An Exit Strategy That Turns Your Business Into Cash

by: Michael Russer (a.k.a. Mr. Internet^®)
REALTOR® Magazine - September, 2005

Real estate sales is a very intense business.  We can so easily get caught-up in the day-to-day details of closing prospects and transactions.  And as a result, few of us ever stop to think about what is going to happen when we have the ultimate "close" —our retirement.

For most people in the business, the sad answer is "nothing".  All those years of building a book of business and good will of your services translates to exactly $0 at the end of your career, unless you develop your "exit strategy" now.  Simply put, an exit strategy is a formal plan by which you will sell your business for cash and/or payments, and ideally, walk away with no further involvement.

Maximize Your Exit Pot of Gold

There are several factors that will greatly enhance the value of your real estate sales business and the ability to sell it:

• Brand Awareness - if you make your business about you, you can forget about selling it when you retire.  That's because when you leave, the primary value of your business leaves with you.  On the other hand, if you create a highly recognizable "brand" around your services, you have an asset that is much easier to transfer without your continued involvement.  A good example of this is Rick and Joyce Minor's Duckin.com (www.duckin.com).  Their Duckin brand is so synonymous with Seattle waterfront property, they practically own that market.  This is very attractive to a potential business buyer because they can acquire instant market penetration instead of spending years trying to build it.
   

• Systems & Processes - if you are the only one that can run your business effectively because it's all in your head, it will cost you dearly in the end.  People who buy businesses want to know that it can run smoothly without the owner having to keep things together.  The only way to do this is have well-defined systems and written processes that address every detail of your operation so that even a mediocre manager can keep it running like a top.  Ron Garber, a well known top producer and former owner of the Garber Team was fanatical about having documented systems. When the time came for him to sell his business, it was very easy for the new owners to take over.
   

• Great Books - if you can't prove your business is showing a substantial profit because your financial records are a mess, potential business buyers will assume the rest of your business is the same.  The better records you keep the more you can justify the price you set for your business.

Now the above may seem like a lot of work (it is, initially).  So you may be wondering why bother with all that now if you still have 10 - 20 years left in the business...

Transactions = Equity

First of all, everything mentioned above will help your business now.  Branding your sales business is a tremendously powerful way to differentiate your services and create memorable awareness. Systems and processes only help you be more effective and efficient. And, great bookkeeping helps you stay on your financial goals.

There is another very important reason to put your exit strategy in place now rather than wait.  You see, with an appropriate exit strategy every transaction you close results in more than just the commission you earn.  It becomes part of your "book of business" that is a very real and valuable asset in the mind of anyone thinking of buying your business.  This means with every transaction you also are building equity into the value of your business when you finally sell it.  Think of it as a deposit in your retirement account!

At some point in your career you will retire.  And the great thing about this business is you have a choice about how that will happen.  Do nothing and just walk away hoping you saved enough to last.  Or, plan and implement a viable exit strategy and walk away with a ton of cash in the bank and whistling as you stroll through the sunset years of your life.  As always, the choice is yours.

Mr. Internet is the alter-ego of Michael J. Russer, an internationally recognized Internet speaker, trainer, author, and strategic consultant to the real estate industry. He's dedicated to helping real estate professionals leverage their people skills into profit on the Internet. You'll see his column on REALTOR® Magazine Online every month and in the magazine quarterly. Send your Internet questions to help@askmrinternet.com or you can visit his Web site at http://www.russer.com

This article is reprinted in its entirety from the September 2005 issue of REALTOR® Magazine by permission of the NATIONAL ASSOCIATION OF REALTORS®. Copyright 2005. All Rights Reserved other than mentioned above. Mr. Internet® is a registered trademark and Ask Mr. Internet!™ is a trademark of RUSSER Communications.