6 things to think (and be clear about) before buying a real estate business

Are you considering buying a real estate business or franchise?

Business ownership can be an exciting move – but, given the size of the decision (and the implications of it not going well) - there are six important points to consider before signing on the dotted line!

Who I am and what qualifies me to write this article?

I’m the founder of Real Estate Leaders, a business coaching company, specialising in assisting real estate business owners to focus on the right actions and outputs to build and grow their businesses.

One of the privileges of my job is having positive relationships with committed business owners and being trusted by our clients to discuss their challenges and share ‘the naked truth’ of their struggles.

This article is the product of years of experience working with real estate business owners, hearing those common challenges. I’ve also incorporated feedback from interviews with a number of owners and franchisors to gain their insight, experience and advice for those considering real estate business ownership.

Six important points to consider:

1. Business ownership is hard (probably harder than you think)

Businesss ownership is hard certainly appears to have some alluring benefits to the uninitiated. Many go into ownership thinking it will be easy, or relatively straight forward – and ‘give them their weekends back’.

The reality is that business ownership is multifaceted, time-consuming and often challenging. It requires you to understand and attend to many more areas of business than simply sales and customers.

On any given day, you will need to deal with admin, compliance, HR, risk managing cashflow, paying wages, completing GST and PAYE returns, sales meeting planning, training, recruitment, business meeting attendance, post-meeting follow-up, and conflict management (think commission splits and salesperson disgruntlement) – among other things.

Why are you considering business ownership? If it’s because you think things will be easier, in 99.9% of cases, they won’t be. If it’s because you like a challenge, that might be a good reason.

Are you willing to work harder (and stretch yourself and your comfort zone more) than you do now?

2. Sales leadership is much more challenging than sales

Your income relies on the efforts and success of your salespeople.

Successful salespeople considering ownership often think that they’ll just “teach salespeople what to do and how to do it” – and that they’ll do it.

Newsflash: Salespeople, as independent contractors, are not as easy to manoeuvre as you might think (or have the skills for). If you are expecting salespeople to listen to you just because you’re the owner – or because you’ve had a successful sales career, you’re probably going to be in for some surprises!

Sales leadership is one of the most difficult jobs out there. It’s really different from sales. There’s important psychology you need to build the kind of leadership and culture that brings salespeople along on the journey with you.

It’s also not as easy as finding yourself a good sales manager. In my article on ‘The problem with hiring a sales manager’, I explain how good sales managers are like unicorns – and it’s true.

3. What is the opportunity? Why THIS brand?

When considering ownership, it can be common to stick with the brand you know (or the one that approaches you). What’s more valuable (if you want your business ownership experience to be easier), is seriously considering (and making your decision largely based on) the brand offer to both salespeople and vendors.

Why? If you buy a business, salespeople and vendors will equally become your lifeblood. If the brand you choose doesn’t have a standout offer to both, recruitment and hitting your sales targets will become markedly harder as vendors and salespeople go to the competition to get what they want.

Be prepared to put in the time and effort to shop around, investigate your options and do your due diligence.

For a list of questions to ask yourself and the brands you are considering buying a business from, to help you evaluate the opportunity, email me at jasmine@realestateleaders.co.nz

4. Are you prepared for a drop in income?

One common assumption is that you’ll make more money as a business owner.

What new owners tend to not understand until they’re in it, are the costs and financial obligations associated with business ownership (think building costs, admin and marketing staff salaries, tech subscriptions, franchise or membership fees, etc.) – and the lack of direct control on income.

There is financial benefit in a well-run business, but it takes time to establish and start turning a profit while you bed down your new role as business owner, trainer, coach, etc.

Are you prepared to take a drop in income and increase your risks while you build?

5. Capital

After buying the business, do you have adequate capital and cash flow to invest in the critical things a business needs to survive and thrive? Think running costs, marketing, systems, administrative support, training, subscriptions, etc. Be sure to do your homework and properly understand the financial commitment required beyond buying the business. Plan to have a good number of months of capital set aside to help you get through the early months.

6. How willing are you to invest in your own learning and development?

There is no question that there are things to learn and skills to develop. The question is whether your learning and development process is a deliberate one with clear objectives – or more of a ‘cross your fingers and hope for the best’ process.

We work with business owners and managers to help them to build the people and performance skills, systems and cultures required for effective sales leadership, recruitment and continuous improvement.

Do you have those skills? If not, are you prepared to invest time, effort, and money to develop them?

In conclusion

Real estate business ownership is a good move for some people – and not a good life move for others.

It comes with challenges and the need to learn well beyond what you can imagine going into it. There will be times that you love it, and times that you’ll hate it. It can be rewarding, profitable and fun. It is also mighty hard work, with costs, risks, effort and stress associated with things you don’t currently have to think/worry/lose sleep about.

The question will be, once evaluating your options, are you up for it? Does it match your goals and the life you want?

In the next edition, I’ll be sharing the first tasks to undertake if you decide to go all in and commit to the business ownership journey! If you can’t wait till then to get clear on your business growth journey, feel free to drop me an email to set up a time to talk.

Jasmine Platt is the Founder of Real Estate Leaders. As a highperformance specialist, she works with head agencies, branch leaders, franchise owners and salespeople to help them lift their results, make more money and win more of their time (and sanity) back in the process. To speak with her about how she can help you, email her directly at jasmine@realestateleaders.co.nz

Jasmine Platt

Founder, Real Estate Leaders