Employee vs Independent Contractor Mindset | LeadingLane Podcast | Ep 42

Welcome to the leading lane podcast for real estate Pros by Real Estate Pros with your hosts Ashley Frederick and Stephen Burch. If you're looking for an honest, authentic and raw perspective, you found it.

All right, welcome to today's podcast. We're going to get into the fun discussion of employee versus 1099. So W2 employee versus an independent contractor. And sometimes how agents and even brokers really, you know, can put themselves in different categories based off of what is convenient for them at the time. So first off, actually, what is an employee W2 status for 2? What does that mean?

What does that to me? So that is somebody that works for me and I am directing a lot of their duties, if you will. Obviously they fall into their roles, but it's somebody that they report to me. They are responsible for getting things done that I ask them to get done. They have set hours, set expectations. That's how I view employee.

Okay. And then typically your employees are either salary or hourly.

Correct.

Okay. And then so on the 1099 independent contractor side, what does that mean to, to you and to the public?

Right. There's a misnomer for that. So in general, like not talking about real estate. Right. A 1099 person would be somebody that works for themselves or that they're subcontracted to work for someone. Right. So like in our construction business, we have 1099 people that we sub out to help us with things and to work with things. I think the other kind of thing is that many times they can set their own hours and the pay is not always a set wage as well.

And so there, that's more the entrepreneur world, the Entrepreneurship 1099 making sure that we know that basically there's no guarantee, if you will, for their pay. It's. I look at it as commission for compensation. That's kind of a 1099. Or they're for hire, they're a freelancer. There's a lot of different ways to end tomorrow. Yeah, absolutely. I mean it's on a contractor contract type of base, an agreement to fulfill some sort of obligation. So we're going on this topic because of sometimes agents in the, in the real estate world. I'm not saying this is all agents, but there's kind of this wobble in and out of oh, I want to be an employee and then, ooh, I want to be an independent plan because they want the freedom and flexibility. But then a lot of agents have the hard time of being able to actually put in the work. Like a self employed entrepreneur has to make it actually happen. We can get the tools and the guidance and everything. But then for whatever reason, I think a lot of times those people that don't have a clear vision that they are independent contractors, they almost turn the mindset and they take this the blame game, and it's easily pointing at the broker. Well, the reason why I'm not selling real enough real estate is your fault. Or the reason why whatever it is is because you as the broker did not provide that to me. And it's not our job and responsibility, in my opinion, to ensure that they have the work. They have to come to the table and make sure that they turn that around and actually produce for themselves since they're independent contractors. But there's this misconception, this mindset for some of these people. Do you think, do you agree with me or do you disagree?

I 100% agree. And I think most people will say to write real estate isn't as easy as I thought it was going to be is typically what my new agents say. I think where I see a little bit of, you know, difference is some of us a little bit older Realtors that worked at a salary job or, you know, worked an hourly job that was eight to five, if you will, or some of those salary jobs were, you know, 80 hours a week. But I feel like when you came from that, it's a little bit easier to transition into a 1099 type of role because, like, to me, I don't know anything else besides going to the office and working from eight to five or more. Right. Because that's what I've known. I think where it gets a little bit more interesting in today's world are people are getting into, say, real estate right out of high school, right out of college. They've never actually had a true 8 to 5 job. And so the flexibility to them looks great. But then I think that they struggle with actually putting in routines or they're used to, like, classes where, like, you didn't have to get up till 11 and then I went to class for two hours and then maybe I worked at night. And I think that that's where when we're talking about, you know, they like to try to blame brokerages for their production. It's not to say that there aren't some brokerages that need some help as to what they're doing, but it really does come back to the agent themselves and how they're structuring their days. And I think a couple podcasts, you know, we talked about how numbers in the office correlated to production. And I think that this kind of goes back to that too. But it really is, there's mindset that goes involved and it comes down to that entrepreneurial spirit, which I think you can't, you can create a little bit, but I think that really it has to be deep down for someone to understand the drive of what it takes to be a entrepreneur or a sole proprietor. You might be working under someone's umbrella, but at the end of the day, what does that look like when you are truly responsible for your income coming in?

Absolutely. And I think that's a great way to be able to say it. Like you're under their umbrella and there's an affiliation there, but it's not an affiliation like a, you are my boss. Like, yes, you have the oversight, you have the say, all that, you know, happens in your company, but you're not technically my boss. But then where I think this is really interesting too is you said drive. Like we can't force somebody to do something where on an employee side we can say, no, you're going to show up at 8 o' clock in the morning, you're going to do this, you're going to do this. There is the force aspect of it, there is the control over it. And so that's where again, those wires get crossed a little bit. And I mean we can, I mean, I think a great plan in real estate, if you can make it work, is put a licensed agent as a W2 that want the hourly rate and then they are just hourly rate and I'll get 100 of their commission and they get no split. Well, nobody's really going to love that because there's, there's a, two sides to this. As a broker, you know, we want to make sure that we're actually going to see that return. So when we make that investment, we want to see that, you know, kind of. But then as the person receiving that hourly rate or salary rate, when they start selling a whole bunch, they're going to start seeing that number. And I'm like, man, I did. I can do it. Let me, let me know. Get, you know, the person should split. So just think it's really funny how really depending which way it's swaying how people will jump ship to one to the other.

Do you think or do you see any correlations sometimes of like a difference between like a W2 and a 1099 as far as. Yes, the, you know, W2 is here all the time, putting in all of the work and then sometimes how that might correlate to a 1099 as far as like frustrations that they don't put in as much but yet they're getting paid. You know. So I think that sometimes there's that weird balance too of an employee versus an agent. But then like employees feel that they're putting in more effort than agents.

And I think when ends the employee side of things because they are there, because we have these discussions, because they are being able to experience who's walking in the office, who's actually there. What happens is they, they create more of a loyalty, I think to the company. And I could be wrong, but I think that the, because they are looking out for the company, they know company dollar they get to see things in different light than what an agent does. Then they get a little bit, I don't want to call it animosity, but I think that there definitely is some frustration. Yeah. Protective because they're like, look, you have all this, you have the capability. So they see the potential because they can see agents that actually are utilizing it, what they're capable of. But then the, the naysayers, the ones that are, you know, complaining all the time, you know, when they start complaining in front of W2s, they're like, if this person can do it, they have the same opportunity, you have the same opportunity as they do. But yet you want to point fingers, you're in this victim mentality. That's when that frustration comes into play for sure. So do you. I also think that like the insight, at least for you meet with your agents and your staff constantly. And I know that you do a lot of one on one portion of it and planning, but I don't think a lot of agents receive that. And so because they're not receiving it, maybe it's a little bit easier to point fingers. But I think something that you do extremely well with all of your staff and your agents is that you do your 30, 60 90s, you do your one on ones. So you're doing a lot of the, the planning. Right. Reflection, then planning. Then let's do, let's see what we're actually going to be able to do to implement. Like here you go, here's your tools and resources. And then what I also think that what's that's creating is you're allowing your agents and staff to be able to look into the future and start forecasting and starting seeing. And so when the, the next 90 days rolls around, when you turn, you know, the, the mirror a little bit and you can say what did you not accomplish and what prevented you from accomplishing it. Now it's a little bit easier to take that blame instead of pointing you at, Ashley, you didn't do this for me. It's really here. I didn't do it for myself as an independent contractor. And maybe I need to reflect a little bit more and change my pivot, my claim a little bit.

Well, and I think that where I feel like the most help has come from as far as this planning is, yes, they have their one to ones with with me, which they know the questions I'm going to ask. You know, they send me the answers ahead of time. You know, same questions, just different structures throughout the year. So I think they have to be aware of, like, how am I going to answer that? Or that's my own fault that I didn't accomplish that because I wasn't doing this. But when we threw in an accountability partner, I really feel like things changed because then it's not just me, the broker that is keeping them accountable. It's now the know person that they have their desk next to that might be like, did you get this done yet? Or you know, I thought you were going to have two listings this month. Or I thought you're going to meet with a lender this month. And then it kind of takes some of the pressure off of me, if you will, but it also creates that camaraderie. But you know, one thing I took from you was celebrating successes at meetings at the beginning of meetings and we had meeting on Tuesday and I think an agent said something like, I reorganized my closet. It's been on my to do list for the last, you know, three times. And I finally was able to take it off. But right. Like the whole group knew that that was on her list. And so like, what a cool way for us to celebrate her together. You know, that that was something she'd been telling her partner that she was going to do. So I think the other thing that I can't remember what it was right now, but an accountability partner called out another one was like, hey, don't you have a celebration to tell us about that you got done? So I think that it goes back to being aware of your surroundings and aware of what people are watching. And really, I mean, like, we're all trying to root for each other. I think that's where people get a little crossed, if you will too, as far as this entrepreneurial world and that we have to be against each other. And I really don't think that that's the case. At all. I really feel like, you know, people will say real estate is a cutthroat industry. Don't get me wrong, it is. There are certain people that make it that way, but really, like, the more we all help one another, really it makes us all better agents. It makes transactions easier. But again, that comes from, I think, in an entrepreneurial spirit. I guess the way that's the way I view it is like I want to help other people. That's part of being an entrepreneur. Like, we've had some experiences like why have you reinvent the wheel if we've already done that? And all it does is make us better on each side of it.

Totally agree. And you know, I think you also have your agents and your team, they have their 30, 60 90s displayed up for everybody to be able to, to see it. So, you know, I think that really what you're doing is you're creating that accountability aspect for them. Because if they're not even going to be accountable for themselves, then how are they going to be accountable for other. And then I think that the typical person doesn't want to let somebody else down, but when they, they're more apt to let themselves down. And so when you are able to create that culture and create that dynamic between two individuals or a group of individuals, really, it's no longer a wonderful screen pointing fingers to the leader. What's happening is it's this full circle of everybody around, lifting each other up because we all are being vulnerable, we're all being honest and going to the point of the closet, you know, cleaning out the closet. It's, it doesn't all have to be some big production of, you know, transactional. You know, that closet can be something, you know, that you needed to clean out for three months, four months, however long it's been, that's taking up the energy and the space from that person. And then now that they actually got that off their plate, that, you know, the hit of dopamine, that they get the cross off of your, you know, their list and now there's room to be able to go and accomplish something else. So it doesn't all have to be strictly business to help one another.

Yeah, I think, you know, I would say that sometimes from the broker's standpoint, I struggle with a W9 versus, you know, 1099 versus the W2. And I think that it's because it is such a gray area, if you will, and that they're still looking for direction, you know, especially if they're brand new. Agents haven't done it. But also, like, we have a lot of financial decisions to make. We have a lot of industry decisions to make. And right. They know at the end of the day, it's my license. So it's. It's this fine line of trying to either broker slash boss. Right. In a roundabout way, even though we are, but we are. So I do think that sometimes that's a struggle. I think some brokers do take it too far and that, like, no, this is what you have to do and you have to be able to do this. And I think it's the same thing. Like, we can. You can lead a horse to water, but you can't force them to drink it. But I do think that there's definitely an avenue there of, like, walking this tightrope of what are we doing? What are we? And I think that also goes back to. For me, like, in the past, like, I had 60 employees, so I was used to running ways, you know, things which we can take into these. So I do appreciate that the staff here, like, looks for the guidance and understands that at the end of the day, you know, they're ultimately responsible for their decisions, but I can try to help lead them in the right way.

Well, I mean, it's empowering somebody versus being a dictator, right? Like, it's making sure that you are there to help them empower and be critical thinkers to get where they want to be able to go, which then in turn, in my opinion, you'll see far more success versus when you're just a dictator and just a manager thing on top of them, then they're never going to go and be creative or go outside of the box. They're just going to do status quo because that's all you're allowing them to be able to deal and you're not allowing them to lean into their strengths and you might be pushing them into their weaknesses, which turns around to a failure. The other note that I wrote down here is the fine line, you know, the frustration. And you know, even from a broker standpoint, for me, I think it's. I wanted it. I want it more than them sometimes. And that creates the frustration for me. That creates almost an animosity for myself, because I see it in them. Yes, I know that they have the power to be able to do it, but it's like, let me pull your freaking head out of your ass for you so you can see that you have the potential to make whatever amount of money that you want to be able to make. You don't have to be just stuck at that hourly or that salary. You are in power, like you are in complete control of whatever you want to make or as little as you want to make too. So it goes both directions on here.

So if you, if there was someone that's struggling, like their new agent, or maybe they're two or three years in, which in my world is still like a newer agent, and they are struggling with that like line of feeling like they're an employee, but yet they are responsible for themselves at the end of the day. Like, what are three tips you think you could give them to try to make it, you know, more aware? Like, this is, this is your, this is your baby at the end of the day.

So I think the tip number one is going to be self reflection. It needs to be like you need to have a hard look at yourself if you were working for you. So take, you know, take a step back and put yourself on a balcony. And when you're standing on this balcony and you're looking down, you're seeing yourself, right? Would you want to work for yourself? Would you want to work for the CEO and see how you're acting, how you're showing up? What are you doing? Are you actually, you know, putting things into play and implementing? Or are you just somebody that's, you know, spinning your wheels and not going anywhere? I think you have to be able to figure that out. So that's tip number one. Tip number two, I would do an assessment on what tools tech resources support. All of the things that you have provided from your company, from your franchise, your peers around you, everything. What is it that you are using and what is it that you're not using? So are there different tools that are out there? And that could even be the training aspect of things. You're not even taking advantage of different training that are readily available to you. And you're not taking advantage of tools like a CRM system or a presentation builder or whatever it is. What is it that you're not using that you can implement into it? And then for tip number three, I think it's going to be plan your perfect day. And really I'm going to break that up into three different categories. Plan your perfect day and then plan A, so it's good, better and great. So plan your good day, a better day and then your great day. And so you can see if you were to operate, you know, within those realms, those are your, those are your guidelines, those are your beacons that you need to stay in between from the greatest day ever. To where a good day is still a good day. And don't get yourself upset that you didn't spend eight hours in the office when you have only spent, you know, one hour a week in the office. That doesn't make sense. So making sure that you have realistic parameters there. And I think you'll see a huge difference once you have actionable items and consistency and persistency in your schedule, utilizing your resources and realizing that it's a self reflection that you are in charge of whatever the future you want to be able to create.

Those are all great. One thing I like to tell it's not even just in, in real estate, but I think anyone that is going to be a new entrepreneur is to actually set up. And I'm not an accountant, so ask your accountant but like set up an llc. So a lot of my new agents, I have them create an LLC right away or anybody. I have a couple other people like that are looking at investments, right. And I've had them create an LLC. I think it's like $120 and it to me it hopefully does mind shift because to me you're a lot more aware of what's going in the bank account and what's coming out versus if it's mixed in with your personal, which I know a ton of people do. If you can really separate that out and then like that's where you start maybe paying yourself a salary. Like maybe it's $2,000 you put into this checking account but then you use it for all of your business expenses. So whether it's your gas, whether it's your marketing, you know, your closing gifts and once you really start to evaluate that and I think you can look at that, I think that people start to understand it a little bit more as far as well, that pot needs to be a little bit bigger for me to be able to take this course or to fly to this convention. And I think when you separate the two and not have combined accounts, you can really start to think like a business owner.

You know, I think that is like a big aha. I'm actually going to do a training tomorrow days for an office and been trying to think how do I get people to really see like we've done, you know, reflection and numbers and all of this, you know, a few times and we're still not getting it that you know, we're our own boss, we're own CEO and we're running our own business. So I think that even that creation of like, you know, having the articles of incorporation and you know the true legal things of saying, wow, like this is really a business.

It's like your own checking account. Like your own check that say that LLC's name on it. You're getting paid under that LLC.

Yeah, like, and I think that it's just, it's a visual for me. So like here everything has to go into the business because you're running as a business and it doesn't trickle out to you. You don't get paid until obviously expenses have to be covered. So what does that look like? And so how do you fill that higher so that you can get paid quicker? I think that's a great way to change mindset and shift and truly operate like a business that you should be anyway. And maybe that's something that we should be implementing for agents coming into the office. Day one, hey, this is how I want you to start thinking. And I bet you the shift of how engaged and how people interact from day one, doing that would be just drastic.

Um, well, and even like one of those, one of those very quick things I tell them too, is that okay, when you get your first paycheck too, don't spend it all now you're self employed. So right. We always talk about, and it's different for everyone, but I tell people like a good basis is to put 30% away of whatever your check is. So I was like, you know, now you have a new checking account, so create a new savings account. And on the day of, you know, you get paid, just set 30% away. And I'm like, trust me, you will thank me for it later if you don't have to use it all great, you can do something great at the end of the year. But I know that like I didn't necessarily have those discussions when we first got into business, even under our construction business. And we definitely paid for it by not having those little tidbits. So I think whatever, again, like whatever we can offer to other agents to make them understand that they are their own product and you have to pay taxes and you have expenses. Really helps to get them, I think, to the next level.

Yeah, no, I love that. I think this is a great topic. And it's just, you know, I didn't want to go into this topic of a negativity of, you know, like bitching and complaining that. Damn it, agents that get your shit together. Because I think it's really, there has to be a way for us to be able to help shine a different light so they can see completely differently than what they've always done. They don't know any different. And I think that's our job as leaders, as brokers, as whatever we are out here. Like, to be able to give them different methods to think outside of their typical box, because this is a whole different world than they're ever used to. So hopefully today was somewhat useful and you took a tidbit away. And if you are going to implement or use any of the tidbits that we have given you today, let us know. Reach out to us. And then if there's anything that we can help you with, please, we're doing this for you, so please let us know how we can help you.

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