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Compass’s Disruptive Play: Paying Brokers What They Are Worth

Compass is making headlines again, but this time not for their huge $450 million dollar investment from SoftBank. Now they are turning heads because of the amazing rate that they have been able to onboard brokers. They closed 2017 with 888 agents in their hometown of New York City and are trying to capture 20% market share in 20 major U.S. markets by 2020.

To do this they did something truly groundbreaking, they offered brokers a better deal. Rather than trying to replace the broker like many firms have unsuccessfully tried to do, Compass has always been understood the power of a good broker. Their chief revenue officer admitted the zero-sum game that is the broker market:

“If you’re battling for a candidate with another firm, it’s you versus them because recruiting is all about selling opportunity.”

Much like a good broker, Compass seems willing to attack the process of selling an opportunity from any possible angle. They offer tempting propositions like a 25% pay increase or even 100% commissions for the first year. They have a seamless tech backend and a tech company culture complete with a showpiece headquarters. They will go as far as to have the CEO personally call brokers to help persuade them to make the move. Granted, these moves have not been without pushback, just last week Modern Spaces filed an agent-poaching suit against the steamrolling Compass.

Some of this aggressive sales has to do with the $800 million that they have been able to raise. This kind of war chest certainly helps, but with a post-money valuation of around $2.2 billion, they are still small in comparison to global firms like CBRE with a market cap of over $12 billion.

More than just the money, Compass’ strategy has to do with culture. They understand the value of a good broker and are willing to do what it takes to compensate them accordingly. One of the ways of doing this is by giving them the option to covert some of the commissions into company stock. Not only does this give brokers back a little of the value that they help create but it also aligns brokers with the company in a way much more permanent than a corner office and company letterhead.

SoftBank is trying to invest with a 300-year timeline. Compass, at first, seemed like a strange investment for a firm that likes to place bets on disruptive business models. Compass, at it heart, is just a brokerage. But, it is turning out to be revolutionary in its own right. It is creating a revolution in the real estate world by understanding the value of the broker and compensating them appropriately.

Editor and Co-Founder