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Is a monthly salary as harmful and addictive as heroin?

The harm of a salary and of drugs

At the 99% Conference, well known Venture Capitalist Fred Wilson said, “The three most harmful addictions are heroin, carbohydrates, and a monthly salary.”

Anyone who is self employed and doesn’t rely on a predictable monthly salary knows first hand that there is nothing more motivating than financial uncertainty. When the chips are down, you hustle harder, you make more calls, you write more blog posts, you email more old clients, you push yourself harder than ever.

Really? It’s that harmful? Yes.

But is Fred right? Are those really the three most harmful addictions? Doctors will disagree, but for business purposes we will agree. Heroin is a hell of a drug, bad carbs spike your blood sugar thus your insulin and you can’t process food properly, and monthly income that is always the same stifles creativity and drive.

If as an agent, you knew how much you were making every month, would you really spend that extra hour after work cold calling past clients? Would you be pushing yourself as hard? If you were making a salary, would you care that your client is having a hard time getting approved? If you’re not on salary, you’re in their living room after hours, helping them sort through boxes of papers to find just what they need to make that loan happen. If you’re on salary, you turn your phone off at 5:00pm and go to happy hour and forget about that client.

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Some will say that their passion drives them and the income is second, but we call bull. Everyone is in business because money is involved, otherwise you would all waive your commissions because you’re just so passionate and good hearted that it is the right thing to do.

The rise of salaries in real estate brokerages

No, because we’re a money driven people, Wilson is right in that a monthly salary is a dangerous addiction and we believe it hampers creativity.

Why do we bring this up? The idea of salaried agents is on the rise and we’re hearing more and more about it. In theory, it is a great concept that could really work, but in a sector as complicated and challenging as the negotiation-heavy real estate sector, the inner drive of agents comes from making sure their children aren’t out on the street next month panhandling.

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Lani is the COO and News Director at The American Genius, has co-authored a book, co-founded BASHH, Austin Digital Jobs, Remote Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

4 Comments

4 Comments

  1. Joe Loomer

    July 20, 2011 at 6:30 am

    Ok, ok – gotta throw a red flag for once. Agents who get up every day, do their lead generation, make their calls, posts, emails, mailouts, etc… Can literally get rid of that basketball in the garden hose and level out their incomes (become salaried – even if they're their own boss). Example: if you know that your buyer lead conversion rate is 50/5, and your seller conversion rate is 15/1 – and know you need X-number of buyer transactions at average commission of X, and X-number of seller-side transactions at commission of Y, then you know at what point you've paid the bills, when you've added to your net, and how your business will grow by expanding your SOI EVERY DAY. This is why 10% of the agents make 90% of the available transaction commissions.

    Real estate agents are the kings and queens of coddling that one transaction from "binding" to "close." Rather than make their calls, do their lead-gen, they'll pull that puppy out, look at it, call the lender five times the first day, and plan plan plan for that beach vacation they'll be taking the moment that Mac-Daddy closes escrow!

    Real Estate will always be a numbers game.

    Every penny you make can be tied to something you did 30-60 days prior. Do today what you want to make in September and October.

    p.s. those commissions can be more addictive than anything 😉

    Navy Chief, Navy Pride

  2. Kathleen Cosner

    July 20, 2011 at 8:40 am

    Salary is cool. Well, it's really cool. In my old life, the one thing that kept me going, and my boss away, was running good numbers, and making a quartly & yearly bonus. There was still some incentive, actually a decent one.

    It's not the end all, be all, though. With a salary comes reviews, someone checking over your shoulder, you become an employee, blah, blah, blah.

    Some of us, who have been in any type of business or corp structure for any length of time, are IC's because we don't need or want any of that, or very little of it.

  3. Greg Eckler

    July 20, 2011 at 9:24 am

    This is a tricky one to answer – Everyone is motivated by something different – praise, achievement, etc but everyone needs to pay the bills. There are pure salary folks, salary and bonus, salary and commission & pure commission.

    Looking at all of them – I think for realtors, commission only is the best option for the client. Getting paid is matched to results. Why would someone pay us before we produced?

    from an agent point of view, I also like the pure commission model. I work hard at what I do and have no guarantees. In a slow market, bad agents leave the business and this is good for consumers (and us as well). If we were on salary, who knows what a consumer could end up with.

    It would be easy to let things go if I were on a salary – I also think it would structure our hours more. Maybe we would only work 9-5 like bankers. Buyers would need to take time off to see homes. Would they pay us overtime if we worked past 5?

  4. Pingback: The danger of becoming comfortable - Monetary Meg

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