Real Estate Recruiting: Profit Sharing, Revenue Sharing and Residuals

by | Real Estate

Profit Sharing, Revenue Sharing, and Residuals (PS for our purpose) is becoming more and more common in today’s market. I have met more than a few people who went with one company or another for this reason. On the surface it usually sounds great, but what about is the reality of it. Well in this article I will go over some of the systems that are available and let you decide what is best.

Those of you who know me understand that I don’t like to ever put down another company. I believe we all stand on our own merits and there is never a reason to bash or discredit another. So for the purpose of this subject I will be using fictitious names and only give real world examples and facts.

Let’s start by looking at the largest PS Real Estate model in the country; we will call them Kool-Aid World or just KW for short. On the surface a system like this can look appealing (or appalling) depending on how much research you do.

Let’s first look at the commission splits. For this example we will use a good associate earning sixty thousand per year, which by the way is significantly above the average? First thing they will encounter is the Royalty/Franchise Fee of 6% so we deduct $3600 leaving us with $56,400 then in the course of that year the associate will pay another $16,920 (70/30 split). Then we have the other monthly (junk) fees, like the technology support fee $10, Voice Mail $10, Desk Fee $75-$500, etc… I think you get the point and all of the big five agents out there that are reading this you know what I mean.

Here is an example of a typical KW office,

Monthly With or without Desk:

Errors & Omissions Insurance $20.00 – 35.00

Technology Support Fee $10.00

National Technology Consortium Fee: $10.00

Voice Mail: $10.00

Network & Internet Access: $10.00

Direct Line: $15.00

Unlimited Calling: $15.00

Desk: $75.00 ? $500.00 depending on location

$165.00 – 605.00 per month

Let me be clear, you are going to encounter these junk fees in most large franchise companies. If you are an agent that thinks they need a big name behind them than there are better choices. Re/Max and Coldwell Banker both come to mind but even these would need to be the right office, just do your research.

Now let’s look at the PS for KW.

Let’s do the math. In 2009, KW paid out 32.2 million in profit sharing with a total of 76,879 agents

That’s $418.83 per agent if and only if every agent received it. The truth is, you are only eligible for the portion of the broker’s profit YOU brought in and then it breaks down like this:

• Monthly GCI

• LESS Production Royalty (6% up to $3,000 cap per agent)

• LESS Associate’s Commissions

• EQUALS Monthly Gross Market Center Income

• LESS Licensee’s Approved Budget Expenses

• LESS Licensee’s Loss Carry Forwards (What is that?)

• EQUALS Monthly Profit

As for the Licensee’s loss carry forward? If you bring in an agent that doesn’t produce, it screws up your Profit Sharing for a very long time given that they are carrying those losses forward.

So in a nut-shell what does all this mean? Well it simply means that if the Market Center is not profitable you do not make anything (period). It does not matter if you helped to bring on a thousand agents and they all did well. Also if you bring on a couple of agents that do not produce even if the Market Center was profitable you still do not get anything? I know, I know that doesn’t make sense well it is not supposed to but don’t give up were not done yet.

There is a bright spot in this program depending on how you look at it and they call it “Vested”. What is that you ask, well basically if you work at KW for three or more years you become vested? That means you continue to receive profit Sharing even if you leave the company!

Ahhh that is great! Just don’t forget to read the small print,

This is what it says if you could find it. What they don’t mention is that if you leave KW for a different (better) brokerage at any time, you lose all your profit sharing. They don’t like to mention that part, but I know several people who stayed there for the three years to get fully vested, thought that as long as their downline was still producing, they would continue to receive the rewards. KW even says that if you leave you still get the profit, but nowhere do they warn people that you can’t go to another office you must retire or leave the industry all together?

So why have so many people become part of this system when it is so obviously flawed? Basically they had no other options plus there is the Kool-Aid here is a direct quote.

“Whether or not you make any profit sharing money through our company is a distant second to the effects that the profit sharing model has on our education and culture. In an industry that has historically always been a “dog eat dog” type business, you now have a company where there is a real incentive for the real estate agents to share their ideas, secrets and models. That is why at KW, our most successful real estate agents are the ones teaching the classes. It’s a mathematical formula. It’s not a question of does it work or not, if the business is profitable than our Profit Sharing works”.

I think that quote speaks for itself and even though there are a few other systems out there I am not going to go over them all in this article. It would just be too time consuming and monotonous so let’s get right into a system that actually works from day one for everyone.

So the question was, how can we build a company that no one would ever want to or need to leave?

To start we needed to establish higher commission splits, so that agents could make their own personal business spending decisions, and then we developed the Revenue Sharing System, a revolutionary system that treats associates in the company as if they were partners in the business.

According to Encyclopedia Britannica, a wide range of businesses in a wide range of countries have used a variety of Revenue/Profit Sharing arrangements since they first appeared in France in the first half of the nineteenth century. In the Unites States, companies as varied as Southwest Airlines to Verizon have Revenue and Profit Sharing structures in place. In the real estate industry, other companies have income sharing structures in place, but no other company has a system that shares revenue with you from day one. There is always a catch, an issue, or something you just can’t sell to anyone that takes the time to do even a little research.

What is the Synergy Revenue Sharing model? It is the most significant compensation innovation in real estate history. This system allows every Synergy Real Estate associate, or affiliate broker the opportunity to participate in the revenue they help generate without assuming any financial risks.

Before I get into details I know all the competitors like to say “Were not MLM” but the truth is that any Revenue/Profit sharing that goes to more than one level is MLM, hence the name “Multi Level Marketing”.

Here is how it works,

Every Synergy Real Estate Associate, and Broker associate (agents) is paid 80% there are never any franchise fees (we are privately owned), Junk fees, this fee, that fee, and or surprises. All of our agents earn 5% Revenue Sharing on the agents they refer to us, and 2.5% on the agents they refer (MLM).

We offer full training and support via our online Web Tutorials, Videos, and Coaching. We have designed the Seven Success Systems that we teach based on what each individual agent is comfortable with. Let’s say an agent is working full time and only wants to dedicate 4 hours a week towards Real Estate we will help that agent design, and implement a system that they will give them the best chance for success based on their abilities. The same goes for the agent that wants to work 60 hours a week. What it really comes down to is that if you can listen, take ego’s out of the equation, and work than you will be successful.

What are you waiting for lets get started today!