How do I pay a BDM (Business Development Manager)?
At Real Estate Dynamics, I think we have seen almost every combination of salary and bonus incentives for BDM’s that has ever been drafted or attempted.
We are often asked, ‘How much do I pay a BDM?’ followed by ‘What bonus incentive should be in place?’
The first thing to consider and ask yourself is – What is an incentive or bonus structure designed to do? If it is intended to drive and increase performance, it must be easy and fast to calculate. Some bonus structures we’ve seen are so difficult that it even takes payroll hours to calculate them. If a BDM cannot quickly calculate how much they are getting as a bonus, it will not drive performance.
In terms of paying a BDM, my philosophy has always been it doesn’t matter what you pay so long as the BDM ‘writes’ their salary amount first before entering ‘bonus mode’.
There are a couple of figures you need to be aware of for this formula to work:
If you’re paying a BDM $55,000 per year for example, that’s $4,583 per month. You need to divide this number by your AAMI (Average Annual Management Income). Your AAMI is calculated by your average weekly rent divided by 7 multiplied by 365 days multiplied by your average management commission.
Here is a AAMI example for you – if your average weekly rent is $400 and your average Management fee is 7.2%, your AAMI is $1,501.71. This is the average management income you receive from each management in your Rent Roll business.
In the example of a BDM earning a base annual wage of $55,000, 3 properties per month would have to be signed to make up their base salary. You may then choose for the bonus to kick in from say 4, 5 or 6 properties for example.
A BDM is an investment in a Rent Roll business, not an expense. Therefore, a BDM should always write business equivalent to their salary before the bonus begins.
The bonus itself depends on how much the business owner is willing to invest to drive growth. Many use the first weeks rent as an example and some use a percentage of income that the particular property brings in over a period of time. Either way, it is the decision of the individual business.
I hope this article provides you with some practical framework to think about with regards to BDM salaries, packages and performance.
If you’re interested in improving your return on investment with your BDM, our high performance program STANDOUT will help them improve your return on investment.