Profit Sharing Is Key to National Franchise's Success

Profit Sharing Is Key to National Franchise's Success


Profit Sharing is Key to National Franchise's Success

Keller Williams Realty Franchise expects to sell $1.75 billion worth of homes — and it expects to pay $2.75 billion in profit sharing funds to its sales associates in 1999.

This leaves no doubt that Gary Keller and Joe Williams, who founded the company in 1983 whenthey were still agents, have stuck to their goal: Building the careers of the people who would buildthe company.

Today, their profit sharing concept has helped the firm grow into a national franchise which Success Magazine ranked 84fh out of more than 2,600 franchises. They now have 100 offices nation-wide and plan to grow to 500 offices with 50,000 agents.

While other real estate firms, faced with soaring business costs, say that high commissions to agents may force them to close their doors or sell, KellerWilliams Realty plans to help 5,000 agents become millionaires. (In addition to profit sharing checks, agents receive 100 percent commissions!)

"We are probably the only corporation in America that is absolutely an advocate for the agents. We believe the business is owned and drivenby the agent," says Mo Anderson, the film's president and chief operating officer. "Our role as the owner is to support the entrepreneur-agent. And if we truly are an advocate for agents, then obviously, we'll treat them as business partners.
Agents Recruit Agents

The key to Keller Williams' profit sharing, concept — that agents are paid for recruiting other agents into the system —has caused critics to dubthe firm "the Amway of Real Estate."

Agents receive a profit sharing check based on therecruits' contributions to profit. That means mat if arecruited agent earns no commissions, the agent willproduce no profits that can be shared. As a result,agents look for the best possible candidates to recruit.Anderson says that other unique aspects of thefirm's profit sharing program are:

• There are no geographic recruiting boundaries.Agents can recruit other agents literally anywherein the world where there is a Keller 'Williams office. For example, an agent vacationing in one state canrecruit one working in another state.

• Agents continue to receive profit sharingchecks as long as the recruited agents continue tolist and sell homes even after the recruiting agentsretire from the business.

How Profits are Shared

Keller Williams' profit sharing program has twoparts:

1. Each franchise office, called a "market center," determines how much profit is available to theprofit sharing pool. In major markets, the formulacalls for 25 percent of the first $2,990 of net profitand 35 percent of the next $8,250 of net profit to becontributed to the pool. Then 50 percent of all profits in excess of $11,240 also must be added to theprofit sharing funds.

2. Profits are distributed each month to agentswho have recruited other successful agents. Theirshare of the profits is in direct proportion to theactual closed monthly production of the recruit. Tenpercent of the profit derived from a recruits' production is given to the recruit. Fifty percent of the remaining balance goes tothe recruits' sponsor and the remainder is distributedin various increments to the next six levels ofrecruitment (me person responsible for recruitingthe direct sponsor, that person's sponsor, and so on). The financial benefits can be significant. Anderson notes that one husband and wife team builttheir Keller Williams franchise into a big enoughsuccess that they have been able to open sevenother real-estate related businesses. This year, thefranchise alone increased sales by $10 million eventhough the couple have not listed or sold a homethemselves in two years.

Provide Great Training

Gary Keller emphasizes that Keller Williamsprovides training and consulting to agents to helpthem become successful.

"We believe the agent's brand name is the mostimportant brand name in our company and that theKWR brand name is secondary" says Gary Keller. "Our strategy is to lift up our people and they'llnaturally take the company along with them."

An agent's number one priority should be developing her or his brand name. Keller notes that whenanother husband and wife team left a competitorand joined a Keller Williams franchise they boostedtheir sales volume to $70 million from $40 millionin one year.

"So whose brand was the most important to their careers? Obviously, the brand name they brought with them to KWR."

Leadership Council

Keller likes to say that his franchises are run asdemocracies, and that is obvious in the company'sAgent Leadership Councils whose members arecomprised of agents and managers. Four councils,national, regional, city and local, act as the decision-making bodies of the firm.The councils develop the company's policies,guidelines and services. In fact, the original councilinvented the profit sharing plan.

Other Advantages of Profit Sharing

The firm's profit-sharing plan has resulted in otherbusiness advantages, Anderson says, including:

• The broker-owners must follow strict budgetsbecause over-expenditures come out of the owner'sshare of profits. The profit sharing pool-cannot bespent on business expenses.As a result, broker-owners and agents alikefocus on the bottom line to maximize profitability.

• All franchises must operate on the same accounting system. This facilitates the calculationand distribution of profit-sharing funds, and alsomakes it possible to analyze the performance ofeach company and fine-tune operations toincrease profits.

• Profit sharing keeps agents constantly on thelookout for good recruits.

• Profit sharing fosters trust because the company's policy includes keeping each broker-owner'sbooks open to all agents with the franchise.

"If your profit share check is directly related toprofits, you'll want to see just exactly what thoseprofits are," Keller says.

Contact: Mo Anderson and Gary Keller, KellerWilliams Realty, (512) 327-3070.