Ethical Homes

Keller Williams’ unique business model, lauded as the “most innovative” one in real estate by Inman News, is one that every serious real estate agent should at least consider.

It’s a model built on a set of core principles that start with the assumptions that there are more important things in life than selling real estate, and that it’s possible to do business in a way where everyone involved comes out a winner. The result is a real estate company that really does things differently from any other one that I’ve encountered, in a variety of ways:

1. Passive Income through Profit Sharing

   In order to reward agents for contributing to the long-term growth of Keller Williams, just under 50% of all profits at KW offices are returned to agents via profit-sharing. Better still, after 3 years with Keller Williams, your share of the profits becomes permanent, and turns into a passive stream of income; there are agents who no longer work for Keller Williams who will continue to earn thousands of dollars per month for the rest of their life.

2. Capped Commission Splits

   KW offers a flat 70% commission split, and the amount of your commission that you have to share with the company has an annual cap; the specific cap amount varies from franchise to franchise, but in the DC area is currently around $30k/yr—after you’ve given that much to the office, you don’t pay them a dime for the rest of the year. How does that compare to more traditional graduated-split systems? Here’s a fairly typical graduated split from a DC-area brokerage:

   Level	Salesperson YTD Income Between	Percentage of Commission Kept
   1	$0-$7499	50%
   2	$7500-$14,999	52%
   3	$15,000-$29,999	56%
   4	$30,000-$44,999	60%
   5	$45,000-$59,999	64%
   6	$60,000-$74,999	68%
   7	$75,000-$99,999	72%
   8	$100,000-$124,999	76%
   9	$125,000-$249,999	80%
   10	$250,000+	85%

   When you look at the GCI that an agent has to bring in to meet the minimum criteria for each level, and compare it to the income that same agent would earn under the KW system or various flat-rate systems out there, the difference is impressive:

   GCI	Agent Income Under Different Plans
   	Graduated	Flat 70%	Flat 75%	Flat 80%	Flat 85%	Flat 90%	Keller Williams Capped 70%
   $15,000	$7,500	$10,500	$11,250	$12,000	$12,750	$13,500	$10,500
   $29,423	$15,000	$20,596	$22,067	$23,538	$25,009	$26,480	$20,596
   $56,208	$30,000	$39,345	$42,156	$44,966	$47,776	$50,587	$39,345
   $81,208	$45,000	$56,845	$60,906	$64,966	$69,026	$73,087	$56,845
   $104,645	$60,000	$73,251	$78,483	$83,716	$88,948	$94,180	$74,645
   $126,703	$75,000	$88,692	$95,027	$101,362	$107,697	$114,032	$96,703
   $161,425	$100,000	$112,997	$121,068	$129,140	$137,211	$145,282	$131,425
   $194,319	$125,000	$136,023	$145,739	$155,455	$165,171	$174,887	$164,319
   $350,569	$250,000	$245,398	$262,926	$280,455	$297,983	$315,512	$320,569

   The Keller Williams split beats the graduated system in every case, and also provides a higher split than flat-rate systems for higher-producing agents (who are the most likely ones to be in a flat-rate system in the first place). In fact, the only situation I can think of where the KW split leaves one worse off is for high-producing agents who are determined that their business not grow any more than it has.

3. Compensation That Encourages Team Success

   At most brokerages, agents are at best friendly with each other, and at worst actively competing against each other. Keller Williams, on the other hand, actually makes it more profitable for agents to be actively cooperative, because of the same profit sharing and capped commissions that also provide agents with more passive and direct income. KW’s business model assumes that each franchise has a core of “cappers”—agents who are bringing enough business in to the franchise that they quickly reach their annual commission split cap—and the profitability of a franchise is strongly correlated with the number of those cappers. Since the pool of money from which an agent can receive profit sharing is based on the annual net profits of a franchise, every agent has a huge financial incentive to make sure that every other agent in their office is successful, because any agent who isn’t a capper is, in effect, costing more than they are bringing in, which means less profits to go around; speaking from personal experience, I’ve never seen a brokerage where so many agents share leads, cover for each other, and offer each other great advice without worrying about whether they are losing money by spending the time to do so, because it’s actually in their financial interests to do so.

4. Organizational Effectiveness

   Most real estate offices are run by a managing broker, who is usually a former top-producing real estate agent; unfortunately, 95% of running a real estate office has nothing to do with being a top-producing real estate agent. The typical managing broker’s responsibilities include reviewing contracts, recruiting new agents, training existing agents, keeping records, managing finances, and solving problems and putting out fires for agents, all while planning the growth and development of the office as a whole; anyone who has been at an office where the managing broker is responsible for all of that knows just how hard it is for one person to juggle all of those responsibilities, and how much the lack of the managing broker’s full attention to any one of those areas can hurt the productivity of the agents in that office.

   At Keller Williams, on the other hand, each Market Center is run like a real business, with specialists in each area making sure that nothing falls through the cracks; at the franchise that I’m part of, the breakdown of responsibilities is:

   • The Managing Broker reviews contracts and transactions
   • The Director of Career Development handles agent training
   • The Market Center Administrator takes care of all of the finances
   • The Director of Agent Services handles all of the office infrastructure
   • The Team Lead is responsible for recruiting and for resolving short-term agent issues
   • The Agent Leadership Council (or ALC) is responsible for making decisions for the franchise as a whole that will resolve any long-term agent issues

   The end result is an organization that just works, allowing agents to focus on doing what they do best—helping consumers to buy and sell homes. (And for those agents who do want to expand their horizons, that Agent Leadership Council that I mentioned is their opportunity to learn about the business side of things—the ALC makes all of the big decisions for the office: whether or not to make large capital expenditures; what companies to enter into business partnerships with; even planning charity and social events.)

5. Business Development Training

   Many agents have a love-hate relationship with their chosen profession; there are great things about it, and it can be very rewarding financially, but there’s also tons of things that most agents hate to do but have to put up with in order to survive. Keller Williams teaches you how to continue doing the things that you love, and to outsource the parts of the job that you hate.

   KW has spent years analyzing the systems, habits, and even behavioral and personality profiles of top agents around the world; a quick overview of their findings can be found in Gary Keller’s book The Millionaire Real Estate Agent (known around the company as The Red Book), but the bulk of the results of that research has gone into their KWU training system; they have training on real estate basics for new agents, of course (including a great month-long boot camp for kick-starting your business), and ongoing training for experienced agents (including weekly conference calls where those Millionaire agents discuss the secrets of their success), but where they really shine is in how they train you to turn your real estate job into a real estate business. The proven systems that they teach you show you how to focus on the parts of the job that you do best, and how to find (or hire) help to take care of the rest; many franchises even have an in-house transaction coordination consultant to whom agents who are struggling with the transition from working by themselves to building a team can offload many of their more basic needs until they are ready to make those first key hires.

   As someone who often teaches courses myself, and as an inveterate perfectionist, I am probably one of the harshest critics that I know of training programs of any sort. My friends and colleagues are usually used to me returning from some course or another complaining that 90% of the course was a complete waste of time; to both their and my delight, though, I often return from KWU courses praising them as some of the best training I’ve ever been to, and the range of classes they offer beats any other brokerage I’ve seen, as you can confirm for yourself by looking through the online KWU course catalog.

   And the best part of it all is that, even though some of the training does cost money, like everything else at KWU it’s designed to earn you lots more money in the long run: systemetizing your business according to the KW model makes it easy to sell it when you retire, or for those who truly follow the KW model and grow their business through the seven levels that of development that it describes, you can turn your business into one where you don’t have to sell it to make money—it will be self-sufficient enough that you can walk away and pursue other interests, while it continues to earn you passive income.

6. Ownership Opportunities

   Although it is relatively new to the mid-Atlantic region, Keller Williams is the fourth-largest real estate company in the nation, and is rapidly expanding in this area—and one of the great advantages of joining is that top-producing agents (i.e. cappers) have the opportunity to buy ownership shares of new area franchises as they open, again creating passive income. The managers of the particular franchise group that I’ve joined believe very strongly that nobody who doesn’t work with Keller Williams should be an owner of a franchise, so they also have a “buy-back” policy, where they will re-purchase the shares of agents who leave the Keller Williams family entirely (relocating to another franchise in another part of the country is fine); in effect, that gives owner-agents a guaranteed return of their initial investment, and as a result makes these ownership shares remarkably low-risk given the high profitability of the franchises. (Obligatory legal disclaimer: I’m very careful about where I put my money, and after spending hours poring over the finances of three KW franchises, I was convinced of the value of this ownership opportunity; I’m not a financial analyst or investment advisor, though, and nothing I say about investments should be acted on without doing your own research. Past performance is no guarantee of future results; all investments involve different degrees of risk, so you should be aware of your risk tolerance level and financial situation at all times, and go over the numbers yourself to make sure that any investment that you are considering makes sense for you.)

7. Wealth Building

   I’ve mentioned passive income multiple times when discussing Keller Williams, because it really is one of the ways that KW sets itself apart from any other brokerage: in some ways, the focus of the company is as much about teaching agents how to leverage their real estate skills so that they can make themselves financially independent—and thus free to pursue more important things in life—as it is about providing a brokerage through which to practice those real estate skills in the first place. That’s why, for example, they recently applied the same research and analysis that they used in developing the Red Book and created the new book The Millionaire Real Estate Investor (aka The Blue Book); that’s also why they have twice-weekly conference calls discussing real estate investing and “wealth building” in general.

Intrigued by what I’ve described? Feel free to drop me a line and I’d be glad to answer any questions that you might have. If you’re interested, you can also listen in to the KW Wealth Building Wednesdays conference calls, where members of the KW community discuss wealth building opportunities at Keller Williams; the call is held every Wednesday at 3pm Central time, and is open to the public by calling 512-225-3011 and entering access code “87647#” when prompted.