I'm really struggling with this one. I see the comparisons to MLM, and I try to understand the formula. I watch as Realtors are told how they'll have income forever without working? And I probably have misconcetions. Nonetheless, a brief synopsis.
1. Gary Williams wrote a good book (a little elementary in my mind) that described ethics, work habits, other, and hilighted 16 realtors (only 4 of whom currently work for KW as best as I can figure).
2. The book doesn't describe how to recruit, it talks about customer retention, building value, creating lead systems that leverage your time and become an assett.
3. They really work hard on training, but appear to provide little other services.
4. The profit sharing is split first by 50% profit to owner, then a percentage to a group that oversees the company profits, then down to the agents based on their recruits production.

The only things I can find that report profit sharing have to do with gross nation wide numbers by the number of agents, and a gentleman on the east coast who said he had 42 agents in his downstream, and made $7,000 last year. Because the number for the "Profit sharing" isn't given for the formula, owners, overseers, etc, I begin to draw these conclusions:

If I as a broker charged what KW seems to, with little services except training, and overseeing the companies profit, I'd be very profitable and would be glad to share with my agents. Kind of like over paying the IRS, so I'd get my money back at the end of the year, an interest free savings account.

If I as an agent worked as hard, and turned 42 leads, my profit would be much greater than recruiting 42 agents.

From my perspective (as a borker), I sell a service. My service is what I provide to agents to be effective, profitable, well trained, motivated, and have tools in their hands that will help them be Realtors. I believe firmly in rewarding Realtors who help bring in a prospective realtor by sharing the income made from that Realtor. It just seems to me that between the Gary Williams book of being successful, and the practice of "Recruit all you can to make us big" something was lost in the translation. It seems that Big Recruiting won out over quality recruits. From what I've seen KW trains, and recruits, yet individual average production is much less than other quality programs.

And, I am biased. Can any one help me see what I'm missing?

Jeeze, just reviewed my spelling. My mind was working faster than my fingers....

I am sorry, i just read that whole thing and I am still unclear as to what your question exactly is.

My question is, I'd like to understand their profit sharing. We've had a large number of agents who believe they will be able to retire in just a few years (like $10,000 profit sharing if you recruit a single mil producer). If I loose agents for this reason, I want to understan the true mech, and let them make an informed decision. So the question is, what is realistic number that an agent can get? With only a few recruits?

some people swear by it, i have experienced it personally and find it a hoax, here it is in a breakdown. If you are an agent for KW and get someone else to come aboard, you get rewarded, if and only if that particular office that referred agent works in is profitable. KW sets aside some amount, say %2 for example and gives that to their agents who helped bring them agents. I referred two people to KW and got a whopping $40 dollar check and havent seen one since. They make it confusing for a reason, becuase they dont want the ignoramouses understanding it. They just want people to bring them bodies with credit cards. I found it impossible to run my business with KW taking 36% of my profits plus their montly office dues, so I left. Businesses cant be run like that. Instead of offering referral programs, just offer your agents higher commission amounts and stop playing games like KW.

It works like this:

First each agent's contribution is figured out as a percentage of what they contributed to the income of the center for the month. Let's say Joe 's split to the company equaled 2,000 (to keep numbers remotely clean). Let's say the market center's gross income for the month is 50K. Joe contributed 4% to the gross income of the company. Remember this as it will be important later.

your split with the company first goes to pay expenses and then to the profit sharing pool for your market center.

I don't have it in front of me and the numbers get a little jumbled around because I've played with them a lot, but the breakdown is something like this:

After approved company expenses are paid (rent, utlities, etc.) the rest left over is the gross profit pool per market center.

The profit pool is divided using a scenario like:

25% of the first 3,000 of the owners' profit
35% of the next 7,000 of the owners' profit
50% of anything over 10,000 in owners' profit.

in a hypothetical world....lets say the company profitted 25K for the month. The pool would be tallied like so:

25% of the first 3,000 = $750
35% of the next 7,000 = $2,450
50% of the remainder = $7,500

The gross profit pool for the market center is $10,700.

Now...since Joe earlier contributed 4% to the gross income. 4% will be his personal profit pool (4% of 10,700 = $428)

Now that 4% get's split through the downline through a formula that I don't have in front of me so I'll guess and be reasonably close.

direct sponsor 50% = 214
level 2 gets 10% = 42.80
level 3 gets 5% = 21.40
level 4 gets 7.5% = 32.10
level 5 gets 5% = 21.40
level 6 gets 10% = 42.80
level 7 gets 12.5% = 53.50

If I did my math properly then those numbers add up to 428 bucks.

Don't forget that KW caps peoples personal incomes at 18-20K depending on the market. Once they hit that cap they won't be contributing to profit share anymore.

I read somewhere that you can expect to receive around 2K per year per direct sponsor of someone who hits their cap. Although I can't testify to that it sounds about right to me. I don't think profit share is a true retirement plan, but I think of it like a strong bonus system. Also, if you can make 18-20K a year in profit share....it's pretty much the same as being on a true 100% split.

I wrote this really fast because I have to leave, but if you need me to clarify my explanation please let me know

Thank you so much. The most complete answer I've ever seen. If I may think out loud. Refer to VM's comment about the 36% given up vs a 100% agent. This goes to the core of my beliefs. I think that a broker should be chosen on the basis of the services offered. I've based my company on offering Technology, Office space, fast color laser printing (30 ppm duplex), web site, web based appointment desk, personlized graphics, advertising to name some. Yet, it appears that the KW here is out recruiting everyone. There split isn't much better or worse than others, and most of the agents they are attracting are mostly new or mid level producers. Fact is, from what I've gotten from the MLS, their agents are averaging 3 sides each for the last 6 months. My company has averaged over 6 sides per agent the last 6 months, but I can't get agents to talk to me. The only thing I ever hear about is:
a) the profit sharing, or
b) Christian/family values.

Is my basis wrong? Do we brokers sale a service to the agents? Should we concentrate on trainging, 100%, charge for each thing?

I've tried to come up with competitive splits, and include ALL costs in those splits. Easy, no accounting headaches, no bean counter mentality. Should I be shifting off that and moving another direction?

That's a tall order of questions that I think only you can decide.

The thing I like the most about KWs setup is that it promotes a TEAM environment. Everyone wants the company as a whole to do well because it means more profit share for everyone. As a mortgage broker, I get to spend a lot of time at various RE offices and the KWs are always the most friendly and vibrant.

The feeling I get from other offices is that they're going through business like it's a poker game. Agents don't want to talk too much for fear of giving other agents an edge.

I think if you can duplicate the "charge" I get from setting foot in the KW offices then you're company will do outstanding.

I'm not sure what to attribute that to, and again I'm in a hurry. I'd like to think outloud later and see what people think.

On a side/personal note for a situation I'm dealing with now. For future reference, if you're going to take a buyer out and get them to purchase a property. Please get them to sign a loan application sooner then 5 days into a 30 day escrow. I'll sleep a lot easier at night. Also, business bank accounts and personal bank accounts are treated far differently under different investors. In fact, most don't allow the use of business funds for a personal purchase even if they are sole owner of the business. Please don't complain to your mortgage guy because the borrower has cash...just not in an account that he can use. Oh yeah, antiques & tapestries do not count as liquid assets no matter what the borrower tells you. Ok....I'm done. I feel a little better now.

HAH, glad you'll sleep better. Wish everyone could be up front about finances, assets, etc. Hate finding out about child support the day of closing!! And thank you for the input. Fact is, maybe I don't want the agent looking to get rich quick. I want those who know that hard work bring you reward.

You're Mike Volkin posting under yet another screen name, aren't you?

I don't know if he is or not. I understand what he's saying about playing games. My approach is the split is the split, and everything is included. If you don't want the services, I'll negotiate, but I don't want the time or software to make all the accounting and billing for each service. Seems to me the KW plan of overseeing the company profitts, figuring if there is a profit, splitting, who gets what... on and on. Lower the split, or provide services. Why charge the 70-30 and not provide anything?

jflynn, its amazing you are so unwelcome everywhere you go. Yes, it is me, posting under a different user name because i started my own company and didnt want my old name, is that ok with you dad, i sure hope i have your permission

VM, wow that had some bite to it.

Maybe he's busted your chops a bit before (I don't know) but your reply seemed a bit harsh.

he busts my chops everytime i say something. Also, when someone has a question, instead of answering it he ALWAYS says something smug or sarcastic. I am tired of him, he doesnt contribute to this board at all and uses this board to make fun of us

morningshw,

I have only heard of a few KW agentsactually making decent residual income under the profit sharing plan. Most have gotten checks for pennies. But, you are right, agents are lured there by the smoke & mirrors of extra income & retirement income. Most see it for what it is when they get in there & experience it.

I do run up against them too in my area (although they aren't very big here). I try to explain it like this:

1) The *extra* money you are getting is the money you gave them from your split anyway. So basically they are giving you back a portion of the commission you already gave them - no matter how it's explained, that's essentially it. I offer a higher split than KW here so why not come here & get it up front to invest in how you see fit.

2) I explain that I would much rather have them out prospecting & growing their business rather than focusing on recruiting. I had looked into an Exit franchise & determined that I didn't want the agents recruiting for me to earn extra money. I want them to bring in agents they would want to work with. I also have them think about how they would feel knowing they were being recruited to work for another firm because the agent received a portion of their hard earned commission if they joined?

And you also have to realize that there are some that you just can't compete with. I have a few firms here that no matter what I do-the agents will never leave. It's like they are brainwashed. Very strange but that's the reality of it. You just have to weed through the agents & find the ones that see value in what you have.