Determining the commission structure for a BDM has so many variables since every office has its own, and each region or area has a different market. There are different responsibilities and tasks and the structure is obviously different for a BDM in a combined sales and PM office compared with a BDM in a PM-only office. So how do you know how much a BDM should be paid? What structure should they be on?
Does anyone feel they have a tried and tested structure that we could build a framework on?
Great post @rikki I donāt have a structure as such, but what I do have is a way to reverse engineer what the commission structure should look like. These are just skyhook figures; I always say to start with a salary in mind of what you think a good BDM should earn and work your commission structure backwards. E.g. if you believe that a good BDM should earn $120,000 a year and perhaps you will pay them a base salary of $60,000, then they need to earn $60,000 in comms. If you are comfortable that a good BDM can secure 10 new clients a month, then they need to getting paid about $500 per door to earn their $60,000 in comms, bringing them to $120,000. I know there are many other moving parts but this often serves as a good starting point.
Its always a tough topicā¦ I am always surprised at how cagey we all can be around wagesā¦ But here goes! Full disclosureā¦ hopefully I donāt live to regret it!
I am, and have always been in the mindset that a BDM has to earn their base. I have always been happier to give away higher commissions (normally a percentage of annualised income) per property they bring on from zero, and they have a tracker which will allow the BDM to see how they are going on achieving both their base, and their comms past this point.
We work on a quarterly wage review basis, so if the BDM was on $80k salary, they had to bring on $100k worth of annualised income per quarter to maintain that base. (paying 20% of annualised in this example case).
If they achieve over this then they can get 25%, double this you can pay out 30% or whatever structure you put in place. This means that their gross comms are then their wage which we have paid out in advance as a good will / means of regulating the BDMās income.
We run this through a simple excel sheet, and it allows the BDM to see that every impact they have on the sale ties into their income. They can see if they sign at 8.5% vs, 7.5% what that means for them. They can see that if they bring on a rental of $1000 a week, vs a $300 what it means for them. It allows them to be paid proportionally based on what is important for the business. In a sence, a true profit sharing arrangement with what the BDM has control over.
E.g if they give away a letting fee to bring a new door on, it comes out of the 1st years income. If a commission is payable to a sales agent from another company, this comes out of hte cost of acquisition and agin the BDM and the business share this cost of acquisition equally.
I was worried about the admin time, but its all set up and the BDM simply completes at the end of their trello card list for the new MA. It also allows us to have easy conversations with the BDM on bringing on higher fee / higher rent properties will get them to their goals faster. Discounting, and bringing on lower value rents will mean that in most cases they have to work twice as hard!
This has worked for us, happy to share the spreadsheets and framework if anyone would like, just reach out.
P.S note to all those reading, and wanting to contribute. This is a closed LPMA posting, so only verified LPMA members are able to view / comment on this post. Hopefully that helps you feel confident in sharing what is working, or what isnāt for you in this area.
Thatās a great summary of your growth team commission structure @ashley.giles and I even understood it. I like that you are using annualised income as a base component so you growth team understand where the metric are coming from.
Thank you, luckily none of them have asked āWhat about every year after that?ā
I know that some business pay a trail to their BDMās if a property stays on past the first year, I have looked at this and while appealing its hard because they donāt have a significant amount of controlā¦
However, like banks it could work as āgolden handcuffsā they only get their retention bonus if they are still working in the companyā¦ Have you had any experience with this structure?
We worked on a retention model (loosely use the word model) also @ashley.giles but we had 3 problems. 1) Managing the whole thing in a spreadsheet; 2) The income was low until year 3 when the trail commission stated building up; and 3) After year 4 the trial commission was so healthy that the BDM didnāt need to come to work anymore. Iām sure there are solutions to these things but we didnāt quite get that far in our model.
Hahaā¦ Yea, i can see all of those problems! seams the golden handcuffs were too heavy at that point! Hahaā¦
I find that its hard to get BDMās to think that long term anyway, and really (and this is going to sound awful so sorry in advance) you dont want a BDM for too long in the business. Part of the āEquityā you guys with a BDM is their network, so the longer they stay, the less valuable that is becuase they should have drained itā¦ I know it does not always work this way, and I am a horrible human for saying this, but that the math sideā¦
The human side is that if they get your business, hit budget, can close with a 90% success rate or higher, then why would you let them go!
Hi Ashley,
I am currently trying to work out a new pay structure for our BDM department. I would really love to see your spreadsheet if you wouldnāt mind sharing it with me?
Thank you
Hi Courtney,
No Problem at all. Email me on ashley@wendellproperty.co.nz and I will flick it through.
Cheers,
Good morning @adam and @ashley.giles and @rikki , Kaan here from Ristic in Epping, VIC - a quick question on this topic I was hoping I might get an insight on. If an incentive of $500 or lets say $1,000 was given to a BDM, would you tax this and would you tax it to factor in payroll tax? (This is assuming the employee is on the payroll, not a contractor) i.e what would the BDM get net. thanks in advance, Kaan
Hi @kaan, welcome back 
Yes all payments would have tax applied to them. e.g. if their incentive is $1,000 they will be paid this amount less tax.
thanks @adam 
,
would it be unreasonable to deduct super and payroll tax from the bonus. or just GST. sorry, getting real technical here. i.e. payroll tax 37% - $1k becomes $630. i know every business is different, just want to ensure we are renumerating lead generators appropriately and keeping it attractive.
No problems @kaan, these are the problems we solve together. I would be aligning it with their employment agreement. If you currently employ them as āIncluding superā base salary, then I would deduct super from their bonus e.g. 1,000 - 9.5% - 37%. If you employ them as ā$Xā + Super then you will need to wear the super yourself.
Thanks Adam, i said pay roll, i meant PAY g 
in any case, this helps and thank you!
Hahaā¦ @adam on the ball again! Nothing I can add here team, well done and great solve!
One thing I do @kaan in NZ as the āBonus Tax Rateā is higher than the Salary rate, is I work on a quarterly roster where their salary includes a provision of x number of managements, it just means you need to do adjustments from time to timeā¦
However, the calculation method above is much easier for the employer to track and get right!
Hi Kaan, it would be worthwhile checking to see if you have to pay super on a bonus. I am pretty sure you donāt have to.
Thanks Terri - to my understanding, if its a contractor or its a special project outside of business hours, its not required, but if its wage based then yes