The Real Numbers Behind Australian Agency Profit, with Chris Mercer

We unpack the real numbers behind Australian agency performance, from average agent GCI and deals to why non‑selling owners outperform selling principals. We compare franchise and independent profitability, and show how property management scale underwrites resilient profit.

• average agent GCI near 430k and 22.85 deals
• impact of PAs and EBUs on productivity and cost
• fee growth driven by property values not volume
• agents vs owners: who makes more and when
• why non‑selling owners build stronger margins
• franchise sales profit vs independent sales profit
• independent advantage in property management scale
• split creep, break‑even, and margin control
• contribution over turnover for agents and PMs
• how to access Trend Tracker and REAP data

Get the Trend Tracker report here: reekdashboard.com/reek-trend-tracker

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Chapters

• 0:02 Setting The Agenda: Cut Through Noise
• 0:44 Chris Mercer’s Background And Credibility
• 3:23 Building Neutral Data: REAP And Trend Tracker
• 6:28 The Real Average Agent GCI And Deals
• 9:00 Teams, PAs, And Productivity Trade‑offs
• 12:19 Commission Growth Versus Deal Volume Reality
• 14:26 Should Agents Become Owners
• 18:16 Why Non‑Selling Owners Outperform
• 21:39 Franchise Vs Independent: Sales Profit
• 24:06 Franchise Vs Independent: PM Profit
• 26:38 Splits, Structure, And True Take‑Home

Transcript

SPEAKER_00: 0:02

Hello and welcome back to the podcast We Are Selling. My name's Lee Woodward, your coach and host, and the author of the Complete Salesperson course. Over the last five weeks, being a weekly program, we've done some wonderful topics about the real estate sales skills, what's going on with people and their technique. Today we're going to take a different turn. We are going to break through the noise, get to the truth of the real numbers of the Australian real estate industry from a neutral perspective. And one of our greatest real estate dedicated accountants to the books, the businesses of the real estate industry for many, many years is Mr. Chris Mercer. He joins us today. Chris, welcome aboard. Good morning, Lee. Thank you. Great to be here. Chris, just for our listeners, especially internationally who don't know you, your profession and your dedication to the real estate industry, what have you done?

SPEAKER_01: 0:56

Well, I've been working in the real estate sector now, dedicated for 25 years, cut my teeth as a chartered accountant before joining the sector. Worked all around the world, from New Zealand to London. And when I came to Australia, the first and only job I ever had in Australia as an employee was with Waybite Real Estate. And in that time, I spent six years helping understand the business model and even had a significant impact on particularly sales agent packages for careers and the ability to run a business not just on a top line or a market share point of view, but transforming that market share into profit share so there was money left at the bottom, which is ultimately the key goal of every business owner.

SPEAKER_00: 1:41

Now, Chris, when you say Ray White, just for the world of listeners here, we're talking the Ray White group, the whole thousand plus offices. You were in charge of the metrics, accountancy, and business structure of that group.

SPEAKER_01: 1:55

That's correct. I uh dedicated software, we reduced good moneymakers, appraisals, listing sales and deals, and then we got heavily involved in the packages from juniors to high-performing uh packages. And then from that time, after sort of taking as far as we could, when I went out of my own and started the Live Group, which is the operating chartered accounting firm I run now, which is a strategic management accounting business dedicated to real estate. I've then worked with almost every other group in the country of Australia and New Zealand and trained them all on how the profit map, my my framework uh as applied to helping manage the profitability of any real estate agency in Australia, no matter how far into the business life cycle they are, whether they're in growth mode or consolidation mode. And then we apply that also to the property management division, where I've done dozens and dozens, scores of acquisitions uh and sell downs for people over the uh 25 years of in real estate.

SPEAKER_00: 2:55

Thanks for explaining that, because we need clarity before we go into the information that we need to. And obviously, Ray White being the biggest group in Australia, being in that scene, regardless that everyone was yellow, you got to see all the business owners all over the country doing what they do and obviously NZ. Whereas today, you are a neutral source. And when you and I were doing some research the other day, I just absolutely love the research and data that you've been doing for many, many, many years, which wouldn't even be possible for us to have today's conversation. Because unfortunately, no offense to the Australian real estate industry, but when it comes to numbers, there is a lot of noise. There is a lot of fibs at times of who's what. Whereas in your world today, you work across all groups, independent, franchise, leading EBU agents, property management businesses. You are not governed by who the color of the brand is, it's just the business. Is that correct? They jealously guard my neutrality, my independence.

SPEAKER_01: 3:58

Many, many people sort of go, Chris, I don't like you working with my competitors. Say, well, I'm giving any person who's my customer the same advice. I'm not in the business of sharing the individual outcomes of a business, and I'm not in the business of talking about information that's shared with me in a confidential basis. So everyone one-on-one is confidential. My experience is I'm able to speed up the learning curve and cut through, as you call it, the noise because I've reviewed over two and a half thousand real estate agencies. And so when I say I know something, it's not based on my assertion or my gut feel. It's based on evidence that I've seen and what I know is happening. Now, I don't I'm here to say we've built this product called Trend Tracker, and we've got six years of data that's come in, but it's not a commentary or an opinion. What it's designed to do is help real estate business owners understand what's actually happening inside their businesses and how they compare to similar agencies without that industry noise. And sometimes these uncomfortable truths. Am I growing my business to get to a target of market share? But to achieve that, I've taken profitability out of my business, which isn't a business outcome I think people should strive for. And we can show people where that error is made and where it's been done well. So both the growth and the turnover of the business has been achieved by those operators that are managing their businesses better.

SPEAKER_00: 5:34

Now, Chris, you have a series of articles about to be released, which is all the findings of this work. And I was reviewing that with you the other day and was quite blown away. And let's get into some of those trends, facts, and things that you have found out. In this show, we have salespeople listening, property managers, business owners, EBU leaders, administrators, everyone's there. And it's interesting when you talk about the business, a lot of people think, oh, but that's not my problem. Well, if you turn up to a business one day that went broke because no one contributed to what it takes to be in business today, no one has a job. And Chris, from my perspective, it's never been harder for our principals to run a real estate business ever with the cost of business, technology stacks, and so forth. It's not as simple as what it was. We've got to look at what's left over in order for the business to progress. Take us into some of these trends. What were your, and let's start with the salespeople. What's the average salesperson writing in GCI in Australia?

SPEAKER_01: 6:32

Well, the number is around 430,000, give or take, for our Australian segment. The key thing here is with these numbers, they're based on the data that the active users of REAP dashboard. First of all, Lee, REAP, real estate agency profitability, REAP dashboard, is a unique infrastructure where we're able to take people's business PLs and standardize them and make them into three clear divisions: the sales division, the property management division, and the directors division. And when you add them all together, you get the total PL of a business. So if you just keep in mind that we look at sales and directors together and we look at the property management business against its own metrics. And then underneath those financial numbers, we have the non-financial numbers, the drivers, which are agent numbers, types of agents these days, number of sales agents and PAs, and you've got directors and PAs, and then you've also got the sales support roles, but primarily we've got deals and listings that come through these things. So we're able to not just measure the profitability, but we're able to track the underlying drivers. The key part we're trying to do is profit and productivity. So the key number for a productivity, for example, Lee, is$430,000 for the Australian segment, which is all the businesses on our REAP dashboard platform, standardized. And when we divide that up by the number of officers, we came up with that number. So that is total turnover divided by the number of agents that are active selling in that group. So that's a reasonably, reasonably accurate number.

SPEAKER_00: 8:14

Coachable moment. So everyone listening to this, I wonder what the average salesperson in Australia is writing. And everyone thinks it's millions and millions and millions. It's 430,000. And then you've got your unique cases. And it gets very foggy, Chris, when you've got super teams, six people in a team, yet it's presented as one name. What are you seeing of the trends there with the effective business unit teams model versus the standalone solo agent?

SPEAKER_01: 8:39

So an interesting, an interesting challenge for a lot of people is understanding what's changed since 2007 and and and the like, and what what uh today is happening. Back in 2007, an agent was an agent, and they were doing 18 sales per year, and they were on roughly 50%. Yes, you had your high performing agents, and the office may have given them a PA support role. Now that's you know, you remember those days, Lee? I do. Today. Every agent almost has a PA. And when you add in how many deals they're doing, compared to when they're on 50% and didn't have a PA and they were doing 18 sales, today almost everyone has a PA. What would you expect the average productivity to be in the number of deals that they're writing? And keep in mind, they're now on 65%, between 60 and 65%. What would you expect the lift and productivity to be, Lee, for the sales, average salesperson and deals they're doing per annum?

SPEAKER_00: 9:45

I'm gonna take a guess at 20%.

SPEAKER_01: 9:48

Okay, so that would have gone to say 20, 23, 24 deals. Mm-hmm. If we're gonna sort of say that. Well, the average number of deals in the Australian market has been done by agents and directors is 22.85. So that's with a full-time PA, and they're getting paid more. Now that means the total average turnover is 438,000. As I say, that is the hard numbers.

SPEAKER_00: 10:17

Now, Chris, a lot of people listening to this have just pulled over their car thinking that can't be right. All I hear is these big numbers. To you, it's not about the ego marketing side of it, it's a business metric that you're looking at, and those committed accounts coming in is the truth. And we're on here today to get to the truth.

SPEAKER_01: 10:36

People only want to talk about the established high performance. The tail of real estate is so significant, it drags the average down. People don't want to know that they've got this tail. I'll give you another stat Lee. 40% of agents don't make one sale in a month, no matter how big the business is.

SPEAKER_00: 10:59

Amazing. Chris, can I ask you for those people that have been pushing for bigger splits, pushing for bigger splits, and then they say, look, you take over your own admin and 65% may be there for you. Not saying there's a right or wrong to that. Did the numbers go up or down? Or are you confirming they've went down and they were better on the lower fee when administration was done for them?

SPEAKER_01: 11:19

Yeah, think agents actually are making more money. What's happened is the commission per deal has gone from what was it, 2007. I would have said the commission per deal on average might have been 11,000. It may have been 10. Certainly in the lower value markets, it would have been under 10. It would have been 7,5 to$8,000. Today, the average uh commission per deal that we're tracking uh through REAC 20 is sitting around 22,000. Sorry, for REAC 20 is 22,000. For Australia, it's 20,769. So we've had a doubling in revenue, but we haven't had a doubling in productivity. We haven't seen the deal numbers double. So what's led to the higher average commission of 430 is not transactional volume per agent. It's combined with the significant lift in value of Australian property.

SPEAKER_00: 12:12

One thing that we talk about on this show, which is very important, a lot of people are a professional real real estate salesperson doing really well. They could be working for a good group, a franchise, or an independent, and they think their only next step is to open a real estate business. Chris, this was in the Trend Tracker Report. Take us into what you learn.

SPEAKER_01: 12:31

The Trend Tracker Report is an interactive document with a number of different data sets for different types of businesses. We've got my control group, the REAP20. That's like the Dow Jones Index. I've got 20 businesses I've been tracking for six years. Every month, every number. And then we've got my Australian segment, which is every business in our data set divided by obviously the performance that they're achieving. I've got a franchise segment, an independent segment, a large sales segment, which is above 10 agents, and a large PM segment, which is above 650 managements, and they've got the small sales, which is under 10, and the small PM under 650 managements. Now, why is that? Why have I taken the time to say that? A lot of real estate agents and property managers aren't really looking for data and looking to pull through the numbers. When it's their numbers, they're a little bit more interested. Rather than sit sit here and provide a trend tracker report full of tables and charts, which we do provide in our appendices, we have written the articles. And I went through the articles and wrote them from the business owner point of view. So what's the business owner sort of questions? What do they want to know? But one of those articles was agents versus owners, who made more money? And in my 10 segments I just outlined, and I've got my top 20 sales and my top 20 PM segments as well. In all but one of them, the profitability achieved from just the sales and directors divisions alone, when I treat the director as a paid agent and adjust their profitability so that the director's been paid a 65% packet of 100, which is uh effectively the average, only the top 20 sales segment outperformed the agents. The agents made more money at their average turnover of 430,000, give or take, at being paid their 60 to 65%, then nine out of the 10 segments. Wow. So I'm arguing that if you don't, if you if you think as an agent that you should just get paid more, right now you're at peak pay. I would be recommending to business owners that this is not the time to be offering higher com splits to keep staff because there's not much money in it at the moment, and you're the one with the risk, and you're the one that's investing in the future agents that don't succeed easily. So the investment to get talent takes one in three to one in five, maybe one in tenly, to get someone out of nowhere to start in your business and get up and running and become a career agent. The success rates, depending on the experience and the infrastructure of the businesses. So the key thing is for the business that did outperform agents, what was the number one trait? It was our top 20 segment. And the reason they outperformed the sales agents is they were non-selling owners. They were dedicated to providing infrastructure, resources, and managing and holding their teams accountable and making sure that they weren't saying yes to crazy ideas of investment. They were providing genuine management, oversight, and accountability. And that business thrived. And they are the most difficult businesses to beat in real estate. Where the business owners are selling hard and actively listing and selling, it isn't as easy to find the time to sit down and be ready and present with your team. It is a really difficult job to do. And of course, we've seen what happens. Agents say, well, if I can't get you, just pay me more. And they throw money at it because they're trying to focus on writing their numbers for the year. This doesn't get them to crack the ceiling. And that is evident in our numbers. For the top 20 sales of our REAP dashboard clients, they win. The others, some of them are close. The large sales business, over 10, they're close, right on there. It's almost break-even. But for the others, they they certainly have not got to the point where they're they're defeating what an agent would earn in a year. Now that's quite surprising. That's controversial because of how I treat directors and their turnover. But the one thing which did transform that is when you add in a property management division of a suitable size, that lays the profitability up to make it worthwhile being a business owner. So without PM today, you're not necessarily going to have a resilient business in profitability terms, given the competitive nature of the sales sector.

SPEAKER_00: 17:12

Chris, great information. Let's move on to another trending question that everybody asks you a lot. When we look at businesses, comparing businesses, who won out of franchise for profitability versus independent?

SPEAKER_01: 17:26

Well, another key question for business owners, as you said, was this idea of hmm franchising versus independence. I think the key thing I'd like to point out here is this is the data. So when I talk to you about what we're learning, I was stunned at these results. If I said to you my preconceived idea of this was not met, it's this it's this franchise versus independence. Why? Who's more profitable in the sales and the director division, franchise or independence? Well, the answer is clear. It is sales is much more profitable for franchises. Why is that? Well, it had to look hard. And then the key numbers that stood out were first of all, the total cost of sales percentage to agents is 66.5% in independent businesses. I've got some pretty big independence here, and for franchising, it was only 60.7. That's a 5.6% left. And I'm going, well, why would that be? Now, there is an other cost that comes in for franchising league. What's that called? The franchise fee. Franchise fee. So everyone's oh, there you go. Interestingly, that number's lower because franchises are paying a say 65% of 90%, right? So the 92%, whatever the figure might be. So that brings it down. And if you think the franchise fee equalizes it, well, look at this next number. Absolute profit of the sales division, non-direct the sales division, just the sales division. Payment, independence 4.8%, and franchises 13.7%.

SPEAKER_00: 19:14

Wow. That would shock everyone right now because they look around and think, well, that independence is the best in my area. But we're not talking about who won the award for vision being visual. This is purely a profit award. And if they ran profit awards in in in the awards nights, you would see a a a different person take the stand.

SPEAKER_01: 19:35

If it's about how pretty is your office, maybe this these numbers don't don't don't reflect that. I think it's important to go. This is not about my opinion. I felt in the articles, you want to find out more the trend tracker reports available. Let anyone read it and attack it. Put the feedback. But this is my assessment. Franchising provides accountability, it also forces people to report. Every month their settlements. They have to use their CRMs correctly and completely. And there's this constant interaction of the franchise groups trying to provide uh you know genuine value to try to keep their people going, you know, not just let them sit there and and collect um collect a check and and not be sort of trying to get on the front foot. And I do think there's more resource available to to go and do that. When people become independent, they feel that they've got their own, their own game, you know, their own map, their own war room. And what that means is they decide that they've got more flexibility. They don't need to do certain things anymore that they used to have to do, say they were for independent, or they never did. The other matter that's um an issue is because they bring that sort of more flexible, they also don't actually get a lot of this call, straight or easy access to expert advice about what what's currently going on or what's happening. And so when their teams come back saying, I've just been offered this from this business over here, they're trying to keep up with, well, what's going on? You know, how do we keep current? How do they know what the truth really is? And they may be reacting to market competitors more so in the sales sector, but they've got deeper roots and they would have stronger connections to the community, having had years and years of experience. Now, this isn't to say that independents don't make money, maybe we've got some very, very, very profitable businesses that are independents, but the overall average came out cold as franchising wins sales. And when I share that with you, Lee, does that surprise you at all?

SPEAKER_00: 21:39

No, it did, because my work's quite specialist. I work with top-performing businesses who can invest in training. And I have a lot of independents that I look after who were once a franchise. Everyone's been a Ray Wide or an LJ Hooker or a Century 21, and then for some reason decided they wanted to do their own thing, which I get that creativity side of it.

SPEAKER_01: 22:01

Well, when we look at overall profitability, I'm comparing the sales agent-only division to sales agent-only division. I want to say this is important to say this. Franchises do not come out ahead in every category in the sales sector. They generally run slightly smaller teams and have slightly lower productivity per agent, but they compensate it with a lower break-even point, which means their margin is higher. Their gross margin's higher out of the 100%. They're coming in somewhere at 73%, leaving 26.5. Whereas the independents are coming out at total cost of sale 76.7%, which leaves only 23.3%. Now, what that means is your break-even is affected by how much money you keep out of the million bucks, the franchises are holding more of that. That means they're able to break even quicker if the fixed overheads are the same. But in both the sales segment, the franchise segment and independent segment, the directed contribution was similar. So there was no win or lose for the directors in both those sectors. That was that for sales. Okay. And property management, this is where independents take the lead. So independents are winning in property management where the average rent roll size is higher, 675, versus a franchise of 437. And independents' net operating profits around 24%, whereas franchise profitability is 18.6. And I think that's got a lot to do with the nature of having been in business longer, deeper roots, often, not always, but at the same time, people that tend to be independent-minded tend to be a bigger business, don't they? They tend to think I've outgrown maybe franchise, or you know, but they can be slightly bigger businesses. So they've got a slightly bigger footprint in their PM, and that allows them to have some scale benefit. And that was the results of the franchise versus independent.

SPEAKER_00: 23:52

Absolutely amazing information. And Chris, one thing I wanted to do today with this podcast was bring to people's attention there is a neutral source and report available, and that report will be should be getting that. And it's not correct. It's it's not as simple and it's easy. And I think, Chris, a lot of people working in a business just think the owners are making a fortune and they deserve more. And and that can really spook your thinking. I know remembering back to being a salesperson myself, being offered every week I'd be getting job offers with these ridiculous uh percentages that they were offering to pay me. And I never left. I only ever worked for one principal, and I stayed with that principal due to a term you taught me, actually, Chris, called principal stickability. And the reason I stuck with that principle was training, and I worked in a company that had essential services. So I didn't need or had to pay for my PA. Three brilliant ladies serviced everything I did, and I did nothing but list and sell real estate. So my percentage was way lower than what I was being uh offered from the other officers. But the other officers were offering me that and nothing else. And if you look at their top-performing agent and myself and go to the ultimate metric of real estate ever for a standalone agent, which is called your group certificate, I was way ahead than those people because I just did way more deals with no distraction.

SPEAKER_01: 25:28

Yeah. And so so much of this comes down to you know structure and you know what's the net pay, gross pay, right? So what's that? That is an orange comparison, you know, and what's left over. But my primarily, if someone gives you a high flat fee and then gives you structure, there's a benefit to that contractors, because you know, they're in a situation where they can manage their tax affairs better. But primarily they've still got to decide how to run their EBU. And so many people are out there running EBUs without the productivity that is required for them to actually feel that they're making more money for doing more sales. They've just put you know one extra head on for no reason to think that they'll grow. The loss of this money really affects how much reserves the business has got to reinvest in, you know, I would argue a lot of businesses have taken out the money that would be available to reinvest in systems and productivity gains. And it's left people really, some people running a very personal manual style approach with technology in a hodgepodge sort of way, because the business owners no longer have the free money that they have to invest in, the up-to-date systems and streamlining that should come. And yeah, you you're a big believer in streamlining and having good systems. But that's that's a comment I want to share about to every property manager, every salesperson out there. If you want to understand how you make money and get a career path improvement, always understand how to make the business owner more profit. Revenues one, margin is everything. There's no point saying, Oh, I got your new property management and I got it at 0.5% management fee. That's worth nothing to the business. That costs them money. If you're a property manager, you prove to people I get business in at high case value at full fee. Business owners will reward that type of professional. Sales agents. If you're out there discounting, you're out there blowing advertising and always demanding more resources, your turnover is not your contribution to the business. Your contribution to the business is what's left to pay the bills. So if you want to be rewarded and pat on the back, understand it doesn't matter if you're in a corporate banking role, insurance role, you know, you're working in retail, if you think you're a great employee, always understand how much profit you make a business owner, not revenue.

SPEAKER_00: 28:03

Chris, excellent information. For those people that want to get a copy of the report, it's in the show notes. If they want to go to your site and find out what you're doing, how do they get hold of you?

SPEAKER_01: 28:12

You go to reekdashboard.com and we've got everything on there. The actual um page is reek dash trend-tracker. That's the specific page, and all our contact details are there. Thanks, Lee, and um really enjoyed having another conversation with you after all these years.

SPEAKER_00: 28:32

And congratulations on your journey. It's been a long time gathering data, like nobody else can go back in time and do what you've done at the level and the access that you've had. But that's a valuable tool for our industry now. And Chris Mercer, thank you for joining us. Excellent. Thanks, Lee.