Setting up your Business to Sell

Article by: Mick Orton
Marketing Director for SFResidence.com

NOV. 2006 - Most Realtors end their careers by walking away from the business they have spent the previous years building up. Why not set it up to sell to a newer agent in the real estate business? Below are some ideas about how to set your business up for sale BEFORE you walk away from it; something that could bring you potential commissions and/or referral fees long after you are lounging in the sunshine of retirement.

Choosing a name for your business

So many times we see Realtors stick with the brand that describes their brokers. Coldwell Banker, ReMax, Prudential and others have name recognition, but since Realtors are really independent business owners within that company, it is important that you, as a business person, stand out from your peers.

The first choice you need to make is to choose a name that is unique to you. That does not mean to use your name. One of the mistakes we see is when a Realtor decides to use their name as the business. But think about it. What use is "Jenny Jones Properties" going to be to "Susan Smith"? Of course, the book of past clients will always be worth something, but the years of building name recognition will likely be out the door!

Instead our suggestion is to select a name that represents the type of business you are shooting for. An example would be "Timbuktu Luxury Properties" or "Atlantis Condominiums". Often we see Realtors specialize in specific complexes and use that as their business name. Often they live in the buildings themselves to leverage their knowledge of the properties.

Registering your domain name on the Internet

Once you choose a name, it is important to incorporate that into your website for maximum Internet exposure and register that as a domain name. In the above example, www.timbuktu.com might be a good choice if it's available. If not there is usually some variation on that name which is not being used. An example of one variation might be www.timbuktu4you.com.

There are a number of places to register your business name as a domain name. A big mistake we see all the time is people register their domain name for their website, but continue to use their Yahoo account for e-mail. In our opinion, this looks tacky and unprofessional. Most registrars provide services for web based e-mail accounts that are associated with the domain name for a little more money. If they don't, choose a different registration service. We have been very happy with Register.com. They charge a little more but have a better variety of services. We do not host our website there, but Register.com has a place to put in our website provider's DNS servers.

The technical explanation might take a little longer than we want to have here, so if you ever have any technical questions about how to do things, please e-mail support@repromentor.com and we will be happy to help you! Please allow 24 hours for a response. This is a FREE service for now!

Policies and Procedures

We were told in a seminar on preparing your business for sale, "If you don't have written policies and procedures for your business, then you are not one." In response to that challenge, we went out and put together a set which we will share in a later article. Basically it is a formalized series of checklists so that anyone could come in and take over your business if something happened to you.

We broke ours down into 6 parts with regard to the real estate side: CMA, LISTINGS, PENDING, SOLD, BUYERS and MARKETING for scheduled marketing events not necessarily dependent on sales like regular magazine advertisements or regular website updates. Finally, we are working on a 7th part for the FINANCIAL aspect of our business, though we do have a bookkeeper who comes in and manages all of our personal, business and partnership accounts for us.

Taking on a partner

Taking on a partner will be key to your business plan, and how you do it will be just as important, if not more so We made the mistake on our first try of giving equal partnership status (not in commissions, but in advertising and promotional considerations) to our fledgling Realtor right away. The assumption was that this person was eager to bring in business in the hopes that it would eventually be hers. However, it did not turn out that way. After 2 years, she decided that real estate might not be for her (though she had been a wonderful assistant to her previous Realtor boss and scored well on the DISC assessment and Realtor exam offered by Coldwell Banker). She came to the realization that she did not have the desire or motivation it would take to run the business.

With that lesson learned, we believe that the way to allow someone to become a partner is to make them earn it. Our new model is to bring in a Buyers agent (good timing given the way the market is at the time of this writing in November of 2006) and begin to slowly transition into a more formal relationship. We will do a separate article on this topic as time goes on and discuss commission splits that work well for different situations.

To Incorporate or Not to Incorporate?

That is the question. And ask any number of accountants and you will get almost as many answers. The real question is, how do you want to structure it? Corporation? If so, C or S? What's the difference? In short, we have found that the C corporation has the most to offer in the way of deductions, particularly in the health benefits area. Though we have been told it is a double taxation, I do not necessarily believe that since we have set ourselves up as employees of the corporation and those paychecks are 100% tax deductible to the corporation as are all the health benefits due to an aggressive health plan we adopted. (Refer to Diane Kennedy's book, Loopholes of the Rich which she wrote as a Rich Dad Advisor.)

Other forms of owning the business might be a Partnership, Limited Liability Company (LLC) or Sole Proprietorship which would end up on a Schedule C of your personal tax return.

Finances

No matter whether you are a corporation, partnership, limited liability company or a sole proprietor, do yourself a favor and get your finances set up on Quicken or QuickBooks or another money program. Get checks with your business name printed on them as well as a separate bank account for depositing your commission checks and from which to pay your bills. Finally PAY YOURSELF a salary. If you are serious about creating a business you can sell, you must spend less than you earn. Otherwise you will find yourself in that high percentage of Realtors who go out of business in the first 5 years!

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