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What Does the Master Agency Model Look Like?

So yesterday I did the math on commissions for UcaaS for sub-agents. (See here)  Today, let's take a look at the economics of being a Master Agency.

Remember the UCaaS example? If the seat price is $20, on a 100-seat deal we are talking about $2000 per month. [ $2000 x 20% = $400  ]  That $400 is split between the partner and the master agency per the agreement.  It could be 50% to 100%.

That is correct. Some masters pass 100% through to another master in a swap. However, they lose $32.50 per transaction like this. It costs approximately $30 to collect the correct commission from a provider and about $2.50 to cut a check to the master. So on 100% pass-through, you actually lose money.

Then there is the overhead for the master agency. The physical office, the staff (that gets quotes, handles orders, tackles issues, collects commissions), the channel managers, the legal aid (to get ironclad contracts) and the events (and event planner) are all expenses that have to come out of the percentage that the master keeps.

That is near impossible on a 90/10 split on most orders.

The cable game is even tougher. The commissions percentage are smaller than anything except a wholesale deal. The amount of work due to the nature of the cable company and their arcane processes is more than on other deals. There is volume there but on $300 cable modem sales... Why be in that game?

So even on 100 deals per month at $500 per deal with a 15% commission and a 70% split with the sub-agent, it is tight.  (100 x $500 x 15%) x 30% = $2250 to the master ($5250 paid out to agents).

That accumulates as long as the customer keeps paying their bills. And hopefully it increases every month so that January is $2250 but February is $4500, March is $6750, et al.

Based on the 10% closing ratio that most experience, to close 100 deals, there would have to be 1000 quotes per month (or more).

Based on Pareto (80/20) that means for 100 partners, 20 are going to be bringing in 80% of the deals. So 800 quotes to 20 partners, who will close 80. The other 80 partners will quote 200 deals and close 20 (hopefully).   (That's why partners get graded - A, B, C.)

It's math. And you can get more efficient at some processes and procedures to reduce friction and increase productivity. You can get better at quoting and closing. You can recruit better. But in the end it is mainly sales math!


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