Infonestira

Self-employment can be a rational and rewarding choice, Nick Schlekeway writes, but it should not be mistaken for building an asset that compounds.

Inman Connect

Invest in yourself, grow your business—real estate’s biggest moment is in San Diego!

As a new year begins, many real estate professionals take stock of what they built over the prior 12 months. Production is tallied, rankings are reviewed and revenue is measured. Yet an important question is often overlooked: Is the business designed to endure and grow without its founder, or does it still depend entirely on their continued presence?

For much of the industry, the honest answer is the latter. High production, strong margins and even sophisticated teams frequently mask what is, in effect, a form of self-employment. The distinction matters more now than ever, as market volatility, margin compression and consolidation expose which business models are durable, and which are not.

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Income vs. asset

Self-employment and enterprise value are often conflated in real estate, but they are fundamentally different. Self-employment converts personal effort into income. Enterprise value, by contrast, reflects what a business is worth independent of its owner’s daily labor, what a rational buyer would pay to acquire it if the founder stepped away.

Measured that way, many successful operations have little transferable value. A high-producing agent may close substantial annual volume, but if client relationships, deal flow and decision-making are inseparable from that individual, there is no standalone asset to purchase.

The same dynamic applies to many teams and brokerages where the leader remains the primary producer, recruiter or decision-maker. Remove that person, and the organization struggles to function.

Enterprise value only exists when systems, processes and assets operate independently of a specific individual. That independence (not gross commission income) is what allows value to compound over time.

Why production models plateau

Most traditional real estate models reward activity rather than ownership. Compensation is tied to transactions closed, not to assets built. As a result, businesses are optimized for maximizing personal production instead of creating transferable value.

Production has natural limits. There are only so many transactions an individual or even a closely managed team can oversee. Once those limits are reached, growth slows unless additional personal oversight is added, which reinforces dependence on the founder.

Ownership-based models function differently. Development projects, equity stakes and systematized operating businesses can appreciate and generate cash flow without proportional increases in personal involvement. The initial effort may be substantial, but the value created is not consumed at closing, it remains and compounds.

Development and ownership as value creation

This distinction explains why many experienced professionals eventually gravitate toward development or other ownership-oriented strategies. Development is not inherently superior because of deal size or complexity; its advantage lies in asset creation. A completed project exists independently of the developer’s ongoing labor and can continue to produce value through appreciation or income.

The mindset required is also different. Ownership models demand longer time horizons, patience and disciplined capital allocation. Decisions are evaluated on multi-year outcomes rather than quarterly results. Short-term income is often traded for long-term equity, a choice that runs counter to how success is traditionally measured in the industry.

The role of structure and discipline

Compounding value is not simply a matter of intent; it requires structure. Businesses that successfully transition from self-employment to enterprise value tend to share several characteristics:

Financial resilience: Adequate reserves reduce reliance on immediate production and allow for longer-term decision-making.
Independent systems: Operations, training and client delivery do not depend on one person’s constant involvement.
Clear governance and partnerships: Decision rights, incentives and conflict-resolution mechanisms are defined, enabling leverage through collaboration.
Time-horizon discipline: Leadership resists optimizing solely for annual production at the expense of long-term value creation.

Without these foundations, attempts at compounding often revert back to production-driven behavior under pressure.

Brokerage models under scrutiny

Brokerages are not immune to this issue. While firms can and do transact in mergers and acquisitions, valuation is often driven by agent count, market presence or short-term earnings rather than durable systems. In many cases, the owner remains central to culture, recruiting and decision-making, limiting transferability.

Building enterprise value at the brokerage level requires intentional investment in leadership depth, repeatable training, scalable operations and technology that functions independently of the founder. That investment typically reduces short-term profitability, a trade-off many owners are unwilling to make.

Reframing success

Transitioning from self-employment to enterprise value is rarely abrupt. It involves a gradual reallocation of time, capital and attention, from consumption to ownership, from personal oversight to systems, and from short-term income to long-term equity.

The implication for the industry is significant. As market cycles tighten and consolidation accelerates, businesses that rely solely on personal production will remain vulnerable. Those that prioritize transferable value will be better positioned to adapt, transact or endure.

Self-employment can be a rational and rewarding choice. It offers control, flexibility and high income potential. But it should not be mistaken for building an asset that compounds. Recognizing the difference allows real estate professionals to make clearer, more intentional decisions about what they are ultimately trying to create, and what they are willing to trade to get there.

Nick Schlekeway is the founder of Amherst Madison, a Boise, Idaho-based real estate brokerage. Connect with him on LinkedIn.

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