More and moreteams are popping up everywhere. Some as big as 20-30 members, and some assmall as the realtor and assistant being dubbed as a team.

The benefitof a building a real estate team is known as the economies of scale.

Economies of scale is an economic term referring to the cost advantage experienced by a group or company when it increases its level of output (i.e real estate sales). In other words, the advantage arises due to the inverse relationship between fixed cost and the sales produced.

Think of it this way. Realtors all spend money on marketing their brand. Most will need an assistant at some point in their sales career. Balancing demand and supply of time and resources are often a challenge. A realtor only has so many hours in a day. Being too busy can mean either losing business or not maintaining service excellence. When you begin giving away business to other realtors in your office, you’re losing future repeat clients.

Cost Savings of Team Building

Building a team saves costs because several realtors benefit from the same brand presence and marketing dollars spent, several have access to the same assistant or marketing coordinator, and most likely save costs on sharing office space (and desk fees). So leads that the team reputation and brand generate are reaped by all realtors on the same team. The power of the group outweighs what each one independently could have achieved alone. And let’s face it, a group of agents generating a $1 million in gross commissions earn awards and accolades that put the group in among the best of the best in the industry, which in turn generates a bigger brand presence.

Why do real estate agents join teams if they have to give up 50% of their commissions?

You mightthink that only new agents, who are just graduating from OREA are joining realestate teams. That’s not entirely true. Most real estate teams are not keen onhiring straight out of OREA because a new agent is a very high-risk hire.

Will the new agentlearn quickly? Will the new agent handle the clients with professionalism and confidence?Will the new agent have the ability to close deals and negotiate againstexperienced realtors? Will the new agent even enjoy being a realtor? Will thenew agent survive the 24-7 demand needed to succeed in real estate? Will thenew agent stay in the team after year 1 or 2, when they start earning sixfigures?

Producing Realtors join teams everyday!

I have personally interviewed and placed into teams realtors grossing $100,000-$700,000, and they join a real estate team knowing that they will give up 50% of their commissions. And it might seem crazy why anyone would do that, but successful realtors join teams every day.

Some realestate salespeople know that they love selling. They love meeting clients, doinglisting presentations, offer negotiations but they don’t like working onmarketing, or financial management, or administration or even hiringadministrative support. Some just don’t want the headache of running a realestate business ---- they just want to be salespeople. There is nothing wrongwith that. In fact, taking 50% of the gross commissions earned, without worryingabout marketing expenditures, hiring, retaining and paying for an assistant,renting office space, is actually a lot more money than what they might netalone.

So why do Buyer Agents leave teams if it’s as good as it sounds?

The shortanswer is not all teams offer value. Value will vary from one agent to another.Some value leads --- they simply want to be fed warm leads without any doorknocking or cold calling efforts. Some salespeople want coaching and support.Some want to pass off all their administrative work to the officeadministrator.

In today’shighly competitive market, realtors who want to attract amazing buyer agents totheir roster need to do more than just sell their “brand presence”. They needto offer coaching. They need to provide warm leads as well as teachprospecting, even if it means door knocking together with the team lead. The teamneeds to invest marketing dollars co-farming each of their buyer agents; afterall the buyer agent didn’t join a team to just cold call internet leads that maynot come to fruition for 12-18 months.

The sweet spot in real estate teams

Every day, Ispeak to buyer agents in large teams that are looking to make a move to asmaller, more involved team leader relationship. Buyer agents want a team thathas two to three buyer agents to one team lead who offers coaching, teachesprospecting, provides warm leads and has an administrator to support the team witha solid marketing campaign. This appears to be the sweet spot. Especially ifyou are trying to attract buyer agents with a proven sales history of $100,000GCI per year. For buyer agents making more than $300,000 a year net commissionsearned while on a larger team, their motivation and needs will be verydifferent as to why they will make the move. One size certainly doesn’t fit all.

The exception to every rule

There are large teams that are very well structured, offer a lot of value and have amazing retention of their Real Estate Associates --- I know because I have helped recruit for them. Theses teams do not label agents as Buyer Agents. They often give them titles of Real Estate Associate or Sales Partner. They offer coaching, marketing and all sorts of administrative support.

Bottom line…it’s all about value. You will attract the type of realtor that                                                                                                                                 youroffering will yield. If you do not offer coaching, or fair market commissionsplits, or any warm leads, nor any administrative support, then chances are,you’re going to attract someone who won’t be very productive or someone whowon’t stay very long.