Profit From Paying Community Managers (the right way)

Since up to 70% of an HOA management company’s total expenses can be in payroll, it’s critical that you know how to manage this line item to ensure your business’ profitability.

There are basically 3 compensation models for community managers.

1) Straight salary2) Straight commission3) Hybrid salary/commission

Let’s explore all three.

1) Straight salary

In the straight salary model, the owner of the business knows exactly what the payroll expense will be for salaries. Similarly, the community manager knows exactly what he or she will be making (regardless of productivity or results). Average salaries for community managers vary depending on years of experience in the industry, cost of living in their market, and industry designations. That said the average salary is about $42,000 a year with the high end being about $75,000 a year.

2) Straight commission

In the straight commission model, the owner creates a completely variable compensation expense (note to owners: variable expenses are good, fixed expenses are bad!). The community manager doesn’t know how much he or she will be making but the do know that the more they bring into their company (with through more effort or by working smarter) they more money they make. Most entrepreneurs love the all commission model, but it makes recruiting difficult and most folks that are looking for a $42,000 a year job aren’t really into risk taking, especially with their income.

The straight commission model also creates potential issue with complying with the Federal Standards and Labor Act (FLSA). This issue alone makes this model a bad idea for most HOA management companies.

3) Hybrid salary/commission

The newest model of compensation in the HOA management industry is the hybrid model. In this approach, the company avoids any potential problems with FSLA compliance while creating a compensation cost that is as variable as possible. Moreover, most employees are more comfortable knowing that they’ll receive at least a base income regardless of how much money they bring into the company and yet are often excited by the upside if they are more productive (read: bring in more money to the company) than their peers.

Here’s an example of how the hybrid model works:

Base salary: $XX,000 per year, PLUSCommission bonus: X% of all revenue brought into the HOA management company

The community manager can make more money by encouraging his clients to buy additional services from the HOA management company. I’ve seen community managers make a lot more money per year on this model and the company loved them for it!