One of the questions that I have heard thrown around over my 17+ years with KW as a way to dismiss the company has been, “Is Keller Williams a Pyramid Scheme?” These questions are related to the misunderstanding of the Keller Williams Profit Share System.
Despite the rumors & a multiple payment level structure, Keller Williams is not a Pyramid Scheme. Over the past 30+ years the system has withstood legal scrutiny. The Keller Williams Profit Share Model is approved in every state in the United States & DC along with all of the Canadian Provinces.
Most of the people that are asking this either a) don’t know what the term actually means or b) have not taken the time to find out about Keller Williams to see if it is actually true. I am going to dispel the myths and fill you in on the true about Keller Williams regarding its pyramid scheme status.
In this article, I will talk about reasons and facts why Keller Williams does not follow a pyramid scheme and how it actually follows a system different from the pyramid scheme.
You can see a lot of reasons why Keller Williams profit share system differs greatly from the pyramid scheme. To understand why Keller Williams is not a pyramid scheme, first, you have to understand both of the systems.
What is a Pyramid Scheme, and How Does It Work?
A pyramid scheme is a type of business investment where participants make money by recruiting more members. These new members have to buy memberships or products to become a part of a business. In many countries like the UK, the system is illegal because it wastes both time and money.
Now, you might want to know how the scheme wastes time and money. Let me explain it to you in a simple way.
At the beginning of a business that follows the pyramid scheme, the founder targets a group of people to become members of his company and buy products. He gives false hopes that the members can make a lot of money if they invest in the business.
But, to make a profit, the members have to recruit more members. The members also have to promote the business and give positive reviews to potential members.
Things look great at the beginning, and members also make money, but it goes downhill pretty soon. As the pyramid scheme starts to grow, new members face difficulties in making money. This problem occurs because the number of members expands rapidly.
Let’s imagine a scenario. Suppose the founder recruits 6 people in his business. Then, the six members recruit 6 more members each. This makes a total of 216 members in the business. These members have to keep recruiting new members in order to make money.
So, in the twelfth recruiting round, there will be 2.1 billion members who have to recruit more than 13 billion people in the company. As you can see, this number is way more than the existing population of the world.
In reality, the business cannot even run this long. When the pyramid scheme reaches its limit, about 80% of members lose all the money they have invested, let alone make profits. So, only 20% of the members end up making money. Again, this money comes from the people who are recruited by the top members. Hence, a lot of people lose money too.
Although the pyramid scheme is illegal in many countries, it still exists in the corporate world in the disguise of harmless business or multi-level marketing. The pyramid scheme might be hard to detect, but one can still spot it by observing a few features.
Now, these features can be compared with Keller Williams profit share system and see how the system is not a pyramid scheme. Before that, you should know about the profit share system of Keller Williams.
Keller Williams Profit Share System
One of the best reasons why Keller Williams Company is a big name in the real estate business is its profit-sharing program. This program enables the agents of the company to make additional or passive income.
Gary Keller, the founder of Keller Williams, first thought about the profit-sharing system in 1986. He saw that real estate agents were always joining and leaving real estate companies in the hope of better payments or benefits.
Gary Keller thought about how to keep the best agents in his company for a long time. So, he introduced a revenue-sharing system in 1987. Later, this system turned into Keller Williams profit share system in 1989. And since then, the company has attracted many agents and started to expand.
How the Profit-sharing System Works?
At the time of joining Keller Williams, new agents have to fill out some documents. They are also given a sponsorship form to name the agent who sponsored them. There is a line that says, “Who do you think was most influential on your deciding to join our company?”
The agent may name another agent working in Keller Williams as his or her sponsor. Thus, the sponsor becomes a recruiter of that new agent. A recruiter agent can recruit or encourage any potential agents to join any office of the company.
When the recruited agents give a percentage of their commission to the market office, the office will keep about 52% of the commission profit for paying bills and distribute 48% of that profit among the sponsor agents.
This way, a sponsoring agent can earn 50% of the profit from each of the recruited agents. The profit keeps growing if the agent recruits more agents.
Again, when the recruited agents start to sponsor or recruit new agents themselves, they will be at level two, and you will get 10% of their profit. By sharing their profit, Keller Williams expresses its gratitude to the agents helping to develop the company.
When the sponsoring agent retires from the company, he or she will still get the profit share every month as long as his or her recruited agent pays the commission to the company.
Moreover, the sponsoring agent is asked to write down the name of a beneficiary. So, in case anything happens to the agent, the beneficiary will keep getting the profit share of the agent from the company. The agents are sure to have this opportunity in the company once he becomes a sponsor.
Reasons Why Keller Williams Is Not a Pyramid Scheme
If you carefully observe the description of the pyramid scheme and Keller Williams profit share system, you can see several differences. Here are the reasons Keller Williams profit share is not a pyramid scheme.
- 1. A source of passive income
In a pyramid scheme, the source of income for the members of business is recruiting new members. The members take all the money of the recruited member and it is their main source of income in the company.
For example, suppose John is a founder of a company following a pyramid scheme. He recruits ten new members in his company. The members have to buy memberships, shares, or products to join the company. John will keep all their invested money and encourage them to bring new members.
He convinces the members that by recruiting new members, they can multiply their investments. So, when the members recruit ten new members each, they make money. Now the new members have to pay a fee to their recruiters, and the recruiters have to pay a fee to John.
The process goes on and on until a certain point. In the end, the founder and the members who are in the upper level take most of the money and walk out. But the members at the lower level or the bottom lose all their money and time. Again, if any member fails to bring new members, he will also lose his money.
On the other hand, Keller Williams profit share system is the second source of income for the agents. It is not the main source of income of the agents in the company. The agents already work for the company before their profit share program starts. They work in a commission split.
When the agents recruit or sponsor new agents, they start to get a share from the company’s profit. Hence, it is an additional income. The agents will not lose their jobs, even if they cannot sponsor any agents. 2.
- 2. No extra fees or time
The second obvious reason Keller Williams is not a pyramid scheme is that the agents do not have to pay any extra fee or time to become a part of the profit share system. They do not have to knock door to door to recruit new members.
In a pyramid scheme, one has to invest a considerable amount of money to become a part of a company. The members have to work hard to recruit more members. Only then, they can get back the money they have invested and then earn the profit.
But, at Keller Williams, an agent just has to tell a potential agent about the benefits of joining Keller Williams. The agent does not have to pay any extra fee or recruit a lot of members to earn profits. Moreover, there is no geographical limit. You may work in an office in Florida and sponsor a new agent in Texas and still get the profit share.
Thus, there is no need for investment and no chance of losing your money. However, you can earn extra by convincing others to join Keller Williams.
- 3. Levels of earning profits from sponsored agents
As you have seen, in the case of a pyramid scheme, the members keep earning money from recruits below them. There can be many levels like 10th or even more. As a result, members at the upper level will keep getting money.
However, in the case of Keller Williams profit share system, there is a limit. A sponsor agent will get profit shares from up to the 7th level. Besides, the percentage of profit also varies.
For example, let’s say Mike is an agent of Keller Williams. He has been working with the company for a while now. He tells Jake and Anne about the benefits of joining Keller Williams as an agent. So, Jake and Anne join the company. Now, Mike will get a 50% profit share of Jake and a 50 % profit share of Anne from the market office every month.
Then, Jake recruits George in the company. So what happens now is that you will be at level 1, Jake is level 2, and George is level 3. Therefore, you will get another 10% of the profit share. The profits are shared on the 21st of the month
The seven levels of Profit Share System are like this:
1st Level: 50%
2nd Level: 10%
3rd Level: 5%
4th Level: 5%
5th Level: 7.5%
6th Level: 10%
7th Level: 12.5%
So, after the 7th level, Mike will not get any more profit-share. Moreover, if any recruited agent by Mike reaches his or her cap of the market office, he or she will not pay her commission to the market office for that year. But it will start again next year. It also depends on individual office profits.
You can see that the company may not offer a lot of money, but the levels of profit-sharing are understandable. Keller Williams wants to be fair to all of its agents. So, they limit the levels of profit sharing to give opportunities to all agents justly.
- 4. No False Promise
Keller Williams does not promise a lot of money from the profit share system, and the system is not illegal like the pyramid scheme. The pyramid scheme promises a lot but shares profit with only a limited group of people. The people lower or at the bottom of the pyramid lose everything.
The founder of a pyramid scheme may convince the recruits that the pyramid scheme is a lifelong opportunity, but after a while it is proved as a false promise. Also, when a member leaves the company, he will not have any profits from his recruits.
On the contrary, Keller Williams profit share system does not give any false hope. Your additional income depends on the agents you recruit and their commissions paid to their market office. Profit Share is an equal opportunity, unequal reward system.
The best part of the profit share system is that an agent can still get his profit share even after retiring from the company. The company will not forget to send his profit share every month. Furthermore, an agent can make a person his beneficiary or heir of the profit share.
If something happens to the agent, the beneficiary of the agent will get the profit shares.
Although the Keller Williams Profit Share does not promise a lot of money, it has a decent offer for the agent. The sponsoring agent may not be able to make any sales, but he can still have his passive income from the company.
Moreover, the profit share will continue even after the death of the agent. This system is not seen in any business following a pyramid scheme.
- 5. Interdependent Culture
Unlike the pyramid scheme, Keller Williams cares for each and every agent of the company. In a pyramid scheme, the members only think about making money and how to use others to gain their own profits. As a result, when the company collapses, the bottom members of the pyramid scheme are abandoned.
But, in Keller Williams, the agents are treated as members of a family. The company has a unique culture of sharing. It knows that the existence and the development of the company depend on the agents’ success. Similarly, the agents understand that they can have a great career and make money by working hard for the company.
The company does not keep all the money from the commissions of the agents. It uses a part of the money to pay the company bill and then share the rest of the money as profit with its agents. So, a huge share of the agents paid money actually returns back to them as profit share.
In a pyramid scheme, the members are trained to scam people and make profits for their own. The company using a pyramid scheme knows it will get disbanded anytime, and so it tries to make money as quickly as possible. Hence, it uses its members as pawns to earn money.
Fortunately, at Keller Williams, agents are treated as partners and contributors. Moreover, the company is legal and stable. There is no chance that the company may close anytime soon. This creates a sense of security and safety among the agents.
In addition, the company provides necessary training and technical support to its agents. The company arranges meetings and seminars where they invite both agents and potential clients. In these meetings, the agents can get clients and get more opportunities to have commissions from real estate sales.
So, now you understand that there is no Keller Williams pyramid scheme. Instead of taking away money from its agents, the company focuses on the development of both the company and its agents. The pyramid schemes depend on the money of the participants.
But the profit share system gives a chance to the agents to make an additional income in their already thriving real estate career.