As a property practitioner, you are either dependent on your company or you operate independently. In this post, we will look at the pros and cons of these business models, and then investigate the next evolution thereof, the interdependent model.
The dependent agent
Needing the support of something or someone in order to continue existing or operating.“Dependent” – Adjective (Cambridge Dictionary)
Property professionals at traditional agencies rely on their agencies to become and stay successful. The principal provides office space to her agents, often in high-traffic locations. This is to catch the so-called “walk-in” business that used to be so important in the pre-Internet era.
The traditional agency also provides its agents with office tools, marketing materials consisting mainly of business cards and boards, and leads that are mostly generated on the agency website. In some cases, the principal takes a percentage of the commission – over and above the agent's usual split – when a lead from the agency's website to an agent results in a transaction. Whatever the case may be, the agency is essentially selling leads to its agents for income. In extreme cases, agents at these agencies are discouraged or even disallowed to generate their own business leads. The agent is completely dependent on the agency for new business.
Key take-away – The agent takes value from the agency.
In return for the value the agency provides to its agents, the agent must pay a substantial amount of her commission income to the agency. Generally, agents at traditional agencies must share 50% of their gross commission income with the agency. Experienced and higher producing agents at these agencies could earn more generous splits such as 60/40, 70/30 or even higher in some cases.
But there's a snag!
Unfortunately the agent keeps paying a portion of her income to the agency on all her sales. In fact, the more you sell, the more you pay! Although a higher producer pays much more money to the agency than a lower producer, the agency does not provide much more value to the higher producer than it does to a lower producer. Like the high producer, the lower producer also gets business cards, boards, leads from the company website and so forth, albeit in smaller quantities.
In a sense, therefore, top agents at these traditional agencies are penalized for selling more than their colleagues.
Due to the fact that the agent will continue to pay a portion of her income to the agency, the agency or principal gets the upside of any above-average production and financial gain. Never in complete control of their own business decisions, agents at these agencies have fewer opportunities to build wealth.
Key take-away – The income is shared between the agent and the agency.
Work / life balance
In the traditional business model, the principal controls the agent's time. The agent is dependent on the agency for his next lead and next transaction, which creates an employer / employee relationship, regardless of the wording of the agreement between the agent and the agency. As an example, agents often have to do office duty (also called floor time) to keep the offices open.
Key take-away – The agent is not in control of her time, which prevents her from achieving work / life balance.
Are you working in the traditional model? Are you happy there? For more information about other business options available to you, pop in for a quick business consultation.
The independent agent
Not influenced or controlled in any way by other people…“Independent” – Adjective (Cambridge Dictionary)
At the opposite side of the spectrum is the independent agent. If not completely on their own, independent agents can be found at high-commission agencies. They essentially only rent the agency's brand name and online tools, but are self-reliant and on their own for the most part.
Independent agents are independent contractors so they get limited support from the agency. Agents are responsible for mostly everything ranging from their own office space (with home offices being very popular), marketing, legal and compliance, and management of their businesses.
Agents who are successful in this independent model are usually at a higher level of production and experience. They have often received the required training and experience somewhere else, and now they want to earn a much higher percentage of their gross commission income than the agent at the traditional agency. There is not much cooperation between agents as everyone builds his or her own business with minimal input from the broker or principal.
Unfortunately, less experienced agents with lower production are also lured to this model by the higher commission splits on offer. The lower level of support provided by the agency makes it very hard for this type of agent to become successful. They quickly discover that increased freedom requires increased responsibility and enough experience to go it alone.
Key take-away – The agent holds the value, not the agency.
Independent agents are drawn to the high commission splits offered by these agencies. However, because they are alone and get limited support from the agency, they have to do most of the things their real estate businesses require. The reality, however, is that there is only so much that a lone wolf can accomplish on his own. As such, the independent agent's income and opportunity is limited to what he can accomplish on his own or within the confines of his own business.
As you can see, this is the exact challenge that many independent agencies run into too. Although many independent agencies are run by brilliant people, the challenges posed by the changing real estate and tech landscape alone make it very difficult to stay competitive as an independent agency. It will be interesting to see how smaller independent companies tackle these challenges effectively over the next few years.
Key take-away – The agent's income is limited to what she can accomplish on her own.
Work / life balance
A substantial percentage of high producing property practitioners are independent contractors. However, to be successful as a lone wolf requires inordinate time and commitment from them. Unfortunately this means they do not have a great work / life balance because their work controls them.
Key take-away – If an agent's business is keeping her too busy, she is not leading a life by design.
Are you operating as an independent agent? Are you satisfied with your income, your work / life balance or the level of support you get from your company? If not, pop in for a quick business consultation.
The interdependent agent
The quality or condition of being interdependent, or mutually reliant on each other.“Interdependence” – Noun (Dictionary.com)
At Keller Williams, you are provided with an opportunity to maximize your results with the power of leverage. We believe that together we will achieve more, so associates and the company share a mutual interest in the company's success.
If you win, we win.
Stating that we share a mutual interest in our collective success is not just lip service at Keller Williams either. Associates get generous commission splits right from the word go, and the commission they pay to the company out of their sales gets capped at a certain amount per year.
To make it possible for agents to keep this much of their hard-earned commission for themselves so that they split no more than the small cap amount with the company each year, a typical Keller Williams Market Centre partners with a larger number of associates. For your maximum benefit, our margins are lower so our numbers are higher to ensure that the company is still profitable.
Keller Williams associates who are instrumental in attracting productive agents to the company will be rewarded with passive, potentially long-term income without investing any capital. Although our agents do not assume financial, legal or management responsibilities, they are rewarded for growth with a portion of the revenue, as if they were owners. You can be a part of the company’s success, and you will be rewarded through the Growth Sharing Plan.
Key take-away – Associates and the company share a mutual interest in their collective success.
Regardless of your level of talent and drive, one person can only do so much. Just ask the independent agent. Experience has shown that there probably isn't a busier person in the world than the agent who sells two to three properties a month with no assistance.
But what if you want to do even more? The models, systems, technology solutions, training and support provided by Keller Williams are designed to help you break through any ceiling of achievement.
Your business can be as simple as one that consists of you alone, considering that you are supported by the largest real estate company in the world with the best training available in any industry. Or, if you decide to build a real business in the true sense of the word, you can grow your business in Keller Williams on a structured path to something like this:
If this looks daunting, don't worry. We will provide you with a path to achieve this without you having to assume all the legal, financial and management risk. And remember, this is an opportunity, not a requirement. It's up to you where you decide to take your business.
We will be there with you every step of the way.
With the Growth Share and Profit Share opportunity, you can also earn passive, potentially long-term income without investing any capital. This second stream of income exponentially increases your earnings.
Key take-away – Associates have an unlimited opportunity to grow their income in the interdependent model.
Work / life balance
If you do not have a cleaner, who is the cleaner? You are! If you do not have somebody to wash your car, who washes the car? You do!
Without leverage, your life will be focused mainly on your real estate business, if you want to achieve at the highest level. The beauty of the interdependent model is that it allows you to get your time back with leverage. You can leverage the extensive support provided by a Keller Williams Market Centre, or you can leverage your team if you have begun to grow a team.
The net effect is that you get your time back. Your business does not have to run you, if you unlock the power of the interdependent model.
That's a life by design!
Key take-away – Associates in the interdependent model have work / life balance.
Where are you?
In what business model are you operating? Are you happy there?
If not, pop in for a quick business consultation. We would love to help you start living a life by design.
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