MREA Budget Model
“If you don’t understand numbers, you are going to give money away.” This was the primary point Gary Keller, Keller Williams co-founder and chairman of the board, hammered home as he led the panel discussion entitled “Managing Your Money for Success.”
Along with Jay Papasan, executive editor and vice president, KW Publishing, and Garrett Lenderman, lead researcher and writer, KW Publishing, Gary explored the MREA Budget Model in depth and showcased a table featuring both average and best practice metrics for gross commission income (GCI), cost of sales (COS), gross profit, expenses, and net income.
The panelists recentered their discussion and focused on the expenses, namely the operating expenses, which are the veritable costs of working with buyers and sellers.
It turns out an overwhelming 90 percent of these expenses fall into two categories: the cost of sales and salaries (75 percent) and lead generation (15 percent).
In many cases, Gary explained, agents have their selling associates on a 50/50 split, essentially splurging on the listing side.
As he summed up, “For me, this means settling for less profit.”
The turning point in the conversation happened when Jay offered their collective alternative to this approach: Don’t just give money to people; instead, invest in them … and then do it again. And again.
He acknowledged, “Whenever you have to make big investments of a transformative nature, you have to move backward to move forward.”
Gary enthusiastically agreed, citing the counterintuitive method as his own personal business philosophy. As he put it, it’s all about reinvestment in people, education and systems.
“To me, whenever I got a dollar, instead of upgrading my lifestyle, I reinvested, reinvested, reinvested,” he said.
Jay encouraged the audience further, “You’re laying the foundation for something huge.”
So what exactly is this huge opportunity in real estate?
It’s when job income turns into business income, the panelists posited.
Looking outside the real estate industry, Gary observed that a typical American franchise only makes, on average, $60,000 a year. Bringing it back, he stated that a real estate “job” has a top net income of $200,000 or $250,000.
When an agent hits a level of $350,000 to $400,000, it’s no longer a job – once you shift to this level, it is now “business income.”
“It’s all in people,” Gary insisted. “Master hiring people; get in business with the right people.”
In the end, his vision was simple yet consistent: reinvest in the people and things that matter, and they will build your business bigger than you ever dreamed. But remember that it all starts with the numbers.
“Outcomes can be quantified by numbers,” he said. “(And) the numbers matter.”