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Revenue Share vs Profit Share: How Does eXp Revenue Share Work 2024!

Revenue Share vs Profit Share: How Does eXp Revenue Share Work 2024!

How does eXp revenue share work.

exp revenue share explained 2021 exp revenue share vs profit share.

As a real estate agent, by now you have probably heard about eXp Realty and the revenue share model at eXp Realty. With cutting edge technology, the world’s first ever cloud-based brokerage is able to save massive amounts of overhead expenses in their business model and reinvest it back to the agents for helping grow the company.

But how does eXp revenue share work exactly? And more importantly, what is the difference between eXp’s revenue share model and Profit share?

While the eXp revenue share model was born out of the same structure as the 7 tier Keller Williams profit share model, there is one key difference between the two that makes these two team building structures completely 100% unique. And in today’s post, we are going to cover the difference between revenue share vs profit share and explain in detail how each compensation structure works.

In this post we are going to cover the history of the revenue share model, how the revenue share structure works at eXp Realty, the difference between profit share and revenue share, which compensation structure is more reliable as a residual income stream, how it’s possible for a company to share revenue back to the agents and remain profitable, and go over a math example breakdown between a profit share structure vs a revenue share structure.

History of Revenue Share

The first thing that I want you to understand is the history of the revenue share model at eXp and how both revenue share and eXp itself came to be in the first place.

The founder of eXp Realty, Glenn Sanford, was previously a top 50 Keller Williams agent who built one of the largest KW market centers in North America. When Glenn founded eXp Realty, he took the 7 tier profit share model from Keller Williams and massively enhanced it by sharing revenue to agents off the top instead of sharing profit off the bottom.

eXp is able to do this because of the cloud-based independent nature of the brokerage model. Without franchising costs, brick and mortar expenses, and other miscellaneous costs associated with running a traditional brick and mortar or franchise brokerage, eXp Realty is able to take 50% of total revenue earned from the production of it’s agents and share it back to the agents who helped grow the company.

timeline of eXp history.
eXp TImeline

How Does eXp Revenue Share Work?

Before we get started and compare revenue share vs profit share, let’s take a closer look at how the revenue share model works at eXp Realty.

At eXp, every agent has the ability and opportunity to introduce and attract other agents to the company and become their sponsor at eXp Realty. Because eXp wants to reward their agents for helping the company grow, they are incentivized to sponsor other agents to the company through a process called revenue share.

eXp revenue share is paid to an agent’s sponsoring lineage for up to 7 agents so that means agents who choose to participate in revenue share are not only able to earn revenue share from the agents they directly sponsor to the company, but also from the agents that they sponsor and so on and so on.

So what makes the eXp revenue share structure so lucrative for agents and team leaders? It’s the fact that revenue share is paid on a continuous monthly basis to you as long as the agents you sponsor remain active agents at the company. For each agent that you sponsor to eXp, you are paid 3.5% of their GCI for each sale they close up until they’ve capped at the company and have paid a $16,000 in commission splits to eXp. For the agents on your tiers 2-7, the percentage of revenue share you receive will vary based on tier and circumstance.

For a more detailed look at the eXp revenue share numbers, please refer to the compensation breakdown chart below:

How does exp revenue share work, compensation breakdown.
eXp revenue share compensation breakdown.

Revenue Share vs Profit Share

Knowing what you know about revenue share and the compensation structure, now let’s dive into the key difference between revenue share and profit share.

But before we do that, let’s first define some key terms that will be important to your understanding of the two business models.

Key terms:

  • Revenue is the total amount of income generated by the sale of goods or services related to the company’s primary operations
  • Profit is the amount of income that remains after accounting for all expenses, debts, additional income streams, and operating costs

Judging from the two definitions, most business-savvy agents should understand already the difference between the two.

Revenue Share

To recap, revenue is the total income generated by a company through the sales of goods and services. At a real estate brokerage, that is the total commission income generated through sales agents and commission splits. So when we use the term revenue share, it means that the real estate brokerage is sharing back to the agents, the total income that they generated through commissions splits.

This means that if a company that shares 50% of their revenue to their agents earned a total of $100,000 in a month, they would share $50,000 to the agents who helped the company grow.

Breaking this down further, let’s look at the specific figures of eXp revenue share.

So at eXp Realty, the company shares 50% of their total revenue back to agents who has helped grow the company. To put that into perspective, because the commission splits at eXp is 80/20, 80% to the agent and 20% to the company, that means that in actuality eXp only keeps 10% of the total commission splits and pays the other 10% back to the agents who has helped the company grow by attracting other agents to the company.

Profit Share

Profit is the amount of income that remains after deducting expenses, debts, and operating costs. So to put that into perspective, profit sharing is when a company deducts their operating expenses such as brick and mortar leases, franchise costs, marketing costs, training costs, or payroll first before sharing back a portion of the remaining profits to the agents.

In a profit share model that is also 7 tiers deep with the same compensation structure as the revenue share model, agents are going to be receiving less pay outs in the same situations because the company must first deduct their operating costs before paying the agents.

Let’s say that instead of sharing 50% of the revenue with agents, a real estate brokerage decided to share their profits instead. If the total revenue to the company was $100,000 and expenses were $50,000, net profit would be $50,000. So instead of sharing $50,000 back to the agents, they would actually be sharing $25,000.

Math Example

So now that you know the difference between revenue share vs profit share let’s look more closely at a math example of the same situation with the same payout structure, through revenue share vs profit share.

Let’s say that you sponsored an agent that closes a $10,000 commission deal. At a revenue share brokerage paying put 3.5% of gross commissions, you would receive $350 as a revenue share payment for helping the company grow. Because revenue share is shared off the top and no expenses or operating costs are deducted from it, it can be calculated as a percentage of the gross commission income to the company before splits, because the payout percentages will remain the same every time.

Because there is no variation from deducting expenses and costs, the revenue share compensation model does not change from month to month and can generally be seen as more dependent or reliable if you look at it that way.

With the same example at a profit sharing brokerage, the numbers can get a lot trickier to calculate. Instead of being able to take a set percentage of an agent’s gross commission income, they have to first calculate the total profit that they have made every month based on deducting all operating expenses, fixed and variable, from their total gross commission revenue income.

Math Breakdown of eXp revenue share vs profit share.

Using the same example above where an agent that you sponsor closes a $10,000 commission transaction, instead of being able to immediately payout 3.5% in revenue share, a profit-sharing model must first calculate their total commission income first and then calculate their total monthly profit. And depending on the production of the combined efforts of all the agents at the brokerage, the total profit share pay off for a transaction that yields the same GCI may vary from month to month because instead of paying out a percentage of revenue to the agents, they are paying out a percentage of their total profit.

So even if the percentage remains the same, the total profit that is shared back to the agents will be different from month to month.

Now because of the complicated and variable nature of the calculations that are necessary to determine profit shares, it is almost impossible to come up with a hypothetical situation. So just understand that most profit sharing models calculate their profit share by determining the total profit of the brokerage or market center first then they calculate how much of the profit is shared back to you as the sponsors based on your agents contribution percentage to the total profit. So depending on how profitable the brokerage is each month based on operating costs and total revenue of the brokerage every month, it is possible for you to receive no profit share at all if the office breaks even.

How is Revenue Share Possible?

I’m sure now that you’ve seen both the revenue share and profit share models you are probably wondering how the revenue share model is at all profitable for the brokerage and wondering how it is sustainable.

Well let’s take a closer look at both the eXp revenue share model itself and the eXp brokerage model to better understand how it is possible for a brokerage to share 50% of their total revenue every month back to it’s agents and remain profitable.

How. is eXp revenue share profitable.
You are probably wondering how revenue share is profitable for eXp

First, remember how the revenue share structure works. A percentage of an agent’s GCI or gross commission income is paid back to each of that agent’s sponsor. When those percentages add up, they turn out to be 10%, which means eXp is sharing 10% of every agent’s gross commission income back to the agents that helped grow the company. Because the sales model at eXp is a 80/20 split, with 20% of an agent’s commission going to the company, 10% would be equivalent to eXp paying out 50% or half of their total revenue from agent production back to the other agents at the company.

This means that at the end of the day eXp is still able to keep 10% of agent commissions up until they cap at $16,000. Because eXp can only earn $16,000 from each agent every year in commission splits, and half is paid out in revenue share, you can think of it as eXp only being able to earn at most $8,000 from every agent in commission splits each year.

eXp Realty currently has over 55,000 agents. Let’s assume hypothetically that 1/4 of all agents at the company caps. That is 13,750 agents that would have capped at the company if only 25% of all agents cap at eXp this year. Because eXp earns $8,000 in revenue that they keep from every capping agent, that is equivalent to $110,000,000 in revenue earned from agent production from capping agents alone.

Note: eXp Realty is a subsidiary company of EXP World Holdings LLC, a publicly traded company on the NASDAQ. All figures used in this post are completely and 100% hypothetical and does not resemble the actual figures of the company or its associates. For full financial reports of EXP World Holdings LLC in the year of 2020, click here.

Second, remember that eXp is a cloud-based independent brokerage. What this means is that eXp does have any franchise costs, brick and mortar leases, additional training costs, corporate recruiter costs, and managers to run those offices. All business operations within eXp is done through the cloud with digital resources and platforms, saving the company enough money from these lowered expenses in order to give back to the agents.

Instead of having to purchase or lease brick and mortar office space for agents or broker-owners to go in to, eXp operations are all conducted through a cloud-based brokerage system called eXp World, through the Virbela officing system. Inside eXp World, agents are able to walk around in a cloud-based virtual office as an avatar representation of themselves and interact in live time with other agents, employees, staff members, trainers, coaches, and company partners.

eXp World office training.
A standard office inside eXp World.

eXp World is not only a great money saving tool for the company and broker owners who choose to partner with the company, but also a time saving tool as well for the agents. Instead of having to drive down to a physical office or use third party companies to troubleshoot and take care of maintenance tasks, agents can now simply go on and log into eXp World from their homes and resolve their issues with one of the 600 paid staff members working in the cloud.

Because all brokerage operations are done within the cloud, the company is also saving money each year on training costs and have been able to significantly reduce the costs to provide agents with the best training system in the industry. All eXp trainings for agents of all levels are conducted in virtual training auditoriums in the cloud, which means the company is saving money since they no longer have to build training centers and pay trainers to go into those buildings to conduct these sessions.

At eXp, all the trainings are conducted by the ICON agents, the top producing agents at the company. That is because those agents are incentivized as well through stock awards to be trainers and coaches at the company. To learn more about the different stock awards at eXp, please refer to this post.

Bottom Line

Now that you have all the information you need to know about the revenue share model, the profit share model, and the difference between the two models, you can now make a more informed decision on which structure is better fitted for your team. There are plenty of real estate brokerages out in the marketplace that offers both of these models as a way to encourage and motivate agents at the company to help the company grow.

Although there is a clear and definite distinction between the two compensation structures, both payment structures achieves the same purpose of giving back to the agents and rewarding growth minded agents and team leaders of their brokerage for helping grow the company through their own time and effort. Because of this, it is easy to see why agents at brokerages that offer these models are often more excited and involved about working for that company.

To learn more about the revenue share model, click below on one of our posts, or click on the button to schedule a private confidential one on one revenue share strategy session for free with a top 1% influencer at eXp!

Revenue share resources: