I heard a long time ago from one of my first mentors that you can feed your ego or you can feed your family — pick one. So what does “net” actually mean? Here are five ways your net is more impactful than a higher split.
Over the years, I have witnessed or have been involved in many conversations with agents who are constantly chasing or looking for a company that will give them a higher split.
Anytime I get asked what my thoughts are on that, I sort of chuckle inside and think to myself “Boy (or girl), do you have a lot to learn.” You see the question you should be asking the broker or leader of a company is not “What is my split?” But instead, it should be “What is my net?”
And, quite frankly, net doesn’t always have to mean money. The veterans and mature business people understand that net is more important than split.
Time and time again, I see agents who make a decision to leave a successful company or team to do their own thing or to have their own company. And what I observe, in 90-plus percent of those cases, is the agent actually ends up netting less money or even worse, spending less time with his or her family (and making less money).
I heard a long time ago from one of my first mentors that you can feed your ego or you can feed your family — pick one. So what does “net” actually mean? Here are five places where your net matters more than your split:
1. Your taxable income at year’s end
Not what your 1099 says, but your income minus your expenses. This is an important one because many agents who chase a higher split are so desperate in their attempt to find it that they forget to calculate what everything else will cost them.
You see, if you are paying a split to a company, you are generally getting something in return. If a company offers a higher split to the agent, there’s no money to offer anything in return, thus increasing your actual expenses. I’ll never forget a conversation with an agent a few years ago … he was sitting in front of me asking what his split would be given his years of experience.
Of course, he asked in an entitled way expecting that he should be favored.
Before I responded, I asked him what his current split is and he responded with “I pay my broker 15,000, and after that I get 100 percent.” I said OK, that’s fair and then asked him what his GCI was last year, and he responded proudly with “$140,000.”
I congratulated him and then asked if he pays taxes. And, of course, his response was “yes,” so I followed it up by asking him what his taxable income is after paying all his expenses, and he responded with (not as proudly) “$72,000.”
I said, “OK great.” And then I pointed out to him that he’s essentially on a 50/50 split, and he started to shrink in his chair and finally got it and said, “What would my net be here?”
Just then, he started to understand what it means to be a business person.
2. Your ability to learn and grow
I have yet to find a discount broker that also offers a training and coaching program designed to increase your net. Want to know why? Because it doesn’t matter how much you sell, they will never make more, so what’s the incentive for them to make sure you succeed? That’s right, there isn’t one.
I know some of you might laugh at this one, but you actually want to be with a company that has a vested interest in every transaction you do. What’s amazing about that is you’ll actually do more because of the support, thus increasing your net.
3. Your support and help resources
I don’t care whether you’ve completed 100 or 1,000 transactions, you will always have a situation where you need questions answered or help with a task.
Generally speaking, companies that offer a higher split have a very lean budget, and therefore, one of the first positions to go or not get filled at all is in the support department.
Salaries are the No. 1 cost of a successful real estate company, and if there’s no money to pay talented staff, unfortunately you are on your own.
4. Your conversion rates will net you more money
Think about this: If you are with a company or team that no one has heard of (and studies say that consumers relate better to companies they recognize), then do the math.
By brand they recognize, I don’t necessarily mean a franchise. There are many teams and independent brokerages that have just as well known names in communities as the franchises that have been around for 30-plus years.
If you go on 10 appointments with a “no name” and 10 with a name that is recognizable, will your percentage of contracts signed be higher? Of course, it will!
You could go from getting 5 out of 10 to 7 out of 10 just from that alone. Pretty sure if you do the math on an extra few contracts, per 10 at bats, your net will be higher.
5. You can actually get more of your time back, which is the ultimate ‘net’
Solo agents or agents with companies that promote high splits just simply do not have the resources to provide the world class systems and people that are there to help you be more efficient.
The nice thing is, once you decide what you want to net, you can actually work smarter and not harder because all of the systems and people have been trained to make your life easier and ultimately give you back more time!
So what is your time worth? $30 an hour? $50 an hour? $100 an hour? Regardless of your answer, I betcha it’s worth more than an extra 10-20 percent!
I hope you take the above thoughts into consideration and more importantly, start thinking like a mature business person and not an amateur agent starving for more commission.
So you have to ask yourself: Are you making the right decision based on your net, or are you making the decision based on your ego?
Jeff Glover is a Realtor with Jeff Glover & Associates in Michigan.