I am often asked, “When is the best time to sell my real estate brokerage firm?” The easy answer is, “When you do not need to,” but the better answer is, “When you are ready, and it is a planned event.”
The ideal time to sell your company is when your firm is positioned correctly to convey its value. Even more important is the timing; when it is in your best interests as a career or life decision. Buyers seek and pay premiums for well-run, quality firms, and those are rarely for sale. You should desire to be one of those firms and be prepared when the time is right.
Are you unsure when the timing will be right, or if you should do this now? My belief is that an exit strategy evaluation should be an important part of your annual business plan. Many owners only consider exiting when their profits are not consistently high enough for the amount of effort that running the firm requires. An unexpected exit may be the right timing from a life or career alternative standpoint; however, even if you exit early, an exit preparation will allow you to receive maximum value for your firm. An unplanned or accelerated exit scenario is typically much better for the buyer.
Exit strategy versus succession planning
The terms “exit strategy” and “succession planning” are often used interchangeably. They can be one in the same, but succession planning is usually a process for the owner’s retirement or departure, providing a planned transition for internal candidates. Having potential internal buyers or external candidates is a good idea. I have worked with firms that knew who they were growing their firm to sell to five years out, and then did it successfully.
Begin the plan with some honest self-reflection on your future. This can be simple notes or a formalized process, and a clear strategy on when and how you might exit. Some work will be required, but it will be profitable time spent setting direction for your business. Most improvements will be beneficial for you and a prospective buyer.
Ask questions like: “Where do you want your firm to be in three years?” “What will the firm look like, and what do you need to do to get there?” Follow this by being truthful about when you see yourself doing something different—six months, five years, 20 years? Know that many buyers will want the owner to stay on to assist with the transition. The timeframe can be as short as 60 days, but averages two years or more. This extra time needs to be factored into your plan of doing something new after the sale.
Continuously building your firm with an exit in mind is a healthy exercise. This strategy allows you the opportunity to sell on your terms and timeline.
For more information, visit https://www.WAVGroup.com.
