Re/max Redux;

 

Opportunities for applying Re/Max's compensation concept abound. Other service businesses have tried it, if only on a small scale.

For instance, 10 years ago, in her first job as a travel agent, Lesli Gordon started at a salary of $125 a week. Last year, however, she pocketed $85,000 -- every cent of the commissions she had earned minus her share of overhead expenses and a small monthly fee paid to the agency owner.

"People should get paid if they do the business," she says.

Gordon is a rogue in the travel industry. Most agents still work on salary, although a few take a percentage -- usually about half -- of the commissions they earn for their agencies. Gordon was on a 70-30 split for a while -- 70% to the agency owner, 30% to herself.

The problem with the travel-agency business, according to Gordon, is the same one that Dave Liniger spotted in real estate. "Agency owners," she says, "are always having to bring in new agents who aren't up to speed. So there's never enough money to pay the top people what they're worth."

Gordon's solution, as well, resembles Liniger's. With her owner's consent, she created a separate branch around the corner from Omni Travel's principal Cambridge, Mass., location. Then she recruited partners, now numbering eight, mostly from outside the agency, to work with her. "I didn't want the doctors' wives," she says, "the Junior League types who were doing it for fun. I wanted people who were living on their salaries. They're the ones that need the money."

One partner, a top performer, was bringing $11,000 a month in commission into his former agency and drawing a salary of $375 a week. "He was getting screwed," says Gordon. Last year, their second full year in business, the nine partners in Gordon's breakaway office accounted for more than 40% of Omni's business, earning more than $600,000 in commission on some $6 million in sales.

In addition to the monthly fees, they also pay the agency owner for such services as bookkeeping and accounting, covering much of Omni's overhead. But Gordon's success and the agency's owner's apparent reluctance to embrace the 100% commission concept throughout the agency mean that Omni tentatively has a tiger by the tail. The high earning potential of the rogue group around the corner could lure the better performers out of Omni's conventional agency office, leaving it with just new hires and the Junior League types.

Further, Omni's hold on the tiger's tail is tenuous at best. The nine full-commission partners don't own the business in the sense that they could sell it. "But we could pick up and walk away with it," Gordon says.

"Of course, salon owners don't like the rent-a-booth concept," says Don Rollfing, co-owner with Sandee Ricklefs of The Hair Cartel Inc., in Denver, which rents 18 booths to experienced, independent hairdressers. He charges each $130 a week. Other salon owners don't like the concept, according to Rollfing, because they don't make as much money at it.

At least they think they wouldn't.

If Rollfing were running a traditional 50-50 shop, his expenses would be much the same as they are now, and he'd probably be grossing at least $250 a week for each hairdresser he employed. But he doubts that he'd be able to keep all 18 booths filled -- and certainly not with good employees. The young ones just out of school don't know anything, he says, and the good ones are hard to find. His turnover in five years of owning The Hair Cartel, he claims, is less than a dozen.

The rent-a-booth salon is easier to manage, Rollfing says, because the hairdressers working there are, by necessity, more experienced and more self-disciplined than those in a conventional shop.

When their chairs are all rented -- which is most of the time -- Rollfing and Ricklefs collect $2,340 a week. Each of them also cuts their own customers' hair, earning slightly more than $1,000 a week on average. Pooled, that all comes to $225,680 in gross revenues. They could make it more by opening another salon, but Rollfing points out that he and his partner deliberately work only four days a week. "Money," he says, "is not the most important thing to me. I like to smell the roses."