Dawn McKenna Group, Naples, Florida
In my 26-year real estate career, I have built two million-dollar real estate teams and I have coached a few of the most successful teams in the nation. So I am a firm believer in the value of teams for building long-term success and wealth. The only problem is figuring out which real estate team structure will maximize your chances of thriving—or even surviving—in 2020. To make things even harder, not all team models will work for every team lead.
So if you want to build a real estate team, the challenge is deciding what the best team model is for you, and not someone else. That means taking the time to plan out the structure of your team before sending that first recruiting email. That’s why in this article, I will share with you the three most successful team models in real estate today and briefly cover their strengths and weaknesses so you can make an educated decision and build your own million-dollar team.
The Best Real Estate Team Models for 2020
The main challenges in deciding which real estate team model is best for you is understanding the financial risks, the difficulty, and the outcome you would like to achieve. Here I will break down some of the main differences of the most successful team models.
The three most successful real estate team models are:
1. The Mentor/Mentee Model
2. The Team Leader Model
3. The Lead Team Model
In the chart below you can see a quick comparison of each team model.
Real Estate Team Models Comparison
| Number of Team Members | |||
| Split to Team Member | |||
| Expected Transactions/Year per Team Member | |||
| Team Member Retention | |||
| Number of Employees | |||
| Inside Sales Required | |||
| Overall Cost to Operate | |||
| Difficulty | |||
| Scalable to Other Markets |
1. The Mentor/Mentee Real Estate Team Structure
If you are looking for a low-cost, low-risk real estate team model, then look no further. In this model, you mentor newer agents into the business in exchange for a percentage of their commissions for a specific period of time (typically 12 to 24 months). The objective for both is that the new agent will leave the team after the training period is over and pursue a real estate career of their own.
You are responsible for providing them structure, discussing expectations for success, and answering their questions. However, you are not providing leads, paying for their marketing, or managing them.
This is a common real estate team model for agents in brokerages that offer residual income from their MLM (multilevel marketing) or downlines, like Keller Williams, Exit, and eXp, for attracting other agents into the brokerage. If you are in this type of organization and you enjoy teaching others, then this may be the best model for you.
Mentor/Mentee Real Estate Team Organizational Chart
The Mentor/Mentee real estate team model is different from the other two models as it doesn’t have Operations in its organization chart. You, as the mentor, are not providing team members additional services. Therefore, operational activities are handled by the brokerage or outsourced to a transaction coordinator.
The organizational model is simple. As the mentor, you recruit new team members, train them to be successful in real estate, and then after six months to one year, you transition them into your downline.
To maximize your downline further, teach your prior team members to do the same. This will grow your downline exponentially to provide you and them with long-term residual income.
Mentor/Mentee Real Estate Team Lead Generation Model
The objective of the Mentor/Mentee Model is to teach them to fish so they can fish for themselves (sorry for the cliche, but this really is the best analogy here). It is not about the leads you can provide them—it is about how they can learn faster from you than on their own.
You will manage the team more like an association than a traditional team. They are paying you a portion of their commissions for access to your lead generation knowledge and experience, not for leads or marketing like with the other models.
You will show them all the techniques you had to learn the hard way to generate seller leads and buyer leads. Lead generation training includes meeting them at the office for outbound prospecting, sphere of influence (SOI) calls, and planning. Showing them how to do an effective open house and canvassing their neighborhood. To manage your time, plan on running training classes at least once a week.
Mentor/Mentee Real Estate Team Model Services & Expectations
In the Mentor/Mentee real estate team model, team members’ expectations are set by their individual goals. Since the goal for you is to have them become successful on their own, then the team member may, and is encouraged to, keep and maintain all clients and leads that they generated while on your team.
You may choose to provide administration or transaction coordination if you are already paying for this in your business. Otherwise, it is not required in this model. Team members will learn to use the resources that are available to them through your brokerage, the Association of Realtors, and your MLS. Remember, the value of your team is your time and training, not what you are providing for them, and marketing is no exception to this rule. Team members are responsible for their own SOI marketing, listing marketing, and advertising. You will show them the best practices and how to do it.
Why Retention Is Intentionally Low
The reason team member retention is low is because this real estate team model is designed to move new agents into production. This is why this model is ideal for agents who work at brokerages with an MLM structure like Keller Williams, Exit, or eXp, because when they transition into your downline, you will continue to receive a portion of the brokerage’s revenue or profit generated from the agent’s transactions after they leave your team.
Even so, some team members may choose to stay with you long after they have been trained by you. This is the best-case scenario—just don’t expect this to be the norm or you will be very disappointed.
Mentor/Mentee Real Estate Team Model Splits & Costs
This real estate team model is designed to teach a team member to become an independent real estate agent, and learning how to manage the expenses of being an agent is a large part of the lesson. Therefore, the team members are responsible for all the expenses associated with being a real estate agent. This includes all marketing, their office bill, MLS fees, and split to the brokerage.
The splits in this model are lower to you than the other real estate team models because you are not paying the team member’s fees, like their office bill, MLS, or marketing. Therefore, you can only expect to receive between 10% and 30% of their commissions.
The percentage you ultimately choose depends on the amount your brokerage charges them. You will structure the percentage you charge the team member so that they receive at least 50% of the total commissions after the brokerage takes its portion and the split paid to you. This ensures that your team member is making enough money to stay in the business.
How to Tell If the Mentor/Mentee Model Is Right for You
The Mentor/Mentee Real Estate Team Model Is Right for You If:
This is a perfect model if you like to teach, work with others, and are at an MLM-style brokerage and want to produce a continuous source of productive agents to fill your downline. This real estate team model will allow you to use your experience and knowledge to create long-term passive income through your brokerage.
The Mentor/Mentee Real Estate Team Model Might Not Be Right for You If:
I don’t recommend the mentor/mentee team model if you are not building a downline at your brokerage. This is because this model is not a good team member retention model, and training new agents will take time away from your own personal production. In the long run, you will find that the small portion of commission you earned for training a new agent didn’t compensate you for the time you lost that could have been used to make another two to three sales.
2. The Team Leader Model
Dawn McKenna Group, Naples, Florida
The Team Leader Model is centered around actively promoting the team leader or the team leader’s brand. This traditional real estate team model concentrates its efforts around a neighborhood or community.
In this model you, as the team leader, provide structure and resources to team members. Team members promote the team leader’s brand and not themselves. Since you are building a brand around a specific community, high standards and unmatched customer service is a must for this structure to achieve massive success.
Team Leader Model Organizational Chart
The Team Leader Model is divided into two categories: Sales that handle lead generation, lead follow-up, sales, negotiating, and writing contracts, and Operations that is in charge of the day-to-day administration, business marketing, listing marketing, and transaction coordination.
In the Team Leader Model, the team leader is typically the lead listing agent, and the team members fulfill the showing agent roles. The sales side of the organizational chart may also include a telemarketer and a second listing agent.
This structure requires at least one employee and the business manager, but is most effective with an additional marketing manager and transaction coordinator.
Team Leader Model: Primary Lead Generation Strategy
As the team leader, you set lead generation goals, set team member expectations, and maintain the standards for the real estate team. The secret to success in this model is client referrals, relationships, and unmatched service. This is why it is so important to keep lead generation costs low. You can spend the savings on additional ways to make the client experience second to none.
Ultimately, you are responsible to make sure the team has leads. To accomplish this, focus the team on building brand awareness in the community, either through neighborhood marketing or by setting up lead generation opportunities like open houses, canvassing neighborhoods, and team prospecting.
Lead Ownership
Since your team will be formed with strong relationships, you may feel you should allow the team members to retain clients after the closing, no matter the source of the lead. Don’t. This can be a huge mistake!
Think about it—you took the time to create the team, took the risk of hiring employees, and covered the operational cost of running the team. Therefore, ANY closing that occurs while on the team must remain a client of the team.
This ensures that when a team member leaves the team, the lead will continue to be marketed to by the team and not by the former team member (I have made exemptions for their immediate family members). This MUST be clear when inviting a new member onto your team.
Team Leader Real Estate Team Model Services & Expectations
Since this real estate team model is based on high-level customer service to the client, you will provide full-time administration to do file management and to respond to customers, while the rest of the team is out doing real estate sales activities.
You should also provide all marketing, including printing and postage for all team members. This will promote the brand to their sphere, ensuring that the team members are marketing your team model correctly to their SOI.
How to Set Expectations
In this model, team members have moderate flexibility. While they are not employees and are not held to the standards of employees, team members are expected to achieve weekly or monthly productivity milestones. This could include a specific number of contacts, leads, contracts, and closings.
Team members in this model should be expected to produce four to six transactions their first year and eight to 12 transactions thereafter. Half of their business should be coming from their sphere or referrals, while the other half from participating in the team lead generation activities.
High standards are non-negotiable. If team members fail to provide high-quality service or have a poor attitude, they must be corrected or asked to leave. Hire slow and fire fast should be your motto for this team model. You simply cannot afford to carry dead wood using this team model.
How to Reduce Turnover
One benefit of this model is that it has higher team member retention than the other two models. This is because team members are chosen more on how they will fit in with your team, rather than their ability to fulfill or complete specific tasks.
You can further reduce turnover by having clear expectations and make work feel more like play. So make your goals and expectations realistic, but remember to include fun social activities for your team as well.
Team Leader Model Splits & Costs
In the Team Leader Model, member splits are typically 50/50 or 60/40 (40% to the team), depending on the source of business. You may give a larger split if the team member provided the lead from their own sphere. Just remember that the split you receive must be large enough for you to be able to provide the support and marketing for the rest of the team. If your split is too low, you may end up supporting the team with your own commission income.
As far as costs go, team members should be responsible for their own cell phones, automobile, and National Association of Realtors (NAR) dues. However, depending on the percentage of the commission you take, you may choose to cover the common business expenses of the team members. This may include their office bill, brokerage split, errors and omissions insurance, signs, cards, MLS, and lock boxes. This also depends greatly on the fee structure with your brokerage.
How to Tell If the Team Leader Model Is Right for You
The Team Leader Model Is Right for You If:
If you have an established personal brand or a strong vision for building a brand. You can keep the costs low to operate if your lead generation is less marketing and advertising and more prospecting and team activities. Additionally, this model can be very fun if you like working with others, select the right team members, and set the right expectations.
The team leader model is ideal for you if you have high standards, enjoy working with others, and have proven techniques to generate business that you can model for other team members.
The Team Leader Model Might Not Be Right for You If:
If you don’t take the time to appreciate your team members, they may feel like they are living in your shadow. This will lead to resentment and them wanting to leave.
No matter how good of a leader you are, some team members will fail to thrive and others may leave and become your competition. To have long-lasting success, you will need to check your ego at the door to prevent these events from allowing emotions to cloud your vision for the bigger picture … TOTAL COMMUNITY DOMINANCE!
3. The Lead Team Model
The Lead Team Model relies on advertising to generate consistent leads for team members to manage. This team operates more like a well-oiled machine than a group of friends working together.
Team members’ activities include managing inbound leads, following up, prequalifying, and setting appointments. This is in addition to showing clients and negotiating contracts. Once the client is under contract, the team’s administration handles the lead through the closing.
Highly successful teams that follow this model separate team members into two categories:
- Inside Sales, who deal with inbound leads, follow-up, and prequalification; and
- Outside Sales that handle the showings, negotiations, and contract.
This model is a higher-cost model that requires high transaction volume to keep the machine moving. That means advertising will likely be the main source of lead generation. Because of this, the Lead Model is the most expensive and riskiest model to operate. But, if you get the recipe right, you will be able to grow beyond your community and even scale into other states!
Lead Team Model Organizational Chart
The Lead Team Model is similar to the Team Leader Model as it is also divided into two categories: Sales and Operations. The main difference from the previous model is that in this model, operations also oversees the sales team.
This allows you, the lead listing agent, to work autonomously from the team, giving you the flexibility to work both listings and buyers or even to take time off without disrupting the team.
This is an operational-driven model and not a sales-driven model. Therefore, you must have both a business manager to handle day-to-day operations and a lead manager to lead the sales team. One of these positions can be you—but I don’t recommend it due to the inflexibility of those positions.
To maximize the return on your advertising, you must make sure that all leads are attended to. This is done by having Inside Sales Associates who are responsible for the lead qualification and assignment. They can be either licensed or unlicensed depending on their compensation. I will discuss this later.
Lead Team Model: Lead Generation Strategy
The main source of lead generation and expenses in the Lead Team Model is advertising. The cost of advertising can start at $500 a month and can easily exceed $20,000 a month or more.
This includes advertising on sites like Zillow and Google or using lead acquisition platforms like Zurple, Boomtown, Tigerleads, and kvCORE (see my kvCORE review here). In a previous article, we interviewed Luke Monroe, who spends over $100,000 a month on leads.
While your team will have one main lead source, lead generation doesn’t have to be advertising only. If you prefer prospecting, your team can prospect expired and FSBO leads using software like REDx and Landvoice. Either way, the cost and strategy of the lead generation for the team is your responsibility.
Lead Team Services
The Lead Team model requires salespeople to stay focused on sales; therefore, all other tasks should be handled by the operations team. This includes file management, marketing, and even client communication once they are under contract.
Lead Team Model Services & Expectations
Due to the high cost of lead acquisition and tight profit margins of the Lead Team Model, the team member expectations are much higher than the other real estate team models.
Each team member has rigid daily or weekly milestones that must be maintained in order for you to provide a consistent return on your advertising investment. Because of these requirements, your state laws may require you to employ them instead of keep them in independent contractor status.
Each team member should have an expectation to close a minimum of one closing a month, with a stretch goal of three closings a month. With your systems and support, they should have no challenge achieving this goal. However, if they are not making efforts to achieve this, don’t be afraid to replace them with someone who would love this opportunity on your team.
Lead Team Model Member Retention
This model has the tendency to attract new agents because of the low split or flat fee. Therefore, turnover is higher than with the Team Leader Model. Some team members won’t last because they just didn’t develop the skills in sales, while others may thrive.
A challenge with a team member leaving is the leads they take with them when they go. To prevent this, it should be written into your team agreement that any clients will remain the property of your team. Keep in mind that this may be unenforceable simply because at such high volume, it is difficult to keep track if a former team member is marketing to or working with a lead you provided while on your team.
Lead Team Model Splits & Costs
This real estate team model is a high-volume model and is heavily reliant on systems and not the skills of the team members. Therefore, your team members can be new to the industry.
Some of them may be just like I was when I started 26 years ago—a lot of motivation and no money. So look for team members who are highly driven and looking for the right opportunity.
Since they are newer, they may not have the funds to pay all the costs to be an independent agent. Therefore, you may consider covering their office bill, MLS, NAR dues, and so on. This way, they can focus on your leads, following up, and the clients instead of taking a part-time job that interferes with your plan for them.
Inside & Outside Sales Compensation
If you structure your team with both Inside and Outside Sales, Inside Sales should be in charge of prequalifying the leads and setting appointments for the Outside Sales (showing agents). You should compensate Inside Sales with an hourly rate plus a bonus on appointments set or successful closings. Just remember to comply with any state employment requirements, including minimum wages and tax withholding.
Outside Sales people will receive either 25% to 30% of the commission or a flat fee of $800 to $1,500 per closing for showing the client and negotiating the contract. This may seem too low, but remember the Outside Sales person doesn’t have any expenses. Nor do they handle the lead acquisition or manage the lead once it is under contract. This allows them to do three to six transactions a month. They can easily make $40,000 to $60,000 their first year—plus, they don’t have the financial risk that you do.
How to Tell If the Lead Team Model Is Right for You
The Lead Team Model Is Right for You If:
This model may be for you if you wish to have a large real estate team and you don’t wish to brand yourself and meet with every client. Unlike the other team models, this model is not reliant on having the best and smartest team members. Quite the opposite: It operates on the processes and systems to manage hundreds, if not thousands, of leads each month.
Since the Lead Team Model operates on the marketing and systems of the team and not your talents or time, it allows you to build a scalable business that can generate millions in commissions. Examples of this similar model are Redfin and Opendoor. Both companies have significant lead generation systems that provide leads to agents who work the leads for a greatly reduced split.
The Lead Team Model Might Not Be Right for You If:
This model may not be for you if you don’t have significant startup capital. This is the most expensive of all the models to set up and operate, and can be a significant financial risk if you don’t get it right. The most common mistake you can make with this model is the desire to overpay team members and employees because you are trying to attract them or retain them. The advertising costs are too high and the margins are just too thin to overpay for talent.
Another risk is that advertising techniques, sources, and messaging can become less effective over time. This may leave you scrambling to find new lead sources to maintain your production goals and team members.
Bottom Line
This is not to say that there are only three real estate team models. In fact, there are thousands of successful real estate teams across the nation. Each has their own unique structure. The three I share here are the most common successful models and if you follow my advice, they will give you the best chance of success building your real estate team.
If you are considering starting a real estate team and would like more advice, fellow coach Chris Linsell and I are available for questions in our weekly coaching as part of The Close Pro.
Over to You
Have a real estate team structure that we overlooked? Let us know in the comments or join us on our Facebook Mastermind Group here.
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