5 Reasons Agents Should Stop Focusing on Split and Start Focusing on Net.
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, either in terms of marketing, office space, training, or some mix of perks. If a company offers a higher split to the agent, as a general rule the company has less money to offer the agent anything in return, thus increasing the agent’s actual business expenses.
2. Your Ability to Learn and Grow
There is yet to be a high split, low cap commission model 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. You want to be with a company that has a vested interest in every transaction you do - it’s called the lattice effect.
The lattice effect in the real estate industry means that you will go further, faster when you have something to wrap your “stems” around. In this case, the fencing is the brokerage or team that is continually offering training and coaching (because they have a constant vested interest) and the plant is the agent. The more training and coaching, the higher the fence, which means the taller the plant. The taller the plant, the more net for the agent.
3. Your Support & Resources
It doesn’t matter 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 to not get filled at all, is in the support department. Salaries are the largest cost of a successful Real Estate company and if there's no money to pay talented staff, unfortunately, you are on your own. By the way, this is not just limited to administrative help, it also refers to your wealth determiner.
Gary Keller has always said that in order for an agent or leader to achieve their highest potential, they need to pick the right wealth determiner. Meaning, does the person you generate revenue for, pour into you to live your best life? Does the person you determine wealth for have the type of life or lifestyle you’d like to have? Are they considered successful in their field and therefore can help you to become successful? If the answer to the above questions is “I don’t determine wealth for anybody, I determine wealth for myself”, we’ve got bigger problems.
4. Your Conversion Rates
Everything we do in this business, including the company we affiliate with, impacts our conversion. This refers to contacts to appointments set, appointments set to appointments gone on, appointments gone on to contracts signed, and closings to future referrals gained. Of course, most experienced producers will look at this one and say no way, it makes no difference, while the greats all know that it does make a difference today more than ever. Why now more than ever? Because today social media is the new pre-listing package and consumers aren’t just checking you out before agreeing to meet with you, they are also stalking your company and digging deep to explore your company or team’s reputation.
So what does any of this have to do with split vs net? Generally speaking, the companies that generate more revenue from agent commissions (or franchise fees) take a large portion of that income and they put it right back into advertising, branding, community events or things that lead to positive PR, thus putting more net money into their agents’ pockets from their higher conversion rates. Every study under the sun tells us that consumers prefer to do business with local or national brand names they know or have heard positive things about in the past and companies or teams with larger advertising budgets use this to their and their agents' advantage.
5. Your Time
Companies that promote the high split/low cap model just simply do not have the resources to provide world-class systems, technology, marketing, and people to help you be more efficient (and effective). Many teams or companies that use the high net model put you in a position to actually work smarter and not harder because everything has been put into place to make your life easier and ultimately give you back more time. What has been found is that instead of just spending time working IN the business, you end up spending time working ON and IN the business and both lead to more hours worked in the split model.
In the high split model, you will spend anywhere from 20-50% of your time each day, completing low dollar per hour tasks, taking more money out of your pocket. Sure, you can hire an assistant but who's going to train them? Who’s going to manage them? Who’s going to spend time retaining them in today’s job market? All of these take precious time and while hiring staff and building a team is meant for some, it’s not meant for most. Leave that for those that actually enjoy hiring, training, developing and managing others in the industry. When you do the math and look at what you’re worth per hour (for most of you reading this probably somewhere between $75-$200) you’ll discover that taking on all of the above is not worth the extra ten, twenty, or even thirty percent in your split.
Even after considering all five points above, in rare occasions, a higher split does lead to netting more money, and in the end it might just make the most sense for an agent to consider that model… but as a leader you’d be doing the agent a great disservice by not opening their eyes to all the factors at play as it relates to their personal and professional life.
Content credit to GloverU
