Why you SHOULD be thinking about commission splits!

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Nothing to do with commissions, just a cool shot from North Carolina’s Sand Dollar Island

This post is short, it includes free stuff, and it deals with a subject that I know is close to all of your hearts:

Commissions

Commission splits specifically.

Really understanding how your commission split works can help improve your bottom line, instantly.

How?

Back in June, Meredith Hill of the Gifted Travel Network and the Global Institute for Travel Entrepreneurs published a great piece on analyzing commission splits with your host agencies.

I am quickly becoming a fan of Meredith’s, and you should check out her article.

Just to summarize, Meredith is encouraging us to take a close look at the plans available from various hosts so we’re not giving away commission dollars that could be ending up in our wallets.

That 70/30 split sounds great, but is it?

Well…that depends.

You’ve got to run the numbers and do the analysis to find out for sure.

How in the world do I do that?

I’m an accountant.

I’m good at running the numbers.

After reading Meredith’s article, I was a little ashamed that I had not done a proper analysis on the commission split for our own firm, Southern Girl Travel.

I put together a little spreadsheet of my own to help, and I’m glad to share it with you.

Just click here to download your own copy.

I’ve got your spreadsheet, now; how did you run the numbers?

First, gather your data.

You’ll need to know the details of the various plans your host offers.

Our host offers 4 plans:

  • No charge 70/30 split
  • $20/month 80/20 split
  • $40/month 90/10 split
  • $200/month 100% no split

Second, enter your data into my spreadsheet.

Just follow the directions on the sheet, and drop me a line if you have any problems or questions.

Third, take a look at the far right column and think about the results.

We all tend to gravitate to the 70/30 split plans with no monthly fees. In some cases that might be a good thing, especially if you are just starting out in the business and you need the comfort zone of a low investment.

That said, after an initial period when you might need some extra comfort, that 70/30 is often not the best choice.

To make the final choice, you’ll have to play with your sales figures and find that break even point when avoiding a monthly fee is no longer a cost savings but case of short-term thinking.

Here’s some of what I learned from my own initial analysis.

The 70/30, while comforting, is not really the best option monetarily. Here is a great example of why:

At $200,000 in total sales, the 70/30 plan with our host will net you $14,000 in commissions. Their most expensive plan with 100% commission to the agent and a $200 monthly fee will net you $17,600. Do the math…that’s $3,600 more in earnings.

It’s a no-brainer.

The 70/30 has to go!

We’ll be changing our plan ASAP!

Your results will likely be different, but you’ll never know unless you follow Meredith’s advice and get to crunching those numbers.

Do that analysis now, and you may be able to improve your bottom line with just a phone call to your host.

My spreadsheet should help with the crunching. If you download it now I’ll be glad to offer you 30 free consulting minutes to help you understand the numbers.

You’ll receive an email a few minutes after signing up for the spreadsheet. We’ll work out the details for the  free 30 minutes then.

Thanks for reading and please let me know what questions you have!

The Travelers Guide to Tax Deductions, get it just for signing up!

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