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Selling a Real Estate Business Is Complex

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By Ernie Whitehouse

Selling a real estate business requires a diligent, focused effort to paint a clear picture for prospective buyers. If you’re interested in learning how to sell a real estate business, you will need to focus on consolidating information into a prospectus that shows what is actually happening in your business:

• The operating culture you employ
• Current market opportunities
• Cash flow and asset valuation

Outlined below are several important considerations when preparing to sell your business. Unless your recent business operating model mirrors this outline, it may take a year or two to get your brokerage ready to sell. To paraphrase Ben Franklin, “An ounce of preparation is worth a pound of success.”

You should first focus on performing an operational review on your brokerage operations. Implementation of the operational review results will provide important informational elements for the business prospectus. These elements include:

1. Creating a Real Estate Business Plan
• Develop and implement a strategic real estate business plan
• Use this plan as the standard to direct monthly and annual brokerage operations
• Outline performance matrices within the plan and hold all management personnel accountable

2. Financial Clarity
• Financial statements need to be in industry standard formats
• Operate with an annual budget and monthly comparative analysis
• Reduce and/or eliminate all debt
• Eliminate all ownership “perks” that aren’t directly related to the real estate business
• Align and adjust all associate and employee compensation and benefit plans within industry norms
• Eliminate all unnecessary operating expenses

3. Operational Clarity
• Update all policy and procedure manuals
• Make sure there are written job descriptions for all associates and employees
• Perform written annual performance reviews with all associates and employees
• Implement weekly, monthly and quarterly internal communication platforms
• Deliver annual performance recognition events to associates and employees

4. Competitive Analysis
• Outline industry characteristics and market sizes
• Assess growth trends
• Analyze all direct market competitors and marketshare positions
• Outline competitive positioning strategy

5. Real Estate Brokerage Valuation
• Hire an industry expert with valuation credentials to perform an independent, third-party brokerage valuation of the business
• Review this valuation with your certified public accountant
• Prepare a reconciliation between financial statements and tax returns
• Prepare pro forma cash flow projections to simulate the valuation model within the projected operating results

Learning how to sell a real estate business starts with an operational review of your company, which helps you focus on existing market opportunities, efficient operations, clear communications and an atmosphere of accountability. These are all healthy operating practices for your real estate business, and they reward owners who are looking to sell a real estate business.

For more information, visit www.pcmsconsulting.com.

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