What will happen to your real estate agency when you’re ready to move on? A succession plan will make sure you can transition away from the business with ease.
If you watched the hit TV show Succession, you will understand the importance of having a clear plan in place for who will take over your business when the time comes to move on.
Not every real estate agency owner has offspring vying for the leadership position but if you want your business to remain in good hands and want to walk away with some money in the bank, you need to think about things ahead of time.
Here are some succession plan stumbling blocks and factors to consider when creating a path to transition away from your real estate or property management agency.
Real estate business succession planning challenges
The first challenge of a succession plan is not having one. It’s something you need to think about from early on if you have a goal to sell or pass on your business to another owner when you no longer want to operate it.
The next challenge is stepping away when the business is owned as a partnership. This can make a sale difficult because the other owner/s may not be ready to move on. The earlier you can have discussions about likely exit scenarios for either of you, the better.
At other times, outdated systems and policies can affect an agency’s ability to be transferred to a new owner. Your team could be operating with an ‘if it ain’t broke, don’t fix it’ mindset, without realising how much other players in the industry have evolved.
Then there is business finance and reputation. If you want to pass your agency on to someone else, you need to be able to clearly demonstrate the value of the brand, the staff, the database of contacts and the rent roll (to name a few).
The other factor is time. A successful succession plan can take ten years to form and execute, particularly if the business is set to be sold in its entirety.
What does an ideal succession plan look like?
All the above stumbling blocks can be overcome if you keep an exit/succession plan in mind from the day you open your doors. In a perfect world, an owner thinks about their eventual departure when creating policies around:
shareholder responsibilities
remuneration
role definition
funding and expansion
branding and marketing
footprint and target clients.
The other aspect is financial management and record keeping. When the time comes to implement a succession plan, your agency valuer and accountant will thank you if you can share access to detailed records, budgets and forecasts.
If you think about your exit plan every time you make a business decision, you will find the eventual transition much easier.
What to consider
There are several ways to exit a business, including:
passing it on to family
selling to a partner
selling the entire business to another agency
selling the rent roll only
passing away or being unable to work due to injury or illness.
When you create a succession plan, you need to keep all these possibilities and options in mind.
Think about:
which parts of the business can be sold or handed on
the age at which you would like to retire
what would happen if you suddenly found yourself unable to work
how shares in the business will be distributed and who would take over in the event of your death
what would happen to non-performing staff if you left the business
whether your staff would transition to work under a new owner as part of a sale
whether administrative processes are clear and documented
whether or not your rent roll properties are compliant with regulations (it will affect value if they are not)
diversity across your rent roll and client base (e.g. do you have a good spread so not all your eggs are in one basket?)
whether the business has a good enough reputation for someone to want to take it on.
Other questions to answer are whether you will prefer to hand over the business in stages or in one go. Your succession plan may involve training someone so they can move into the owner role, merging with another agency or allowing another business to absorb your brand.