Looking for some guidance on debt and equity commission splits with a capital markets team.
Current offer:
$150k salary;
2x salary payback before commission;
45% to producer until $1mm gross fees;
50% until $2mm in gross fees;
60% thereafter.
No idea where the market is on these.
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What’s the typical deal size? These terms are aren’t terrible
I use “not terrible” to describe most things fyi
What happens if you fall short of the $150k does it accrue?
The base salary is essential a draw (a loan) with a 2.00x make whole.
You don’t get in the brokerage to earn a salary. I think that the splits in excess of the 2.00x make whole are kind of tough but it’s probably because you’re getting a decent salary.
Do you have brokerage experience? If not, take it and don’t negotiate. We’re about to go into a recession. Take the offer and learn as much as you can on someone else’s dime as you can renegotiate later once you are actually producing enough to warrant negotiating splits in excess of $1mm in fees.
If you have meaningful brokerage experience then you shouldn’t be even interested in the salary.
Disagree with your final sentence. While rarely spoken about, many of the top brokers actually get salaries. And to jump ship for poaching, many brokers will negotiate a salary in order to do so. A paycheck every two weeks really helps smooth things over compared to getting paid Jan 2 and than Sept 9th (for example). Doesn’t matter if you take home $2M in those two deals, it’s hard to not know when you are getting paid.
They most definitely don’t.
However let’s be clear here and define what I mean by the top brokers. As in the guys who have a piece of the team’s P&L and make money originating deals as non-salaried professionals.
There are salaried brokerage professionals – both senior and junior in experience and rank – who work alongside them in an execution capacity (underwriting, packaging, distribution/marketing) and are not focused on sourcing new businessI am not talking about those people. They work in brokerage, but they are not really brokers if you get what I mean.
Generally these staffers are salaried and are offered incentive compensation through a form of a bonus with varying intervals (annual / quarterly / deal-by-deal) depending on the team.
What the top brokers will spend a majority of their time negotiating when they jump ship to another firm is the sign on “bonus” that is essentially structured as a zero coupon loan and sized based on a multiple of your historical gross fee output (e.g. trailing 36-48 months average), duration of required tenure at new firm, fee performance stipulations and clawback/recourse. And then of course the splits. The graduated splits are essentially all the same at the major firms if you look at the boiler plate contracts they give you and cap at a blended 65% net to the brokers after about ~$1.5MM in gross fees. I can dig up one of my old contracts if someone is actually that curious.
Source: Worked at two of the major institutional brokerages for top capital markets team(s) in major gateway markets. The first team I worked for did exactly just this. I was heavily involved in this process due to my comp structure via the P&L.
What’s your experience? It seems like a large base for debt and equity brokerage. The 2x payback is also something I’ve seen or come across. It seems pretty favorable to the shop, they’re basically taking the bet that you’ll do at least 150k in commissions, the next 300k is all theirs and then pretty favorable splits for the house thereafter.
Probably not a bad structure for you to take if you’re getting started in a recession
The scaled splits based on gross fees is pretty standard, but I’d imagine the hurdles to get to 55, 60, 65% etc, are much lower at other shops with lower/no base salaries
It’s give and take…if you want more upside, ask for a lower base or no salary but better splits. If you want downside protection, what they’re offering is not a terrible structure. It seems a little unusual but fair
If you fall short, it’s in their discretion if they roll you, freeze it, or let you go.
Thank you, these are all very helpful.
Deal sizes vary from $30mm - $250mm+ in total project costs. Average is about $60mm.
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