Whether you are in the early stages of building your real estate practice or approaching retirement, establishing a succession plan is essential to securing your future. As you grow your business, expand your client database, generate referrals or establish a team, it’s important to consider how these elements contribute to creating a valuable, salable asset that can support your retirement plans.

 

Why succession planning matters for real estate team leaders

 

For team leaders planning for retirement, a solid succession plan is a crucial component to protecting your legacy. When executed correctly, your business becomes a valuable asset that can help you to retire on your own terms. It also serves as a contingency plan if you’re ever unable to work unexpectedly. On the other hand, succession can offer exciting acquisition opportunities to those looking to expand their existing real estate operations. A business with established systems, clientele and consistent sales performance can be an attractive option for potential buyers.

 

When should you start thinking about succession?

 

It’s never too early or too late to plan for your business’s future. Whether you’re nearing retirement or just starting to build momentum, you can harness the power of a strong brand to ensure your business is a highly marketable asset when it’s time to sell. Your future transition plans should influence everyday business decisions to ensure scalability. And, having a plan in place – if the unexpected occurs – can help minimize disruption, support your team’s well-being and reduce financial risk.

 

Key elements of an effective succession plan

 

Keep an organized database: Your database is the backbone of your business. Ensure it’s up to date and thoroughly organized, with contacts segmented into groups like active clients, past clients and referral sources, including lenders, stagers and other agents within your sphere of influence.

Track Key Performance Indicators (KPIs): If organized correctly, your database can reveal where your deals come from and your annual returns and average commissions, among other KPIs that reveal consistent or improved performance, benchmarks over time. Tracking KPIs gives potential buyers insight into the health of your business and its potential for growth.

Manage your finances like a pro: It’s critical to have a strong handle on and understanding of your finances. Creating annual budgets and monthly Profit and Loss (P&L) statements to track revenue and expenses helps keep you on target to meet your goals. Businesses with consistently strong financial performance will be most attractive to potential buyers.

Clearly document systems and processes: Buyers will want to see Standard Operating Procedures (SOPs) in place for lead generation, client conversion, listings and client management, along with all the other processes in your business. Clear, efficient and easily replicable systems make the business easier to acquire and scale, increasing its appeal.

Ensure cultural alignment: While it is often overlooked, it’s important to find a buyer who shares similar values and service standards. For example, a business that serves first-time buyers may not be the best fit for a luxury real estate operation looking to expand. Similarly, companies with inclusive, team-oriented cultures will not align well with top-down leadership models. Buyers will be keen to retain the sales and operations staff, which is critical to sustaining performance results.

 

Valuating your business

 

Businesses are typically valued using a multiple of annual net income averaged over the past three to five years, excluding periods of unusual fluctuations, like the pandemic. Multiples typically range from two to five times net income. The key elements listed above will influence the multiple.

The transition model also impacts valuation. Sellers who exit immediately, while not recommended, should be willing to accept a lower valuation. It is preferable to support your successor in a multi-year transition, which can garner a higher price.

 

How to find the right buyer for your business

 

If you have a trusted brokerage owner or manager, your first step should be to discuss your options with them. They can likely offer guidance, review your succession plan, and help you identify potential buyers. When it comes to local recruiting trends, your brokerage owner may be well-positioned to help you make connections.

You can also look within your own team. In many cases, the best buyer for your business is someone already working with you. Leveraging talent on your current team ensures continuity and minimizes transition time, maintaining consistency for your clients, staff and sales team.

 

How to successfully transition your business

 

The ideal transition period is two to five years, depending on the size and complexity of your business. This period allows for the seamless integration of sales and operational processes and builds trust with clients as they shift to working with new advisors.

For buyers, the length of the transition is likely to impact the purchase price. A shorter transition period—although likely less expensive—may pose more risk, as database loyalty would be harder to retain. As the seller, a gradual transition allows you to maximize the sale price and earn income during your exit while ensuring a continuity of service to your clients and their ongoing loyalty in return.

 

Working with a trusted real estate brand

 

The brand you partner with can make or break your succession plan. Choosing to work with a reputable real estate brand that provides access to trusted resources, training and support, and strong local leadership will help ensure a successful transition. A leading brand also increases the attractiveness of your business to potential buyers.

With a vast network of highly productive real estate professionals, Royal LePage® can provide access to potential buyers within its own ranks. The brand’s brokerage owners and team leaders, with exceptional local expertise, have extensive experience in business acquisitions and can offer strategic advice, important connections and promising opportunities to support your succession goals. What’s more, Royal LePage offers access to a dedicated national team of professionals ready to assist you through this important transition.

Hear from some Royal LePage team leaders about their own experiences, and how the company helped them achieve their business succession and retirement goals.

 

Cindy Avis, broker, Niblock Avis Team, Royal LePage® Real Estate Services Ltd.

“As I began thinking about the future of my business, I wanted to establish a two to five-year plan that included blending with a strong team that would ensure longevity and stability for my clients and team members. Partnering with Royal LePage was a natural next step, as their proven systems, dedicated support and industry connections made the transition seamless. They took the time to understand my goals and were instrumental in connecting me with the right team while providing strategic guidance along the way. I’m confident that when the time comes, I will have left my business— my staff and my longtime clients – in capable hands with a reputable and enduring brand.”

 

Rob Ohs, founding partner of Ohs Marketing Team, Royal LePage® Parksville Qualicum Beach Realty

“Royal LePage offers unparalleled support to agents with teams, providing expert guidance to develop effective succession plans aligned with their unique goals and aspirations. By delivering comprehensive resources and personalized strategies, they empower real estate professionals like me to successfully navigate growth opportunities while supporting others in a seamless transition out of the industry. This has provided me with a solid foundation for long-term prosperity and peace of mind for the future.”

 

Succession planning is vital

 

Succession planning is a vital part of building a sustainable and lucrative business. By preparing for the future, you’ll create a path toward financial security, operational continuity and a smooth transition for both your clients and your team.

Want to talk about the future of your business? Reach out to kellymccain@royallepage.ca.