Exit Realty founder and chief Steve Morris cooked up the idea for the company’s residual business model in his sleep one night about 20 years ago. He went to bed asking himself how a realty company could outflank RE/MAX, which he thought was the industry’s top dog at the time.

He woke up with his answer a few hours later.

Exit Realty founder and chief Steve Morris cooked up the idea for the company’s residual business model in his sleep one night about 20 years ago. He went to bed asking himself how a realty company could outflank RE/MAX, which he thought was the industry’s top dog at the time.

He woke up with his answer a few hours later.

“I ran out to the dining-room table and wrote it down. For about five weeks, I was six feet off the ground, but then I had to wait 13 years before I could employ it,” Morris said.

Competitors say that Exit Realty is a multilevel marketing scheme, but Morris characterizes it differently. He says Exit Realty incorporates what he calls a “third dimension” to realty brokerages. The first two dimensions are listings and sales, and the third is a single-level residual model that enables brokers and agents to profit from new agents they recruit into the company.

Exit’s business model is based on residual incentives. Agents recruit others into the company and earn up to 10 percent of those recruits’ gross commissions, up to $10,000 per recruited agent annually. The company’s number of agents grew 71 percent last year and its residual formula paid out $9.1 million, according to Morris. The highest amount one individual earned from residuals was $274,000. The most agents one individual brought in was 74.

Whatever the business model, do not underestimate Morris’s excitement about his company’s growth. He believes he’s onto something good, and he maintains a razor-sharp focus on executing his business plan.

Morris spits out the smallest details without even flexing a brain muscle. He recalled the exact time–3:17 a.m.–when the idea for Exit Realty hit him. He backs up his stories with statistics from studies he’s read and never stumbles over numbers.

The Canadian native was a real estate agent with RE/MAX in Toronto at the time. What he wrote down late that night has since become a working business and expanded into 7,200 sales agents in nearly 400 offices throughout the United States.

Morris grew up just outside of Toronto. As a young boy, he spent a lot of time around the small restaurant his parents owned. He attended high school in Oakville, Ontario, then went straight into stock brokerage after graduation. He never attended college.

“When I finished school, I didn’t know what I wanted to do for the rest of my life,” he said.

Exit Realty first entered the United States in 1998 and sold half of its regional franchise rights within a year. Franchise rights are now about 75 percent sold and Morris expects to sell the rest within a year.

“It’s working, there’s no question. The secret’s out,” he said.

After trading stocks at the Toronto stock exchange for six years, Morris landed a job in the cosmetics business with Revlon, where he said his interest in advertising lit up. From there, he entered the life insurance business, where he honed a few ideas about residuals. He’s spent the last 28 years in real estate.

Morris managed to launch Exit Realty without a bank loan.

“I started broke…It was Sept. 3, 1996, after about six-and-a-half years of recession,” he said. “People thought I was crazy. They thought the name was crazy.”

He chose the name “Exit” because he thought it would be a brilliant marketing scheme since the average person sees about 250 exit signs each day. And he likes knowing his brand name is located above doorways inside his competitors’ offices.

The company’s residual program, which enables agents to keep earning money from their recruits even after retirement, also could be an exit strategy for older real estate agents. Retired agents can continue to recruit for the company and earn money from their recruits’ commissions long after they’ve left the business.

“Now the real estate agent has a future where there never was a future before,” Morris said.

He intended to storm the United States after conquering Canada and plant offices from coast to coast. The company started in the East Coast and worked its way through what Morris called the “power states” of California, New York and Texas. Exit now is selling regional franchise rights in Wisconsin, Illinois, Indiana and Ohio, then it will fill in the Midwest.

Morris attributes Exit’s success to his “eat what you kill” philosophy and the aggressive nature of his team.

“We had to keep moving and pounding the pavement,” he said.

Morris travels to the United States three days a week to speak to crowds of about 100 people each. He said it’s all just part of pounding that pavement.

Send tips or feedback to Jessica@inman.com or (510) 658-9252 ext. 133.

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