One of the best books I have ever read about business is called the E-Myth by Michael E. Gerber. He talks about building your business from day one with the intention of selling it.
Now most business owners do not go into business to sell their businesses, they go into business to make a living and hopefully enjoy profits from the business. The only problem is most operators forget that one day they may want or need to sell (maybe they want to spend more time with family, maybe they want to relax and enjoy the good things in life, maybe they’ve become ill). The problem is they have not planned for this and most of the knowledge is stuck inside their heads, making the business of little value without them.
If done correctly, a business that is just about to be sold has systems, structures, policies and procedures in place that makes it a very desirable business – something that can run effectively and efficiently without the founder. In the same vein, businesses that are structured and have lots of systems, procedures and policies are very profitable well-run businesses.
So, Gerber is absolutely correct, why wait until you are just about to sell a business to build it to be an amazing business? Why not do it from the start, whether you eventually sell the business or not? And here’s another reason to take this approach from the beginning – very well-run, profitable and desirable businesses are sustainable and run just about on their own due to the automation and step-by-step systems, procedures and structures put in place. Therefore, they never need to be sold – you will have built a great business and be able to reap the benefits – spend more time with the family, travel or step back from full-time work.
This also reminds me that we have an ageing industry with thousands of operators set to retire in the next 5-10 years with no succession plan in place. Most of these offices or rent rolls will be sold at bargain-basement prices or will need to shut down if nobody wants to buy them.
The sad reality is that there are tons of younger, more energetic agents and people out there that would give their left arm for an opportunity to be part of, or take over, an office in 5-10 years’ time but the owners just won’t let go.
I am currently working with super-successful office. The owner has made good money and worked extremely hard. At the tender age of 44 he wants to step back after 20 years in the industry. We are arranging for some key people in the business to step up and manage their departments in order to continue growing the business and allow the owner to work a few days a week until he can completely retire and enjoy dividends forever.
He realises this will take a few years and has been working on it for a while. He also realises that to get the key people invested and taking ownership he will need to dangle a carrot by offering them the opportunity to buy into the business. This doesn’t bother him as he realises that by getting two or three people invested and taking ownership, the business could double in size in five years’ time. So even though he may give up 40 per cent ownership, by doubling the size of the business he will still be the equivalent of 20 per cent better off in five years. He also knows that his investment will be well-looked after and will continue paying him dividends for the rest of his life and allow him to pass that legacy onto his kids. Based on his track record of reaching out for help whenever he is looking to make changes and learn what would be the best way to go about things, there is no reason he will not achieve his goal. He is not afraid to let go and grow.
So if you are head down bum up but perhaps looking for a succession plan, do not wait until it is too late and you have to accept a rock-bottom price or shut down and walk away with next to nothing. Start working on your exit strategy long before it’s needed and get the cogs working so that everything falls into place whenever the time comes for you to throw in the towel.
My upcoming FREE half-day Real Estate Brilliance webinar looks at how you can use systems, structures, policies and procedures to create a well-run business that will benefit you now and, in the future, when you decide it’s time to let go.