Leaving the Business? “I’ll buy your contacts and all your smart business practices too.” Few sales associates plan their exit from the business ahead of time. Isn’t it time you started thinking about your own strategy? Use these 10 strategies to show clients and customers why it’s more important than ever to use a Realtor® and why you’re worth every penny.
Virginia Glass, CRS, loves her real estate career so much that she’s stuck with it for 41 years. A sales associate with Coldwell Banker Hartung & Noblin Inc. in Tallahassee, Glass is also acutely aware of just how valuable her business could be to one or more other sales associates at some point, so she’s taking the necessary steps now to prepare for a time when she’s ready to hand the baton off to someone else and spend more time traveling and volunteering.
Through several meetings with a business consultant, Glass learned how to document her business processes in order to achieve the best possible price when it comes time to sell her book of business. She also learned that documenting three years’ worth of income would help prove her business’s worth, and strengthen her sale price.
Glass has developed a mental plan that involves passing her business on to at least two sales associates, both of whom share her values, integrity and level of professionalism. She envisions working closely with those professionals for at least two years before retiring, at which point she would sell her book of business to them.
“I’d like to start the process two years from now and be totally unencumbered from the day-to-day tasks within five years,” says Glass, who closed over $27 million in transactions last year. Based on conversations she’s had with other veteran sales associates, Glass isn’t alone in her desire to exit the business in a way that generates income and ensures that her lengthy client list is taken care of by competent professionals.
“A lot of my peers want to find a way out, but don’t know how to get started,” says Glass, who hasn’t received much help from her accountant, who had a hard time wrapping his mind around valuing a real estate business. “I’ve been diligently trying for years to obtain information on how to maximize the strategy to exit, but to no avail.” In the Minority
The fact that Glass is thinking about how to pass her business along puts her in the minority of real estate professionals who are actually preparing for a time when they no longer broker real estate transactions. Like many small-business owners who are caught up in the day-to-day tasks of running their firms, most sales associates and brokers simply don’t take the time or have the impetus to develop an exit strategy.
“Most agents don’t even consider the fact that they might need an exit strategy at some point,” says Marilyn Moats Kennedy, managing partner at Wilmette, Ill.–based CareerStrategies. Kennedy, who often works with real estate professionals, says the problem is that most sales associates don’t see themselves as business owners, even though they are. And even those who do treat their practices like businesses still overlook the need for long-term planning. Here are some steps that can help you earn money, even after retirement: 1 Hire a Business Consultant
A business consultant who specializes in helping you prepare your business for a sale can offer you the template plan by which your entire business is prepared. From working with you on a business plan that can help you immediately, to helping you value your book of business and your experience, a consultant can make the process go smoothly.
Glass advises you to speak with business consultants who have some knowledge of the real estate business. “Seek out someone who can help you maximize your strengths, improve on your weaknesses and achieve your end goal when the time comes.” 2 Build a Business Plan
“If an agent were to actually put together a ‘real’ business, document [his or her] business processes and work from a business plan, then he or she could probably sell that practice successfully to another agent,” says Kennedy. “Unfortunately, most just drift along, and then one day they’re just gone from the business.”
To avoid that trap, Carla Cross, president of Issaquah, Wash.–based real estate training firm Carla Cross Seminars, says sales associates should create and use a business plan that outlines the company’s mission and purpose, market strategy, target customer base, objectives and financial goals. Use the plan as a benchmark against which to measure results, she says, and tweak the plan accordingly. This seemingly simple step is often ignored, yet simply having the right documentation and records of such activities can go a long way in convincing someone of your business’s value. 3 Document Your Office Systems
Cross says you should look particularly closely at the systems you use on a daily basis, as opposed to just your client and customer list. A qualification system used when selecting buyers or sellers to work with, or a method of converting Internet leads into actual customers are good examples of systems that can boost the value of a real estate practice. “You can sell your book of business,” says Cross, “but it won’t be worth as much as [it would be] if you were to sell the entire business, with the congruent systems intact.”
So, how do you do this? Break it down into small bites to make it easier. For example, start with your listing presentation. Make a checklist detailing all you do to prepare for the presentation. 4 Hire an Assistant
You may not realize it at the time, but by hiring licensed assistants, you form the foundation for a successful, profitable exit from real estate in the future. In fact, Patti Brotherton, president of Santa Barbara–based PAB Performance Partners, says the sales associate who has had a licensed assistant for at least two to five years will be in a good position when it comes time to exit the business.
Choose an assistant (or colleague, depending on which route you want to take) whose personality, business goals and work ethic match yours as closely as possible. Because that person will be working with your clients and customers, and because your clients and customers like working with you, it stands to reason that the closer you can come to cloning yourself, the better.
And, that assistant can be part of the benefits you offer to the sales associate or sales associates who will buy your business. “By that time he or she [your assistant] should know your business very well, making it a natural hand-off,” says Brotherton. 5 Get It in Writing
Brotherton also advises drawing up an agreement and/or contract that clearly states what is expected of each party before handing over the book of business and accompanying systems. When Brotherton exited real estate in 1987, for example, she worked out an arrangement by which she received 25 percent of the income generated by her client and customer base for a specified time period (this would usually be two to five years).
You may decide you want to receive a certain amount up-front and then a percentage of the generated income that the buyer receives over a certain period of time, paid on a sliding scale. Or, you may want to charge one upfront fee and make a clean break. Regardless of how you structure the sale, it’s vital that you hire an attorney to help you draw up the contract or agreement. 6 Choose Wisely
Remember, the success of the person taking over your business will be vital to your agreement if you’re banking on receiving a steady check after you retire, especially if your agreement specifies that you’ll be getting a percentage of the income earned after you leave. That’s why you want to choose a sales associate whose work ethic and personality are similar to yours. While some associates choose to have one person take over his or her business; others like the idea of splitting it up between two sales associates or a team. 7 Make a Seamless Transition
“You want the transition to be easy and comfortable for your clients; otherwise, they’ll just go somewhere else,” says Brotherton, who suggests using tools like direct mail to alert clients and customers to the upcoming changeover. Start slowly by using postcards that feature photos of both yourself and the new sales associate(s), and then move into materials that mention the upcoming retirement and the new sales associate’s qualifications and experience.
“Don’t just give them the ‘Goodbye. I’m out of here’ speech,” says Brotherton, who suggests spending at least one year transitioning the business. “If you do it too quickly, you won’t get any residual business.”
Glass, who will continue to hone her strategy in anticipation of a time when she can spend more time enjoying life and helping others, says the fact that some sales associates work their entire lives to create a following, then simply walk away when it’s time to retire, is a travesty. Bridget McCrea is a Clearwater-based freelance writer.