The 100% commission split, new agent Ignite training, and fantastic company culture will likely be enough to convince you to join Keller Williams. Yet, there’s another golden nugget that very few other real estate companies will offer: an additional way to help you secure passive income in your real estate career. We’re talking about the Keller Williams Profit Share System.
The Keller Williams Profit Share System redistributes about 48% of the Market Center’s profit. You’ll earn a cut for each agent you sponsor, earning 50% of the profit they bring to KW. This creates a tree. When your agents become sponsors, they’ll be on level 2, and you’ll earn 10% of their profits.
What would you say if we told you it was possible to pad your pockets with extra bills, purely by getting other agents to join Keller Williams just like you did? To learn about the Keller Williams Profit Share System, its benefits, and how it works, read on.
The Inspiration Behind the Keller Williams Profit Share System
The concept of the profit share system came from Gary Keller himself around 1986. Upon overhauling this new real estate company that saw plenty of skilled agents come and go, Keller set his eyes on programs that would incentivize staying with the company.
These programs would focus on what many good agents were desperately in search of in a real estate company: A better deal and greater revenue. Thus, 1987 brought a revenue-sharing system, transitioning to a Keller Williams profit share change just two years later.
The WI4C2TES ideology and Keller Williams Profit Share System were officially born.
This concept sent the company into a whirlwind of success, especially since it emphasized the “W” in WI4C2TES—Win-Win or No Deal. Hardworking agents immediately began to appreciate having their broker reinvest in their business, adopting the unofficial role of “business partner” with their brokers. After all, a successful agent means a successful broker and vice versa.
A profit share system within real estate companies isn’t unique by any means.
Yet, no other company has been able to create a profit share system that stands the test of time, encourages agents to pledge their loyalty to the company, and refers a massive number of new agents to the brokerage quite like Keller Williams’ has. Many companies who have tried (and failed) ended up missing out on profits or having to shutter their doors entirely.
Over three decades later, this Keller Williams Profit Share System is still a major sticking point with new agents in search of a great company.
The Keller Williams Profit Share System is simple to understand in concept, but the fine details can be a little confusing unless you’ve done your research. So in this section, we’re going to walk you step-by-step through the system, including a look at the big picture—your Market Center—and a more narrow scope—the role you potentially play.
A Keller Williams Market Center Crunches the Numbers
With the profit share system, the financial folks at your Market Center will crunch the numbers regarding your Center’s performance each month. Your Center will then take the gross closed commission for the month and subtract the following:
- Keller Williams Royalty Fees (will yield the Market Center’s net gross commission)
- Associate Commissions (brings you to your company dollar)
- Market Center Expenses (results in your Market Center’s KW profit)
Your Market Center’s total profit will vary from month to month. But the crucial benefit is that these numbers are crunched every month, so you’ll receive passive income more consistently.
For the purpose of an example, let’s say that your Market Center’s company dollar for the month is $150,000.
The Profits Will Be Split Between Market Center & Profit Share
Next, your Market Center will then divvy up the profit so that 52% goes to your Center’s owner, with the remaining 48% going back into the agents’ pockets via profit share. How this overhead is distributed is broken into three levels:
- Level 1 (Up to $2,990): 25% goes to profit share, 75% goes to owners
- Level 2 (The Next $8,250): 35% goes to profit share, 65% goes to owners
- Level 3 (Over $11,240): 50% goes to profit share, 50% goes to owners
Once your Market Center’s profit exceeds the maximum for level 1, the level 2 percentages kick in, and so on. The first $2,990 brings $747.50 to the pool, level 2 accounts for an extra $2,887.50, and everything above that will account for an extra 50% of the overhead. This calculates out to the 48% to the profit share pool and the 52% to the Market Center owner.
Now let’s say that your Market Center’s profit is $75,000. Using the levels above, here’s how much would be added to the profit share pool in this case:
|Level||To the Pool||To the Owner|
|1||25% ($747.50)||75% ($2,242.50)|
|2||35% ($2,887.50)||65% ($5,362.50)|
|3||50% ($31,880)||50% ($31,880)|
The Market Center’s Profit Share Factor Is Applied
“Company dollar” is a term used to describe the total amount of money that the Market Center received in the form of a commission split (this is 30% unless an agent has reached their cap for the year). Your Market Center’s Profit Share Factor is then calculated out by dividing the total amount to the profit share pool by the total company dollar for the month.
This usually yields a decimal around 0.25, though it really depends on how well the Market Center does during the month.
Based on our hypothetical values from the previous two points, we would divide the $35,515 profit share pool by the $150,000 company dollar. This brings us to a profit share factor of 0.24.
Your Market Center Distributes the Profit
The next step in the calculation is multiplying your contributions toward your Market Center’s company dollar by the profit share factor. The number you get will determine how much money goes back into your account for the month as a part of the profit share.
However, there’s a strong possibility that you’ve sponsored another agent in your time with Keller Williams, meaning you’re now among the branches of the Keller Williams profit share tree. With one agent immediately beneath you, this brings you to “level one” of the profit share tree, yielding you 50% of the profit share of your agents.
Here are the seven levels of the tree and how these funds are distributed by levels.
- 1st Level: 50%
- 2nd Level: 10%
- 3rd Level: 5%
- 4th Level: 5%
- 5th Level: 7.5%
- 6th Level: 10%
- 7th Level: 12.5%
These funds are distributed on the 21st of the following month.
The more agents you refer to Keller Williams and the more new agents they sponsor themselves, the larger your passive income will be each month. As of now, the profit share system only has seven levels. However, adding more levels or branches in the future doesn’t seem to be out of the realm of possibility as the company continues to grow.
If you paid $2,000 in company dollars during the month, that would be multiplied by the 0.24 profit share factor to yield a total of $480. Now, here’s how that would be distributed amongst the branches of your profit share tree:
In Other Words
We understand that this program seems a little complicated given all of the numbers, calculations, and levels. Take a look at this Keller Williams profit share video that explains in pictures and graphs exactly how this program works:
The Role the Keller Williams Commission Structure Plays
The Keller Williams commission structure will yield individual agents incredible agents as they see success throughout the year. The downside of this amazing split is that it might just limit how much you end up earning through the profit share system.
All Keller Williams agents are on a 70/30 split. But more precisely, it’s a 64/30/6 split:
- 64% will go to the agent in the form of commission
- 30% will go to the agent’s Market Center
- 6% will go to KWRI in the form of royalty fees
What’s unique about the Keller Williams commission structure is that your earning potential suddenly increases once you reach your “caps.” Once you pay $3,000 in KWRI fees during the year, you won’t owe anything over that until the next year starts. There’s also a cap on what you owe your Market Center—the 30%—but the exact value depends on your market center.
Once you reach the cap for both the Market Center and the KWRI royalty fees, you’ll be earning a whopping 100% commission on all sales you help broker.
But this also plays a crucial role in your Profit Share System earnings.
Many successful agents with Keller Williams will reach these caps within the three-quarters of the year. This will mean that the associates in your tree are no longer paying the 30% to your Market Center, which is where your Profit Share System profits come from. With that detail in mind, your passive income might tank during the last few months of the year.
This stresses the importance of widening your tree as well as adding additional levels.
A Few Side Notes on This Program
The Keller Williams Profit Share System is an excellent source of passive income and undoubtedly has its perks for all KW real estate agents. However, there are a few scenarios where your total passive income will vary or be non-existent for a particular month.
While these points won’t be detrimental to your passive income earning potential through this program, these are crucial points to keep in mind. There’s no guarantee that you’ll receive a check each month, especially if the agents you sponsor reach their cap or haven’t made any sales during the month.
Let’s review some things you need to know about this program.
Profit Share Depends on Company Dollar
Remember that profit share is dependent on how much your Market Center profits from a particular agent in the form of company dollars. Once a real estate agent reaches his or her Market Center cap during the year, there’s no profit left to be distributed for the remaining months.
Sponsors & Associates Don’t Have to Work Out of the Same Office
Fortunately, it’s entirely possible to name an agent in the office across town, across the state, or across the country as your sponsor. As you expand the branches of your profit share tree, you might be earning passive income from agents all across the country.
You Can Earn Permanent Passive Income
Just like teachers receive “tenure,” real estate agents with Keller Williams can achieve “vested” status after three years and one day with the company. That basically means you can feel free to leave Keller Williams after this period and still receive your dues via profit share.
You Can Add It to Your Will
Your success as a real estate agent won’t become family folklore once you pass. Instead, assuming you stay with the company for at least three years and expand the branches of your tree, you can include this passive income in your will to benefit the next generation of your family.
What Makes This Profit Share Program Excellent
Keller Williams has a lot to offer both new and tenured real estate agents. Just looking at the numbers and calculations above, you can see that there’s earning potential. But what is it about this program that makes Keller Williams stand out among the other companies attempting to do the same thing (or something similar)?
It’s Not a Pyramid Scheme
If you look at the shape of a profit share tree, you might experience a sense of nervousness—it kind of looks like a pyramid, and nothing good ever comes out of pyramid schemes. While the profit share tree definitely mimics the shape of a pyramid scheme, the structure differs greatly.
Unlike a pyramid scheme, the Profit Share System doesn’t force you to pay any fees to join or remain with the program (or company). You’ll profit a bit when those you sponsor makes sales each month, but the money that goes in your pocket doesn’t come out of their pockets. It comes from the profit of your Market Center instead.
So you don’t have to worry about potential consequences if you or those below you in your tree don’t turn enough profit during the month.
It Comes With Near-Unlimited Earning Potential
Sponsoring one new agent with Keller Williams won’t suddenly make you a millionaire or help you pay off your mortgage in just a year. After all, there are Market Center caps for each agent, so your passive income earning potential is also somewhat limited for each agent you sponsor.
However, you can ensure near-unlimited earning potential by dedicating yourself to expanding the branches of your tree. Remember, the more you widen your tree by sponsoring more agents, the more twigs you can build off of those branches as well.
You may sponsor five agents, they may sponsor three each of their own, and each of those may bring on one new agent themselves. Now instead of just earning a commission on your own sales, you’re also turning a profit of some sort on 35 agents.
So it should come as no surprise that, after less than a decade, some Keller Williams agents are earning over $200,000 a year on the profit share program alone.
You Receive Real Frequent Payouts
Plenty of companies promise more money back in their employees’ pockets through a revenue-share program. Yet, it seems that many of these companies dodge these deposits, or employees simply forget about them after waiting a year for them.
The best part about this profit share program through Keller Williams is that it’s a consistent passive income source. You’ll receive a check on the 21st of every month, reflecting the profits that your tree yielded in the month prior. So even if you don’t sell any homes in that particular month, you’re still guaranteed a check when your tree makes deals.
It Promotes a Culture of Sharing
The real estate industry is a dog eat dog world, and you’ll often find yourself competing against fellow agents in your own office for the same listings. The Keller Williams Profit Share System helps to promote a culture of sharing where all agents and brokers benefit in the long run.
Knowing that more money will end up in your pocket when the Market Center earns more company dollars, you go out of your way to aid your fellow agents. You might bring one of your peers a buyer to make an offer on their listing, help them perfect their marketing strategy, or send a referral to a lead that doesn’t fit into your busy schedule.
Unlike a revenue share model where you’re more concerned about how your revenue share tree is fairing, you focus on the entire Market Center or team as a whole. This helps fend off the cliche culture of selfishness that tends to develop in bustling real estate markets.
A Ton of Money Has Already Been Redistributed
The Keller Williams Profit Share Program makes great sense in theory, but how much money actually goes back into the pockets of its most successful agents? The company had catapulted its profit share distribution from $38.3 million in 2011 to a huge $154.4 million in 2016.
The company eventually exceeded over $1 billion returned to agents by 2017. So the question you have shouldn’t be, “Will I profit from this program?” but rather, “How much will I profit from this program?”
It Makes Financial & Logical Sense
Another vital benefit of this profit share program is that it makes both financial and logical sense. Here’s a look at what that means:
- It’s tied to profits instead of revenue. This is good news, as your Market Center will pay all of its bills to stay financially afloat while distributing whatever is left to the agents who work hard to keep the company growing.
- Keller Williams profit share not ending. Another benefit you’ll appreciate is that this program is so successful that it doesn’t show signs of going away any time soon. If you’re with the company for three or more years, you’ll earn lifetime passive income!
- It’s not tied to stock prices. Investing your profits into the stock market is fantastic when the market is doing well, but you might end up owing more than you earned when the market collapses. The Keller Williams Program is more predictable and has no risks.
- There are no fees or costs. One of the crucial benefits of this program is that you don’t need to spend money to earn money. Rather, you’re getting more money back in your pocket based on how you and your tree perform (get your commission and more).
- It’s an honest program: You’ll never have to worry about not receiving what you’re entitled to with this program. All agents have access to the monthly spending at their Center to see how much the company spent on costs and what will be redistributed.
Fortunately, this program leaves you in a position where you have nothing to lose and just about everything to gain.
The True Earning Potential
So now, you might be wondering how much you can actually earn from this profit share program, especially as you continue to recruit new agents and as they sponsor their own new agents. Now, we’re going to break this down in hypotheticals so you can see the difference each referral makes in numbers.
Let’s assume that, each month, all agents in your tree are contributing $1,000 toward the company dollar on a 0.24 profit share factor for a total of $240 left to be redistributed among their profit share tree.
Here’s how that breaks down in terms of your takeaway at each level of your profit share tree.
|Level||% Take-Home||Total Take-Home|
If you only had one agent you’re sponsoring in your tree at this rate, you would only bring home an extra $120 a month. That might not even be enough to pay your electric bill. But take a look at how that take-home changes as you expand your tree and add more levels.
Ten agents that you sponsor at this rate bring that total to an extra $1,200 a month, or an extra $14,400 in your account by year’s end. If each of those agents brought on two new agents and they all made the same contributions in the form of company dollars, that would bring you to level two of the tree, generating 10% on their profits, or an extra $24 a month per agent.
Now you’re cashing in on an extra $480 a month, or $5,760 more a year.
If you sponsor two agents, they sponsor two more, and so on down the tree, do you know how much you’ll end up profiting at this rate? With 258 agents in your tree, here’s what you’d bring home at each level:
- Level 1 (2 agents at 50%): $240
- Level 2 (4 agents at 10%): $96
- Level 3 (8 agents at 5%): $96
- Level 4 (16 agents at 5%): $192
- Level 5 (32 agents at 7.5%): $576
- Level 6 (64 agents at 10%): $1,536
- Level 7 (128 agents at 12.5%): $3,840
Even minimal Market Center contributions from each branch of your tree with each level of the tree doubling the number of branches can earn you $6,576 a month or more, or $78,912 a year. Now, you can probably see how some agents with a lot of pull are generating hundreds of thousands in passive income each year, sometimes even exceeding their GCI.
That ought to motivate you to encourage new agents to join with Keller Williams. And it’s an excellent sticking point when trying to bring new agents onboard.
The Keller Williams Profit Share System can be extremely profitable, especially if you encourage successful agents from other real estate companies to join with Keller Williams. You might lock down a few extra bucks during your first few months, but this can skyrocket to tens or even hundreds of thousands of dollars per year in passive income as your tree grows.
With that, it’s essential that you dedicate your time toward recruiting new Keller Williams agents and putting in the time to nurture their skills and fundamentals in the business. The better you guide them toward a successful career in real estate, the more you and your whole tree win.