looking at these other thousand carriers. Yes. Okay. It blew my mind. Well, why do you think the independence, like, what like what does it come down to? I mean, you're the insurance expert.

So what it is, what I believe it is, is that Allstate and other companies, not specific to them. Yeah, just nothing against Allstate. Yep. I think the captive exclusive model was always built upon. Hey, you're you're one of our exclusive agents. Yeah, like you're using our brand. Right. You're relying on that. Right. Okay. And we're spending all this money on marketing to build this brand that you're a part of.

It's like a franchise. Like a franchise agreement. You're buying that business in a box, and therefore you got to pay for it. Right.

So we're gonna pay you 10%, which will be less than an independent, because we're providing all of these other added features for you to make that phone ring. Right? So, like, so if leads come into Allstate, they're not going to the independent agent. They're gonna always go to the exclusive agent.

All right, so so that's very helpful. Explain the independent. What does the independent look like that's working with Allstate? What does that look like to the consumer? It's the same, it's the same exact thing. Yeah. But what are they doing? What are they not allowed to do that, let's say uh an exclusive captive person is doing? Like, what's the difference? Is it just a choice by Allstate?

Yeah, it's just a different contract, really. Well, why would they write that contract? Because they want to have exclusive agents, but they also want like right now, Geico's going through it.

Oh, I got you. So it's the person that marries Geico. It's just a distribution model. It's someone who's like dating Geico. Yeah. So it's like they can sell Geico, but like 20 other things if they want. Yeah.

Gotcha. It's just a distribution model. All these companies have different wrinkles to what their distribution is. Right. So it's always been, you remember eSurance? Yeah. Oh, yeah. They were an all-state company. Really? So that was their like direct-to-consumer distribution channel.

So Allstate owns it, but they created a new brand where you're not going to the neighborhood office. You're just opening up your laptop or clicking on your phone and finding insurance options and going right. Yeah. It's freaking B2C, not B2B kind of thing.

So we we contract with SafeGo Insurance, who are owned by Liberty Mutual. Oh. So Liberty Mutual always had their exclusive contracts for their exclusive agent. If you want to be a Liberty Mutual agent, you would write Liberty Mutual. Well, they also had a distribution model where they contracted with independent agents and they would offer the Safe Code brand.

All right, so this is what this is a really good tie-in. Like we talked recently about, I asked you, I said, does the insurance industry have teams? And you're like, no. Yeah. All right. So let's let I'm gonna do doing a Timmy G analogy here. You got the brokerage, and then the team is under the brokerage, and then the team can get paid from their team members. The reason teams exist, there's a couple reasons. One of the main reasons is branding. The team wants to have their own brand, their own field. They don't want to just rely on that big brokerage's or small brokerage's name. They want their own buy-field brand. Yeah. That's why teams came to be. So the example you just made is kind of similar where it's like if you're that Allstate um captive and you bought the franchise, you want Allstate. Very that's what you believe in. So you'll get paid a little less for the name. But then there's the independents who also have access to Allstate because the independents kind of want their, they want their own brand. Right. And their own say and their own choices. Yes. So it is kind of similar.

Very similar.

It's just a different, you know, different culture, different mindset, but it's the same one and needs. And the the funny part is, both those parent companies, the big box real estate company and the big box insurance company, figured it out and said, look, we we should have options. Because if you're an independent like Sean, we want him to write some of our stuff, just like we would the person who bought the franchise. If we're a big box or big box real estate company, ABC Real Estate, we want the solo agent who believes in our name, but we also want the team who wants to be associated with our network, our marketing, our tech, our collaboration, our events, our masterminds, all this stuff. So that is, I never knew that. That's really interesting how that ties in.

It is so similar because the independent agent at the end of the day is saying, I don't care about your brain.

I don't want all, I don't need to go sell Allstate to be successful. I want to go meet my clients where they're at. And if Allstate's the best option, I'll send them your way.

But the relationship for me, see, see, that's the difference too, is that the relationship is between me and the client. Correct. Right? When it's someone going to Allstate or State Farm, it's almost like that person has that allegiance to that brand. Do you know?

Shout out to Billy Williams. Billy, yeah. He made a point in his episode. I can't remember exactly what he said, so don't quote me here. But he would he had said the, you know, the big box brokerage, you know, the big box brokerage like is there to like fit within like the agent. They they want a relationship with the agent. Like the consumers are almost like an afterthought. Right. The the agents more that captive agents, they're a consumer. And he was like, the independents, they want to find the best fit for their client. So the independent owner, like you, is more client focused. Yes. You're like, I want to make, if I got a client and I got 10 options, I'm gonna custom fit that option for lots of different reasons to that client, which is part of the reason you even got into it that way. Yeah. Because that's what you that was your mindset day one. 100%. All these brands don't matter. I'm gonna create my brand and service the client. Yep. Interesting. Um, all right, so why don't we each why don't we do this? We'll each, we won't do a Timmy G top three, the interest of time. Yeah. Which I know you love. Skip over that. Probably your favorite thing about bricks and wrist. You're like, what's our Timmy G top three? Let's do maybe one, let's call a piece of advice mindset, what you would say to someone to start increasing their margin and stop compressing. Um, I can go first. So I would say, you know, in real estate, and I've said this many, many times on the show, I always recommend today that the agent goes solo. That is what I recommend. It doesn't mean it's the best fit. It's actually not a great fit for a lot of people, just because they they just can't, they don't have that accountability, the self-discipline, they don't want to work out of the house, whatever it is, it doesn't matter what it is. That's not a fit for everyone. But if I could give advice to start increasing your margin and stop compressing it, is find a way to like build your book of business in residential real estate on your own. You can go to that cold lease source if you want. You can knock on 100 doors a day, or you can go on social media, you can have client events, you can have Popeye gifts, whatever you're doing. My piece of advice is start to think about the layers of people that you're paying. And look, I have a freaking team. Like, so for me, I've even met with people who have joined Real and I've said, don't join my team because I'm gonna take some of the margin. Yeah, I think you're better off doing this. And those people that I've offered that advice to have really appreciated it because they're like, but I, you know, we can still talk, we can still work together. Yeah, we can still do that. So my advice based on this stop compressing, start increasing, is think about either becoming solo or if you're moving in the path of maybe starting your own team, start to think about that a little bit. Because if you really want to lead agents, that'll also help with your margin.

Yeah, I think for you, giving the example is very important because it's hey, do you want to make more money? Yeah. If you want to make more money, focus on driving your own traffic to build your sphere, to find new clients, to grow that way. And when you get to a specific point in doing that, maybe after a couple years, you can leave that team, right? Yeah. It's almost like it's like training wheels. Yeah. And we talked about it before too, is it right for the the the new agent that's just starting out, right? Like I think you're giving the example of, hey, go be solo, but that may not be applicable to that person that's putting it in.

If you're brand new and young, it's very hard. Right. Definitely. And nothing against age here. I'm just saying, like, if you're like fresh out of college, you've never worked in a job. Unless you're like really good on social and have a great following. Unless you were a hustle since a hustler since you were like 10 years old or something like that, like selling lemonade. Yeah.

But for the vast majority.

Vast majority.

Um make more money. Think about being a solo operator and building your own business and not relying on getting fed with leads.

How about you? If you could give advice to the people out there, let's say it's probably more someone who's looking to start a brokerage, kind of like you. You know, they've been doing this for a couple of years, yeah. And or 10 years, whatever, and they say, I'm kind of ready to have my own shop. And you worked for a big box before you went independent. You weren't like completely biased. It's not like you started with an independent, you're like, I'm just gonna do my own independent.

Well, it's funny because I didn't even know the particulars about the commissions and how they were paid and how much more you could get paid on the independent side. Like I wasn't even, I didn't even know that. Right. Mine was purely based on serving clients. Yeah, it was like the customer experience. What's the best interest for my clients? And it for me, in my opinion, was being an independent, having choices, and then fitting them into where they best fit. So that was my initial thinking. But in terms of having advice for someone like that, I would um I would say be very specific about who you want to contract with, okay, and don't go wide, right? Start putting a lot of business, you know, pick three and then find out what those three are good at. Go a little deeper. Yep. And build your business around what those three are good at and give them as much business as possible.

Interesting.

Okay. Because everything will exponentially be driven from them. When you spread yourself too thin, it can create a lot of problems. You know, you're not giving these three carriers enough business, and that could be a problem. And also, too, when you tie in like loss ratios and different things like that, when you don't have a lot of premium, your loss ratios can be out of whack. Uh-huh. And when your loss ratio is out of whack, that's when these carriers start to look at you and say, You're not the best fit for we're losing money in your agency. Like you being uh an agent for us is not a good thing because of that. So learn from my lesson where I was came out thinking the best way to go about it is have the most carriers or the most business, it doesn't matter. Is no get that compressed to three carriers and give them as much business as possible. I think that's the best way to go about it.

Great advice. All right, go ahead and shut this one down.

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