September 2014 | By Pamela Dittmer McKuen
The graying of our industry is evident. At every real estate conference I’ve been to, people are talking about the need to recruit, recruit, recruit because so many agents are retiring. And when they leave, their business just goes away. The clients they have built relationships with over the years find someone else.
Several years ago, my long-time dentist and friend sent me a letter letting me know he’d sold his business to a new dentist and thanking me for my past business. With no transition or real introduction, I had no comfort level with the new dentist, so I took my business elsewhere.
It got me thinking: We had approximately 20 agents representing $100 million in production who were intending to retire or cut back on their workload. Why not focus on preserving what we had? So about five years ago, I created a succession program to ensure this valuable commodity stays in-house and to provide the retiring agents a residual income. It has become a significant recruiting tool.
The succession program is a structured action plan that gradually transitions a retiring agent’s business base to another agent. We identify pairs of agents we feel will forge the best partnerships, and then we help negotiate such issues as how the revenue and expenses will be split, and for how long, and how decisions will be made. Junior agents must agree to stay with the company for an agreed-upon length of time. Everything is in writing.
In the beginning, the junior agents are more like assistants or secondary agents. Over time, the senior agents hand off more and more responsibility. They also introduce the junior agents to their clients, sometimes at parties or special events. Their names appear jointly on collateral material, and eventually the junior agent becomes the primary contact.
The money handling is similar to a referral program. With any business that gets done for, say, the first six months, maybe the commissions come to the senior agent. Then it might be a 75 percent–25 percent split in favor of the senior agent, and later it shifts to 50–50. When senior agents retire, they continue to get maybe 15 percent or 20 percent, and then it tapers off.
Prepare for the Unexpected
We are very invested in each transitional relationship, but we also determine how to unwind the plan if something changes, for example, if the senior agent starts down the road and decides, “I’m not ready,” and the younger agent has already invested time and energy, or if the personalities aren’t right. That way, we don’t make enemies or lose agents. The contract spells out how a dissolving partnership will split any business in progress and who owns future business. Typically, the succession plans are between one and three years, depending on the size of the senior agent’s business and the strength of those relationships. Junior agents are not always start-up agents. In some cases, they are very seasoned, but they still have 10 or 15 years left on their career horizon.
Not Just for Retirees
So far we have helped about a dozen agents create succession plans—and each situation is unique. In one successful case, an agent wanted to transition her business to her assistant, who did not have a sales license. We helped them put together a plan that included steps toward licensing.
Not all succession plans are for retirees. One of our most successful agents had been with us five or six years when her husband, who is in the military, was promoted and transferred. We helped her transition her business to another agent.
Just last year, we saved the business of seven agents who left us. That equates to $1.25 million in adjusted gross commission. In the beginning, we had to talk senior agents into doing this. Now they are seeing it work, and they are coming to us.
Do as I Say
I do not have a succession plan of my own. I have four children, and two of them work for us. They’ve both decided they’re happy to continue being agents. They don’t want to manage the company. I know I have to put something in place. I’m working on it.
Reprinted from REALTOR® Magazine Online, September 2014, with permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright September 2014. All rights reserved.