Why the 'Revenue Share Model' Will Replace the 'Profit Share Model' in the Real Esta
Updated: Jan 20, 2021
Many great things have come from the profit share model, yet the agents involved have not been top priority all along. Agents have built big teams and have collected profits and awards, but are short-changed in the process.
One large company, in particular, has cornered the market on the profit share model. When agents create teams they are eligible for the profit share program—if the broker doesn’t decide to spend the money first. Meaning, the broker has the option to deduct company expenses from the company profit before it elects to pay out in profit share.
The following is a list of expenses a broker can spend money on prior to profit share payments: taxes, wages, marketing, and insurance premiums to PR and travel (among other approved expenses). After expenses are paid, the broker must consider the remaining profit to pay out to agents.
The next generation of brokers and agents are taking note as new companies emerge with upgraded models. Agents can’t be blamed. For the longest time, it was the best option available. Further, they may have not been (and still may not be) aware they are being short-changed. So, what are the best solutions for you?
1. Educate yourself on the two models. Profit share is good, but revenue share is great. Unlike the profit share model, revenue share is predictable and certain. So, how does a revue share model work in real estate? When an agent you recruited closes on a transaction, you receive part of the commission during commission check processing. With profit share, the agents you recruited pay into the brokerage, whatever profit the brokerage has at the end of the quarter/year is then rationed out to the agents however the broker see's fit. If you were a top producing agent and have added value to the brokerage—more-so than others—you won't necessarily be directly compensated for your efforts. Whereas with a revenue share model, you get to profit directly from your contributions to the brokerage. For someone who is looking for more certainty in his or her life, and more clarity for the future, the structured revenue share model is by far the way to go. There should be enough allocated for broker expense through the system to provide the broker more than enough to operate a thriving brokerage and still pay the agents their cut upfront and in full. Below are two graphics that further illustrate the two models.
2. Determine what you want out of your real estate career. What do you want from your career? Is recruiting for you? Do you want to just sell real estate without building your team? Do you want to own your own office? While there's no right or wrong, knowing what you want is critical. If you want to own an office, there is a lot to take into consideration including additional professional and personal rewards (we'll save that for a different article, or contact me directly to discuss). If you want to build a team, create a legacy, and have predictability, certainty, and reliability in your life, the revenue sharing model is for you.
3. Find the company that offers you the best support and go to work. There are many companies, but not many of them offer revenue share. So, while you consider the handful of companies that do offer you this amazing opportunity, make sure they'll support you in all areas of your business and in all stages of your career. Other items to consider are education, agent support, transaction coordination, CRM, management software, broker access, office locations, reputation, and more. It’s not just revenue share that will make you successful. It’s the opportunity to thrive in all areas of our great industry and finding a company that supports your journey.
Hopefully a few nuggets from this list resonate with you and help you consider what may be a better option for you. Our industry is amazing; there's so much opportunity—let’s make sure we are spreading the knowledge and making things better for our industry, creating a legacy for the next generation of brokers and agents.
If you would like to learn more about City2Shore’s revenue share program (Real Estate Advantage Plan) visit: city2shore.com/franchise and submit your information for a confidential conversation.