Succession planning for your real estate brokerage is a proactive way to best position your business for sale and ensure there is continuity to protect your legacy as a real estate leader. Having a well-developed succession strategy can also minimize the risk of unexpected changes within your business, while maximizing its overall value. Regardless of whether you are looking to sell in the near future, establishing a strong succession plan is a valuable and critical business practice.
When beginning your succession planning process, evaluate and examine your options. Are you passing your organization down within the family, transferring it to non-family managers, or selling it to an outside purchaser? It is also important to gain insight into the competitive environment and the current market demand for similar businesses. This will allow you to develop options to restructure in order to improve value for your stakeholders.
Listed below are a number of important considerations and best practices to guide you in developing your succession plans.
Articulate and demonstrate a solid growth plan.
Buyers will likely purchase your business at a higher cost if there are opportunities for future growth. This includes new products or technology, geographic expansion or new channels. To demonstrate these opportunities to potential buyers, plan and partially implement them within your organization so buyers will be willing to further invest in your business.
Be prepared to sell because timing can be everything.
The strength of the merger and acquisition market in the real estate industry can change at any point and has a significant influence on buyer interest and ultimately valuation. Having your business in a sale-ready condition as early as possible will allow you to respond quickly and strategically to changes in the market. You will generally achieve best results if you allow a minimum of six to 12 months to properly prepare for the sale of your business, which includes completing a number of pre-sale due diligence exercises.
Work with a brand that knows your opportunities.
To best position your business among potential buyers, it is greatly beneficial to work with a brand that understands your market, can identify possible opportunities and will facilitate the transaction. By selecting a brand with a strong reputation, you will increase the likelihood that the acquirer will continue to support the growth and development of your sales team.
Determine your post-acquisition goals and priorities.
Maximizing the value of your business is a common and important objective of the sale process. In addition to this, consider what other aspects of your business are critical to achieve, such as maintaining the culture you have built post-acquisition, ensuring your employees are taken care of under new management and confidentiality considerations. Establishing both short- and long-term post-acquisition objectives will allow you to make strategic decisions for your business along the way.
Thoroughly maintain your business finances.
Getting your business affairs in order is a critical step to take when you are ready to sell. Invest in assistance to help separate the owner’s affairs from the business, manage financial reporting and accounting and clean up legal, tax and operational risks.
Establish a strong value proposition for your business.
Looking at your business from the perspective of the buyer will help you determine your unique value proposition. Identify who your potential buyers are and how they assess value so you can prepare your business to maximize valuation and competitive tension on sale. It is worth noting that buyers who offer the highest price for your business are not necessarily the right choice to meet your overall objectives.
Protect your sales proceeds.
To ensure you are meeting your retirement and succession goals, develop a strong wealth strategy for protecting your post-sale proceeds. It is critical to have the appropriate tax structure in place for the sale of your business.
Balance your business’ growth and profitability.
Ideally, give yourself two years to realize profit improvement initiatives and demonstrate their sustainability to buyers. While growth is important, try not to lose focus on profitability.
If you are the primary person managing and running your business, you will need to develop a succession plan that involves hiring a strong CEO or general manager, as well as a suitable support team who can establish themselves as assets to your business a minimum of a year prior to sale. This will allow your business to be more appealing to a potential buyer as they will take comfort in knowing the business will continue to thrive after your departure.