Building a successful real estate team requires four basic steps: building a solid foundation; understanding your value proposition; choosing the right team structure; and finally, deciding on compensation. In this article, Part 2 of a two-part series, we’ll discuss choosing the right team structure and deciding compensation.
Once you’ve got a solid foundation and you understand your value proposition, keep the momentum going. Up next is choosing the correct team structure.
In real estate, there are two main team structures: the Mentorship model and the Leads model. Under the mentorship model, the team leader focuses on personally coaching and training agents. You’re attracting agents to your team because you’re successful and they want to emulate you.
The Mentorship model: a feel-good model
This model feels really great as you watch your agents grow their business and achieve new levels. However, be aware of a huge flaw — known as the revolving door — in this model. At some point, after you have invested much time and energy, your agents will begin to feel as though they’ve learned everything they can from you.
In other words, just when they start making you money and things start to flow every month, they decide they’re ready to spread their wings and fly solo. Two more drawbacks of this model: 1) your business may suffer due to spending so much time coaching and 2) you can’t justify high commission splits since you’re expecting the agents to generate their own business.
The Leads model: a favorite of top teams
The other model is the Leads model, which almost every top team in the country uses. In this model, agents are attracted to your success, but more so because you’re actively giving them leads.
The benefits of this model include immediate gratification. You provide them with leads so they begin closing business quickly. You see a significant increase in your income, and unlike the revolving door of the first model, your agents become addicted to your leads, making it harder for them to leave.
The downside is that this model is very expensive to get started. It requires substantial upfront investments of cash. However, even if it means starting with just one agent for the first year, I highly recommend it.
Why 50-50 splits are fair
The final step in building a great team involves compensation. First, splits matter. One of the biggest mistakes I see team leaders make is not charging a high enough split. They do that because they don’t know how to justify those splits. Think about it this way: With an 80-20 split, your team has to close five sales for the same income you’d earn closing just one sale. Not to mention 20 percent won’t cover the costs of marketing, office space and lead generation. If you’re providing everything, paying all of the bills, and handling more than half of the work to close a sale, a 50-50 split is more than fair.
In closing, be patient when hiring agents. Just because an agent is willing to join your team does not mean you automatically should hire them. If you’re doing it right, you’ll hire one agent for every 10 you interview.