With more than 1,000 Inman posts, Bernice Ross is a long-time contributor whose weekly column on real estate trends, luxury, marketing and other best practices publishes every Monday.
Check out part 1 and take the quiz to find out if you’re ready here.
What does it take to successfully sell a real estate business? The first step is to determine what you have to sell.
Part 1 of this series looked at your mindset and whether you’re well prepared to leave the business. The next step is determining the value of your business and what you can do to enhance its value prior to your sale.
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, a team that can generate business without you, or if you own the real estate where your office is located, these assets can enhance the value of your business.
Here’s a list of other assets to consider:
- Your past client list plus the list of people in your referral database. 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.
- Current listings, renewable leases and other agents who refer business to you.
- Your branding which includes your website positioning, the history of your brand on the web, as well as your social media presence.
- Your market position within various niches you serve.
- Documented systems and procedures that are replicable and don’t need you personally to generate and close business.
- A well-trained support staff is extremely valuable provided they will continue to work after the sale.
- Property management contracts.
- Niche specialties such as REO where you have a corporate client and people who can handle that business if you’re not available or leave the business.
Document your existing book of business
If you want to sell your business, you must have a client relationship management platform (CRM) that documents your contacts, how often you communicate with them, and via what means (phone, social media, email, face-to-face). You can only sell what you can document.
If you are not using a CRM, hire a virtual assistant or someone else who can load your contacts into a CRM. Begin using it immediately.
In terms of what else to track:
- Each person’s name, address, city, phone numbers and email.
- The types and numbers of transactions each client has closed with you including the dates and sales prices.
- Also track the number of referrals each individual has made to your business including the frequency, the price range of the referrals, the dates each referral was made, as well as the referral’s contact information.
- Track how many times you have communicated with each individual, the dates, as well as how you communicated. A seller who did business with you five years ago only has value provided if you have been in regular contact.
It’s important for your purchaser to have this data so that they can continue to deliver service at the same level and to minimize any shrinkage in the business when you leave.
How to maximize your business’s value
As noted above, a strong, documented referral database and client list greatly enhances the net worth of your business. Here are seven other ways to enhance the value of your business.
1. Get back in touch with past clients
One of the simplest ways to build the worth of your business is to reconnect with past clients. A simple strategy is to hold a client appreciation event and then stay in regular face-to-face contact at least three times per year.
2. Get rich in a niche
Owning a niche is one of the best ways to have a marketable practice. Most top producers have specific niches they serve. A great way to build the worth of your business is to create multiple niches and brand each niche separately.
Although web marketing can be quite expensive, marketing to a narrow niche is one of the least expensive ways to market. Instead of marketing using the name of the city where you live, market using the name of a subdivision or condominium complex. Targeted marketing costs pennies and effectively builds the worth of your business.
Hot niches to consider over the next few years include millennial first-time buyers, baby boomers downsizing or relocating to the sunbelt, single women (about 18 percent of the market, according to the National Association of Realtors’ Profile of Buyers and Sellers), investors and flippers, and people age 50-60, the prime time for people to buy a second home.
3. Brand your business with a salable brand
How have you branded your business? If you are like many agents, you have branded your business using your name, which dramatically reduces the amount a buyer will pay for your business.
Here’s how to fix this situation. Begin by creating additional URLs that reference your brand. Agents seldom obtain the maximum price for their businesses because they haven’t capitalized on the appropriate branding strategies.
A great brand is memorable, references real estate and targets a specific market. In other words, it references what you do, who you do it with and where you do it. Some examples of this type of branding include, “SantaFeHorseProperties.com,” “RollingWoodCondos.com,” or “Homes4LATeachers.com.”
Each of these examples references real estate, a specific niche and a geographical location.
If you have branded your business using your name, add to your existing branding by creating new brands that incorporate these principles. Reserve the URL (website address) for each of your new brands.
Please note that you do not need several new websites. Instead, have each URL link directly to a page on your existing website. These pages should have the look and feel of a home page, even though they are embedded in your current website.
You can also create neighborhood websites (that use the property address as the URL — 123MainStYourTown.com), Facebook business pages, and Instagram stories focused on a narrow geographical niche. These all add worth to your business and can be transferred upon sale, provided you haven’t branded them with your name.
4. Automate your lead generation and lead follow-up
One of the most important ways to increase how much your business is worth is to automate as many aspects of your business as possible, especially when it comes to incoming property inquiries from signs, advertising or any other source.
In terms of never missing an incoming lead, you could hire a virtual assistant or use a 1-800 Call Capture system with SMS text messaging that will immediately send you the caller’s phone number, usually when they’re still sitting in front of the house.
A better approach is to use one of the new real estate chatbots. You can review your options at Realty Ninja’s blog.
My personal recommendation is the IMRE.ca chatbot. The pro version is priced at $10 per month (rather than several hundred dollars per month). It’s an artificial intelligence solution so it’s getting smarter and smarter all the time, and it’s highly effective at engaging and converting your incoming calls. Preview the video about how it works here.
5. Use a transaction coordinator and a transaction tacking platform
No matter how new or experienced you are, getting transaction management off your plate is one of the best ways to grow your business. The reason? It gives you more time in front of buyers and sellers.
The most effective way to do this, whether or not you work with a transaction coordinator, is to use one of the transaction management programs like the one from DocuSign. If you haven’t used one of these systems, they track when every email was opened, who did what on what day, what their responses were, etc. It’s all time-stamped.
These systems are powerful risk management tools. They also help to protect both you and your buyer should there be any litigation while you’re transferring the business or after you leave.
6. A written business plan for the next 3-5 years
If you haven’t created a written business plan, it’s highly unlikely you will get much of anything for your business. On the other hand, if you have five to 10 years of your business plans, a current plan, and plan for the next three to five years, plus the written documentation of how well your business performed in terms of the plan, this will greatly enhance how much you can receive for your business.
7. Use QuickBooks or any other standard accounting program
In terms of selling your business, a written record of your transactions allows you to document the value of your business, especially in relationship to cost.
Having all your receipts in a shoebox won’t work. Instead, you need a system that not only tracks all aspects on your business, but can generate a balance sheet and a profit and loss statement. Meticulous tracking of your finances is critical when you’re selling.
The next step is negotiating your sale. See part 3 to learn more.
Bernice Ross, President and CEO of BrokerageUP and RealEstateCoach.com, is a national speaker, author and trainer with over 1,000 published articles. Learn about her broker/manager training programs designed for women, by women, at BrokerageUp.com and her new agent sales training at RealEstateCoach.com/newagent.