Mid-sized Real Estate brokerages Achieve 10x Higher Productivity Per Person Than Larger Firms

BOSTON, Nov. 19, 2024 /PRNewswire/ -- AccountTECH announces the release of its latest white paper: Production Per Person (PPP) Analysis of Agent by Quartiles: Insights into Efficiency and Agent Roster Composition

Abstract: The report examines the relationship between agent count and productivity, revealing that mid-sized firms achieve higher efficiency and Production Per Person (PPP) relative to larger brokerages. This research examines the correlation between agent count and production per person (PPP) by categorizing company performance into quartiles, based on their PPP. The data shows consistent and significant decreases in productivity per individual agent as a company's size increases. This report also compared PPP data across quartiles to uncover additional insights and trends related to agent productivity and efficiency.

Introduction

In analyzing sales productivity, one common metric is Production per Person (PPP), which assesses individual contribution by dividing total sales by the number of agents. In AccountTECH's analysis, the database researchers created a dataset categorizing companies into quartiles based on their Agent's AGCI PPP values (AGCI is an abbreviation for adjusted gross commission). The main objective is to understand the relationship between company size and PPP and to identify patterns in how companies can maximize efficiency.

Dataset Overview

The dataset categorizes companies into four quartiles based on PPP, providing:

•  Average and Median PPP: This number is Production per person for agents in each quartile.

•  Agent Count: The average, median, and maximum number of agents in the companies of each quartile.

Table 1: PPP and Agent Count Data by Quartile

Key Findings

Relationship Between Agent Count and PPP

A noticeable trend in the data is that companies with fewer agents generally achieve higher PPP values. The Top Quartile, with the highest average PPP of $106,489, has an average agent count of 59. In contrast, the Bottom Quartile, with an average PPP of only $10,840, has an average agent count of 297. This inverse relationship suggests that smaller companies generally operate with higher individual productivity, possibly due to more targeted oversight and coaching, or enhanced motivational factors beyond personal income for each agent.

Quartile Analysis of Agent Count Distribution

Examining the minimum and maximum agent counts within each quartile reveals a broad distribution in company sizes, especially in the Bottom Quartile, where agent counts range from under 10 to 4,574.

In every quartile, there were some companies with agent counts less than 10 agents.  This suggests that higher PPP (and the lowest PPP) can be attained by any sized company – with some caveats.  In the study results, there was no company in the Top Quartile with more than 340 agents.  Furthermore, among the companies where the AGCI PPP was above $50,000 – none of these companies had more than 622 agents.

This variation might indicate that larger organizations face challenges in maintaining high PPP, possibly due to difficulties in coaching and developing a geographically dispersed workforce.

The business case for lower Production per Agent

For some companies, the PPP is not a primary business concern.  If a real estate brokerage has a low PPP but a high agent count, this can still be a highly profitable company.  For brokerages that have additional income sources from Title, Mortgage, Insurance, moving services, etc., the retention of lower productivity agents is likely worthwhile for the revenue they bring to the brokerage's other services on the few deals that they do each year.

Conclusions

The analysis reveals a significant correlation between company size and agent productivity. Companies in the Top Quartile have fewer agents and consistently show higher PPP, suggesting that efficiency is more commonly achieved in smaller companies.

Importantly, in every quartile, there were companies with agent counts far above the average agent count for the quartile. This is proof that building a company with high AGCI PPP is attainable for companies of vastly different size.

Because every brokerage's business model varies, the PPP numbers cannot be correlated to brokerage profitability – but many recruiters believe they are critical for attracting new agents.

About AccountTECH
For over 25 years, AccountTECH's team of real estate accountants and software engineers have been building tools that increase the efficiency of brokerages. Their latest flagship product is darwin.Cloud - a 4th generation evolution of their popular back-office accounting software. The team is constantly adding automation and integrations towards the goal of single-point-of-entry. Their motto is: data entry can happen anywhere, but everything winds up in darwin. In their work with clients, partners and each other, they bring integrity to every interaction and every line of code.

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SOURCE AccountTECH