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Directories Int'l Realty US Realty
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Exit Strategies:What's Yours?By: Alice Held, CRS, GRIHaving an exit strategy is vital to the success of both a business and the agent. It took years before I knew that I needed one, and many more before I put anything in place for the eventuality that all good things may come to an end, whether you want it to or not.
A New Look at Exit StrategiesBack when I started my business, (and I was one of the few who thought of it as a business within a business, working for a real estate broker) my business plan was loose and by the seat of my pants. Now there are profound changes in the industry that forced me to work this strategy into the plan. So what happened?It was a major surgery that made me stop to think. So, I began my research. Before the Internet, that meant asking, interviewing and making mistakes. Luckily, I was given more time by the fates to get my act together. Then, an agent in my office was dramatically physically damaged by a motorcycle accident, one in which her boyfriend was killed. She cannot speak, and it will be years of physical therapy before she can be functional. She leaves her business. . .really leaves her business. . .no plan. No value now. Values change during the years. We have Intellectual Property, which is now considered an "asset", equipment we never had before, software, expertise and teams. In the beginning, any individual agent's business was little more than the sum of the agent's collective vision and specific talents. Should they leave, not much else of value remained. Over the years, however, there are clients who have come to depend on its services, and there is a revenue stream -- tangible stuff that makes it easier for an investor or buyer to put a price tag on it. Knowing your business' price tag becomes essential, if its full value is to be realized.
Exit Strategies as a GoalI began to consider the exit strategy question as an opportunity to educate myself about what was truly needed. I began to see my exit strategy less as a termination and more as a logical part of the goals I had set for both my business and myself. While I may, at some point in career, sell, exit, merge, etc. I will be more prepared.
An exit strategy can -- and must -- change as the business and its goals change. Working in entrepreneurial nirvana with no consideration of its end or change will short you in the end. The reality is that unless you define that end or change, your business may change in a way that wasn't in your plan. Educate yourself through listening, reading, and interacting to know what others strive for, both in like-minded and not so like-minded businesses.
Tax ConsequencesEveryone knows that a successful business must plan ahead, but all too often the pressures of keeping the business going on a daily basis mean that strategic planning is not the first priority. The result is often rushed or missed opportunities.A possibility is an adviser who has the time and space to take the long view and advise on an appropriate course of action before it is too late. Strategic planning will enhance the value of the business and is a plan for value maximization. If a business is to be passed onto children careful consideration should be given to the capital gains and inheritance tax consequences, together with the practical implications of a change in control of the business. A structured tax efficient approach to such a transition can be achieved by staggered gifts and by the use of appropriate trusts. (At a seminar where I mentioned the above, one agent told me an important consideration should be leaving a spouse behind. Should that spouse not be versed in real estate, what then?)
When a heavy-hitter movesLeaving a thriving business means leaving behind equipment, software and most importantly, a database. Agents need to consider all these factors when establishing the value of the business - especially when the cost of all of these things will be part of the initial overhead in the new market.One agent worked out an arrangement when he sold his business to receive a referral fee from each transaction closed with any of his former clients for a short time. These helped while he was getting established in his new area. Another well-known agent sold his business to his executive assistant of 9 years. He still carries that state's license, and a cell phone with his old number, and says so far many do not know he's not there. When he moved to Arizona, he found a seller in a 20-year real estate veteran, who was No. 4 in his market. They have partnered keeping his both names on the team, for the next 5 years as he phases himself out of the business.
Do what's right for you.Write your exit strategy down. Have a road map with a start and a finish. Know how to answer the "What is your exit strategy?" question, but also know that you're really answering the "What are your vision and goal?" question. And realize that, through identifying your exit strategy, you have a chance to preserve and control your own entrepreneurial nirvana.
Preparing an Exit Strategy
Please think of me for your real estate referrals in the Phoenix/Scottsdale area!
ALICE HELD
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