Real Estate Team Leaders Profits Explode Using This New Model

Are you a real estate team owner finding your business less profitable than expected? It’s a common challenge many in real estate face, especially with the assumption that simply adding more agents will solve profitability issues. Today, I will present a straightforward approach to help team owners understand where profits are truly coming from by using a quick profit and loss (P&L) exercise. Here’s how:

Step 1: Simplify your P&L statement

One of the biggest challenges real estate businesses face is using one bank account for multiple agents’ transactions, which makes it difficult to isolate profit sources. The solution? Create a simple P&L statement. Grab a piece of paper, write $10,000 at the top, and imagine you’re working with a 50-50 commission split. Here’s how it works:

• Agent splits: On one side, label $5,000 as the agent’s share, with the other $5,000 representing company-retained dollars.

• Operating expenses: Deduct operating expenses from the company’s $5,000. Typically, team leaders spend 30-35% of their net GCI on office expenses, transaction coordinators, lead generation, and staff.

• Final profit margin: After subtracting 35% in operating expenses (roughly $3,500), the company retains $1,500, or 15%, as profit. While this margin may seem small, it’s actually better than what many teams achieve.

Step 2: Compare your production with your team’s

If you’re still producing, your earnings might be mixed with team transactions, further complicating profit visibility. Try this exercise:

• Personal production profit: Start with $10,000 in revenue, subtract your operating expenses ($3,500), and, as the Rainmaker, your profit would be $6,500.

• Agent production comparison: Divide your $6,500 by $1,500, which shows agents need to sell 4.3 homes to match every home you sell.

Some team leaders find the ratio can even be as high as 7 to 1, meaning for every home they personally sell, their team needs to sell seven. This simple comparison shows whether it’s easier to sell a set number of homes yourself or to rely on the team for higher production.

Step 3: Reduce overhead expenses

By getting precise about expenses, you can identify where adjustments are needed. In September 2022, I cut $600,000 in overhead without impacting total sales, simply by understanding how much less I needed to sell when I took back some of the production.

Maintaining client relationships is also crucial, even if you’re reducing team size. When you hand off clients, they’ll likely stay with the team member who helped them. Since team members stay on average for two and a half years, it’s essential to find ways to work with leads that protect your long-term relationships while giving you flexibility. Using outsourced communication or showings is one way to maintain relationships without sacrificing your time.

For a closer look at where your profit is coming from, download my free P&L template. This tool will help you visualize profitability by category and decide where adjustments can make the biggest impact. To go even deeper, you can book a discovery call with me to receive a free audit customized for your business. Contact me at (480) 332-6468 or email me at dave@zteamaz.com. Let’s make your business more profitable now.