(This is Part 2 of a six-part series. See Part 1: Are you ready to sell your real estate practice? Part 3: How to build a saleable real estate biz; Part 4: 7 ways to beef up your real estate business; Part 5: Putting a price tag on your real estate business and Part 6: Navigating the sale of your real estate business.)
What does it take to successfully sell a real estate business? The first step is to determine what you have to sell.
Last week’s column looked at how well you would fare in selling your business now as well as how psychologically prepared you are to leave the business. This issue examines what has value in your business as well as some of the steps required to successfully sell your business.
What Do You Have to Sell?
Your business has value, provided you can document its worth. Tangible assets such as your car, computers or other equipment usually have little value. On the other hand, if you have a moving truck that promotes your business or if you own an office, these assets enhance value.
Your past client list and the list of people in your referral database are probably your most important assets. These lists have value to the extent that they regularly generate referral business and that you can document the nature and frequency of that business. Also included within this category are current listings, renewable leases, and other agents who refer business to you. Additional assets include your branding, your Web site positioning, the history of your brand on the Web, your market position within various niches you serve, and documented systems and procedures. Finally, a well-trained support staff is extremely valuable provided they will continue working after the sale.
Ten Steps to Creating a Business You Can Sell
Step #1: Identify what role you play in your business – are you an entrepreneur, manager and/or technician?
These three categories come from Gerber’s book, “The E-Myth Revisited.” The entrepreneur or rainmaker is the idea person in the business. This person is responsible for creating new business and often has no patience for handling details. The technician enjoys going on presentations and negotiating transactions, but may not be as effective in terms of generating new business. The manager enjoys administrative details including reviewing contracts, working on the details of a Web site, and other back-office work. If you are a sole proprietor, you must handle all three roles. For example, if you are poor at being a rainmaker, consider joining a lead generation company or partnering with someone who is a rainmaker. If you are the rainmaker, delegate the details of your business to a virtual assistant who can handle Web site issues and to a transaction coordinator who can handle issues after the property is under contract.
When it comes to identifying who will be the best replacement for your business, consider using the Real Estate Simulator. Ideally, your purchaser will score in the top 15 percent (i.e. “highly suited”) to the business. If the person doesn’t score this high, then there is a greater probability that agent who purchases your business will be unable to maintain the business at the same level.
A different alternative is to use two assessments from Target Training International. The first of these is the DISC behavioral styles assessment. Ideally, your purchaser should score above the 50th Percentile on the “D” and “I” factors on this assessment. People who score high on the “D” factor are highly motivated, get-it-done types. They have no problem handling rejection. The people who score high on the “I” factor are “people-people.” If they lack the “D” factor, they may spend a lot of time talking and not accomplishing very much. Only about 5 percent of the population has the “DI” profile. Almost all highly successful real estate salespeople score high on these two values. The second assessment is the Personal Interests, Attitudes and Values (PIAV). This assessment identifies the motivations, attitudes and values that drive behaviors. Target Training International’s research shows that regardless of behavioral style, more than 70 percent of the most highly successful salespeople in both the United States and Germany have “high utilitarian” as the primary motivation underlying their behaviors.
In contrast, your support staff should score high on the “S” and “C” factors of the DISC. The “S” factor reveals steadiness and a preference for systems. People who score high on the “C” factor are detail oriented and often make good accountants and engineers. The very best choice is someone who scores with the “I” “S” and “C” factors above the 50th Percentile. These people can also be successful in the rainmaker position provided they know what to do and couple that with good people and detail skills.
What else do you need to successfully sell your business? See next week’s column to learn about how to brand, niche and document your book of business.
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