Kevin is the Founder of Marker Real Estate, an innovative firm with a transparent, inclusive, client-focused strategy.
The days of commission-only splits are over. In 2021, if you want to recruit the best agents to a brokerage and keep them over time, it is essential to offer them decent splits and other sources of revenue. If you have any doubt, look at some of the nation’s largest and fastest-growing brokerages.
Profit And Revenue Sharing
On the surface, companies like Keller Williams (KW) and eXp may not appear to share a lot in common beyond the fact that they are both real estate brokerages. But a closer look reveals they do share one important thing in common: They both offer alternative revenue streams for their agents.
The revenue model adopted by both of these agencies is simple. When agents recruit a new agent, they are compensated. So, the more agents an existing agent recruits, the more potential they have to make money, even when they aren’t closing deals themselves.
At KW, the percentage is a profit share, determined after overhead expenses. At eXp, the percentage is a revenue share based on gross commission incomes. But however you cut it, both models give agents something they have always needed and not had: a passive source of income. For this reason, it is little surprise that both companies continue to quickly expand.
Don’t Agents Deserve More?
The KW and eXp models are a good start, but don’t agents deserve more? I certainly think so.
As I have explored in a previous article, real estate is a tough business. Every year thousands of agents across the country quit. According to the National Association of Realtors, the median experience of current U.S. agents is just eight years, suggesting a high degree of attrition overall. The median length of time at an agency is even lower (just five years).
Most quit in the first few years for one reason. With no guaranteed salary, a career in real estate can be difficult to kickstart and ever more difficult to sustain over time. With no passive income, agents also have to be on and out in the world, hustling all the time. Profit and revenue sharing models that reward agents for recruiting other talent are a step in the right direction, but I think agents deserve even more:
• Share leads: Finding leads, especially when you’re new to the business, can be challenging. Sharing leads with agents is a great way to support new agents, grow your business and retain agents over time. Remember that when you share leads with agents, you’re also helping them discover how to generate leads. Over time, this will pay you back.
• Education and training: With little gatekeeping upfront, in real estate, most education and training happens after agents are hired. Investing in your agents’ education and training is a powerful way to ensure they succeed and stick around to help you grow your own brokerage.
• Profit and revenue sharing on services: Profit and revenue sharing with agents who recruit other agents is a start, but it doesn’t need to be where this model ends. If you offer services, including access to proprietary platforms, to your agents, you can also reward them for finding new subscribers, creating yet another passive source of revenue for them.
Why Give So Much To Your Agents?
This raises an important question: Why give so much away to your agents? After all, shouldn’t that be bad for business? From my perspective, there are three key reasons why supporting agents, especially new agents, is good for business.
First, any investment in your agents is an investment in your business and future growth. Second, recruiting new agents is expensive. By one estimate, it costs anywhere from $5,000 on the low end to $10,000 on the high end. If your brokerage is a revolving door, you’re not just losing agents but also tens of thousands of dollars each year. For this reason, investing in agents tends to yield a better return. Finally, since real estate is a tough business, lending a helping hand is the right thing to do. If you were once an agent yourself, why wouldn’t you want to give back?