How To Handle Split Commissions

When you are a salesman, whether you are in a small scale business or in the big leagues, a good part of your income would come from commissions. The percentage of the commission will usually depend on the type of business you run, and also on the contractor or company you are in. If you get full commission from a sale, then there is usually no worry, and you only have to focus on making the sale. But what if you need to split a commission?

For instance, you are in real estate, and you're brokering for a buyer. In instances like these, two salespeople would usually have to split a commission from the total proceeds. If you run a sales team, you would also have to split commissions with them, especially if you share tasks and responsibilities.

Here are some ways how to best deal with split commissions.

  • Distribute responsibility. One of the best ways to deal with splitting commissions is to distribute responsibilities and tasks fairly, so everyone will have something to do to contribute to the sale. Therefore, people will have to earn their part. Divide the workload, and keep your staff motivated by the prospect of getting their share of the sale's commissions.
  • Put it in black and white. In cases where you are to split commissions with colleagues outside of your company, it's best to make a formal agreement as to the commission split. For instance, you are a listing broker, and a buyer's broker contacts you for a possible sale. You must be able to agree on your split in paper, so you will not have any disagreements later on when the sale has pushed through.
  • Determine a rate. When splitting commissions, make sure you and your colleagues, staffers or partners are in agreement as to the actual split you will share. Some might go for a flat rate, in which he is assured of a certain amount, regardless of how much the total commission is. This is good if you are actually able to negotiate for a higher sale price or commission. But this is bad for you if the sale price is lower than you expect, as you still have to give the same amount in commissions. It's best to share or split the commission by percentage.
  • Issue post-dated checks. Once a sale has pushed through, it would be a good idea for whoever gets the main commission check to already distribute each person's share by means of post-dated checks. This way, everyone gets assurance that he will be paid his share, even if the buyer or client issues the commission to only one person. This eliminates the problem of trust.

Sharing responsibility lightens the workload for everyone. In these cases, it's only fair to give the concerned people their share in the proceeds from a business dealing. When splitting commissions, though, be sure that everything is clear and that everyone knows what's expected of them, and how much they can expect in return.


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