By Dan Gooder Richard
RISMEDIA, Dec. 26, 2007-In today’s market many agents are getting out of the business. Just look at the most recent license renewal statistics at your local real estate board. The exodus is a great opportunity for agents who want to grow their business and thrive in today’s market.
For every colleague or competitor that drops out, there is potentially a lucrative list of past clients and contacts that have been abandoned. Remember the marketing adage: another man’s customers are your best prospects. No matter, if the drop-out agent’s customer base is small or large, every one of their “orphaned” customers (and friends) no longer is being served. That means savvy agents can acquire that orphaned business – both repeat business and referrals – for little more than a no-risk referral fee arrangement.
For growth-minded real estate professionals in today’s market, the secret is to avoid costly mistakes when evaluating the true value of the seller’s customer database and business. After all, not all soon-to-be-former real estate practitioners are created equal.
By avoiding several all-to-common key mistakes, active agents will not only acquire more business in today’s market, but also put themselves in the best possible position with a larger customer database to capitalize when the market strengthens tomorrow.
Here are five critical mistakes to avoid when you acquire another real estate agent’s practice in today’s market:
1. Make sure you pay for results, not “good will.”
Understandably a seller would prefer cash up front for their business. Yet the best structure of an acquisition for the buyer – and the most common arrangement – is to pay referral fees on future closed deals. Avoid the mistake of the whose-customer-is-it squabble. That’s why it is critical to purchase the seller’s customer list, purge the common names you already have, and agree upon a fixed list of consumers that are “fee qualified.” Any closed client who is not on The List is beyond the scope of a referral fee – including friends-of-friends from the listed names. Agree to pay a percent of future sales for a limited period, say 2 or 3 years. Remember the selling agent must keep their license active to receive future referral fees.
2. Don’t buy an image that isn’t transferable.
Make sure you are buying a business, not an agent’s personal image. Some real estate practices are so intertwined with the agent and his or her “name” – both literally and figuratively – that future business evaporates when the seller leaves the scene.
If the seller’s marketing materials are so highly personalized that you have to reinvent them or build a new website behind a new domain, you are simply paying twice for a very costly expense. If you can imagine the seller’s materials and logo with your photo and name replacing theirs, or better yet a “brand” not built on personality, you’ve got a transferable image. That brand can be worth an on-going stream of new business.
3. Can you document the sources of their referral business?
Be sure to have the seller prove to you with business logs and records the volume of referral and repeat business to be expected from their database. Generating new business from “market strangers” using general media advertising is a necessary investment. But anyone can do it. Make sure the agent you’re buying from has recorded their percentage of referral business and a track record of results from specific marketing efforts, such as their website(s) and direct mail.
4. Take a show-me attitude with customer database.
The selling agent might have numerous names in their database. The more they have, the more their practice is worth, right? Not necessarily. Before agreeing to buy another agent’s practice be sure to test their database. Are the records complete (scan the printout for zip codes and phone numbers)? Do the prospects still live there (mail first-class postcard with “return service requested”)? Are the e-mail addresses deliverable (send an e-mail blast from your e-mail account)?
5. A selling agent’s assistant might be your best asset during the transition from them to you.
Many practices live-or die-by the assistant. Don’t throw the baby out with the bath water. The selling agent’s customers may be more attached to the assistant as a primary contact than to the real estate agent you are buying the practice from.
It could be very beneficial to keep the seller’s personal assistant or virtual assistant, especially during the initial transition of the practice. If the assistant(s) are that valuable, and you can afford to keep them, this is an added bonus.
Dan Gooder Richard is the founder and president of Gooder Group (GooderGroup.com), a publisher of real estate marketing materials since 1983, including six monthly newsletters. His new book, Real Estate Rainmaker ® Guide to Online Marketing, is about Web sites and e-mail (eRainmaker.com). His original book, Real Estate Rainmaker®: Successful Strategies for Real Estate Marketing, is about advertising and direct mail. He can be reached at Leads@GooderGroup.com.
