26 Jul Keller Williams Profit Share & Keller Williams Growth Share
Keller Williams profit share system and growth share system are ways for the company to reward the agents who help Keller Williams grow. The profit share system is how KW profits are shared in the US and Canada. The growth share system is a slightly different version that is used in all the other countries around the world outside of the US and Canada. As of August 2020, Keller Williams has shared $1,464,620,095 back to its agents through the profit share system.
There are many people who are fully retired from real estate sales because they can live a (very) good life with their profit share income. A beautiful feature of profit share and growth share is that you can continue to earn it even when you stop selling real estate, and you can even leave it to your estate. Profit share has funded many retirements and college educations and it has no signs of slowing down.
What do KW profit share and KW growth share have in common?
Before getting into the differences between profit share and growth share, an overview of the similarities will be useful.
Both systems reward the KW agents who help the company grow. The best way to think about the reward system is to examine how Fortune 500 companies do it because KW does it in a similar way.
When there is an open position at a Fortune 500 company and an existing employee in that company refers someone who gets hired for that role, the referring employee gets a financial reward. The financial reward is usually a one-time cash bonus after the employee is hired.
Companies love to pay employees those bonuses because it is expensive and time consuming to find and hire high-quality employees. By filling the job vacancies with referrals from existing employees, the companies save money on external recruiters and save time for their employees in their human resources departments. It’s a win-win situation.
Keller Williams profit share and growth share systems work in a similar way. When a KW agent refers another real estate agent to a KW office and that agent gets hired, the referring agent will be credited for making that happen. When the new agent starts doing deals that generate profit for their office, the referring agent will get to share in some of that profit.
IMPORTANT: The money paid into the KW profit sharing and growth sharing systems comes from the company’s profit. It does NOT affect the commission of the agent who did the transaction. To put it another way, the 70% an agent earns on their side of the commission split is all theirs–the profit share comes from the company’s 30% of the equation.
When agents join Keller Williams, they have to note on their startup paperwork who is responsible for bringing them to Keller Williams in the first place. The person they name is called their sponsor. This process works much like it does at elite country clubs–in order to join the club you need to know someone who is already a member and have they vouch for you (your country club sponsor).
And now for the differences between profit share and growth share…
How does Keller Williams profit share work?
Three things need to happen in order for an agent to receive profit-sharing income from an agent they brought to Keller Williams.
- Someone joins the company and names an existing agent as their sponsor.
- The new agent does at least one transaction in any given month.
- The office where the new agent works is profitable in that same month.
Everyone who joins KW has to name someone as their sponsor. The sponsor is the person who had the most influence in bringing that agent to KW. It is common for an agent to join KW when they have several friends already working at KW. We provide guidance on the appropriate way to choose a sponsor in the startup paperwork.
Keller Williams calculates their profit once a month. You can think of this accounting system as a 30-day fiscal year. Every month, each office tallies how much profit they made and reports that number to our headquarters in Austin.
There is a formula used to figure how much of the profit goes to the owner of each franchise and how much of the profit goes to the profit share pool. The exact formula is not important to know–it works out to about a 50/50 split between the owners of the franchise and the profit share pool.
The profit share pool is distributed using a tiered structure based on who sponsored who, going back seven people. Let’s say Yoko sponsored John, who sponsored Paul, who sponsored George, who sponsored Ringo, who sponsored Jimmy, who sponsored Janis, who sponsored a new agent named Ted. If Ted does a transaction this month and his office is profitable, the profit generated for the office by Ted’s transaction will be distributed to the seven people in that sponsorship tree. Here’s a sample breakdown of the distribution if Ted was responsible for $1000 in profit that went to the profit share pool that month.
- 50% to Janis = $500
- 10% to Jimmy = $100
- 5% to Ringo = $50
- 5% to George = $50
- 7.5% to Paul = $75
- 10% to John = $100
- 12.5% to Yoko = $125
Janis gets the biggest share of the money because she is directly responsible for bringing Ted to KW, but there is a clear financial incentive for ALL of those people who earn profit share money from Ted’s deals to help Ted build a thriving real estate business. It is an elegant way to build camaraderie and a spirit of cooperation.
How does Keller Williams growth share work?
Growth share is the reward system that exists outside the US and Canada. The opportunity with growth share is BIGGER than profit share due to the structure of it.
Growth share is calculated from the royalties paid by each agent when they do a transaction. In the US and Canada, the royalty paid to KW headquarters is 6% until $3000 is paid in a year. The royalty caps at $3000 for everyone. That $3000 per agent is used to fund the staff and support systems at our headquarters.
Outside the US and Canada, the royalty is 8% and it never caps. That means when an agent has paid the local office cap in their country, they will be at a 92% split for the rest of that year until the cap resets.
The 8% royalty is divided between the regional owners (3%), KW headquarters (3%) and the growth share pool (2%). That 2% is distributed in the same fashion as profit share, rewarding seven people in the sponsorship tree. If Ted from the example above contributed $1000 to the growth share pool in a month, this is what it would look like:
- 50% to Janis = $500
- 10% to Jimmy = $100
- 5% to Ringo = $50
- 5% to George = $50
- 7.5% to Paul = $75
- 10% to John = $100
- 12.5% to Yoko = $125
The reason the opportunity with growth share is bigger than profit share is because that 8% royalty where the growth share money comes from never caps. In the profit share system, an agent will stop contributing to the profit share pool for the year as soon as they hit their cap every year (once they are on 100% commission, they are no longer contributing to the profit until their cap resets). With growth share, there is no limit to how much can be made from each person you sponsor because they pay into the growth share pool with every transaction they do, forever.
Is Keller Williams profit share a pyramid scheme or a MLM program?
No.
We used to hear that question on a regular basis when Keller Williams was much smaller. Because it is such a unique program in the real estate industry, it was met with skepticism in the early days. Now that we are clearly the largest real estate company in the world, that question doesn’t come up very much.
To provide some third-party validation, Stanford University had their business students take a look at the profit share program at Keller Williams three different times. They gave it a glowing review each time. You can access the Keller Williams Stanford case studies here.
For a quick explanation, pyramid schemes and MLM programs require people to pay an upfront cost (we don’t do that) and they fall apart when new people stop joining their programs (profit share would continue even if we stopped recruiting agents or shrank our number of agents). As long as KW offices continue to generate profit, the KW program will be in great condition.
Who earns the most profit share at Keller Williams?
The answer to that question is not intuitive. Some people who are earning hefty six-figure incomes through the profit share system have only sponsored a handful of agents. It is definitely a matter of quality over quantity.
The people who earn the most make it a priority to grow their profit share/growth share numbers. They block time every week to focus on it. That steady focus and persistence turn into big numbers over time. Everyone who joins KW has the same incentive to attract more great agents, so it takes care of growing itself once you hit a certain point. Sometimes all it takes to create massive profit share income is one highly-motivated agent to join KW because of you.
We tend to attract agents who are generous and like to share. If you don’t believe that, then understand there is a financial incentive for everyone at KW to help everyone else at KW make more money! When there is more profit, there is more profit to share.
The spirit of cooperation and sharing permeate all of Keller Williams. Our top agents can be found teaching others about what they do that works and mentoring those agents who are new to the business. Giving, sharing and helping are some of the core tenets at Keller Williams and the profit share system is just one component of that.
As we like to say at KW: