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What is Your Exit Strategy?

One of my favorite subjects relating to the real estate industry is business planning. In my opinion its a subject that is given much lip service by agents and managers however the actual execution of a well built business model is a rarity though any agent, manager or owner could if they so desired really develop and execute against a business plan or model.

That being said, in the book, "The Millionairre Real Estate Agent" by Gary Keller one of the basic premises is how to grow a real estate business into something that produces revenue month after month, year after year and the ultimate goal is to either hire a manager to run your business and/or to sell your business when its your time to start to take it easy.

We all know of what look on the surface to be relatively successful real estate teams and or agents in our marketplace and a lot of agents make truly failed attempts at scaling up their businesses to look like those of their competitors.

As one of those competitors I truly sometimes wish I had the business of an individual agent then the larger enterprise of meeting payroll, lines of credit, P&L's, Balance Sheets, IRS filings, taxes and the many additional features of a business. Sometimes at the end of the day the net income seems small relative to the amount of work necessary to get a business in place.

That being said, I always go back to the basics, or as Stephen Covey put in his 7 habits book. Always begin with the end in mind.

In your Real Estate practice, the end in mind should be your exit strategy. In Stephen Covey's book his end in mind was the ultimate end, or the passing to the other side. In our case relative to the real estate business, it should be "how do I want to turn over my real estate business to someone else to run with?"

Of course this is not a simple question, because begining with the end in mind ultimately means that you have to examine things like, what does your business stand for, how do consumers perceive it? What the difference between my business and someone else's business? What is that differentiation? Is the differentiation scalable?

Experience says to me that most agents will either not be able to answer these questions with any significant authority even after they take time to think about their business. That's not to say an agent isn't smart, ambitious, or even hard working. The reality is that great ideas for a lot of agents are either unatainable or not realistic to begin with.

So assuming that is the case for most agents then what is their choice given their given predicament?

Maybe they should invest in someone else's business.

What do I mean? There are real estate offices that are already established that maybe you can either earn some sweat equity in by providing knowledge and efforts or if you are able you could potentially look at making an actual financial investment in the company. Assuming that you have chosen the right company to back either physically, financially or both you may be able to get a return and potentially generate enough free cashflow necessary to create some financial independence from the rat race of always having to rely on the next sale.

Maybe it makes sense to join a company that provides some incentives for helping the office or company grow. Keller Williams and Exit Realty are the best examples of this, however our company though small provides revenue sharing opportunities for its agents.

Ultimately what you want to be able to do is to be able to step away from the business and still earn some ongoing compensation.

Of course there is always investing in real estate which cashflows and ultimately provides ongoing income from rental properties which having the principal repaid over time by tenants.

Anyway I hadn't blogged for a while but this is a subject that I think about often and I truly believe that if you are in the real estate business you are already in control of your destiny, if you'll only define what that is.

All the Best,

Glenn Sanford
--
Founder / CEO
BuyerTours Realty LLC
http://www.BuyerTours.com/

& Real Estate SEO

Posted by Glenn Sanford on 06/20/2009 07:14 PM

Comments (12)

Exit Strategy in the Training Channel

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12 Comments on What is Your Exit Strategy?

JUN

Our exit strategy includes and thriving business that our children run while we vaction everywhere and just cash the checks! How's that for a simple plan?

JUN

I'm not really SOLD on the concept of either KW or EXIT in relation to an "exit strategy". Build your business as your business, forget the multi-level stuff and "watch the machine run" like Lisa says or sell to NRT. I liked your beginning and middle but you lost me on the end. Seemed almost like recruitment to the KW/EXIT business model.

The multi-level always sounds like a good concept, but unless someone can constantly plug people in underneath them. The people leave. I know several people with EXIT who had $50,000+ in residuals coming up at the peak of the market and now don't even work for EXIT anymore. Obviously something didn't work out there. Not sure what?

This recession has got me scratching my head on a lot of issues. My other strategy was to buy rental properties and then sell a few and use the sales proceeds to pay off the others. Only problem is that values dropped, the rent rates decreased, and the taxes and insurance rates skyrocketed, so some of the houses are upside down while the others barely cash flow anymore.

If you have answers, I am all ears.

Some thought provoking comments..To tell you the truth I haven't thought much lately about my "exit" strategy. I've got too much to accomplish in a short amount of time, and I'm not in that mode yet. My long range hope,however, is that I leave a small mark on humanity..and I don't worry so much about the $$$. I can't take it with me!

Good luck to you..

I agree with Linda, if you already planning how to get out, then can you every really get in? Planning an Exit Strategy to early can hinder the future. With so many unknowns and changes, they planned exit strategy will not likely look like the one that actually happens. I agree with planning ahead for 5-10 years, but if you dont plan on getting out in 5-10 years, then worry about it when it does come up in your 5-10 plan.

Thanks for Sharing, Brian Wray

Anyone who starts a business should also have an exit plan because we all are retiring someday, aren't you? How will you know you have achieved your goals if you don't identify them with a plan or roadmap?

We are all going to retire with our business someday either 6 feet below ground or above ground and if above ground your exit plan will be critical, won't it? Regardless of what structure is used in your business plan, your success depends on you working your plan, isn't that true?

My business is at the point where my exit strategy is getting another job. Seriously I have thought about which of my 5 sons might work with me when they get older. I have seen business sold and one issue is the business is often the owner, not the things around the owner. Frequently businesses do not survive the owner. The best way to do this is slow transition.

Lisa: Great Plan... I have two daughters and so far neither one of them really has an interest in being in the biz...

Brian: Not a recruitment for the KW / Exit model (Actually only two sentences to that subject) however I was with KW for 3 years and have some minimal profitsharing continuing to come in. 2006 was my peak with a little over $6000 in residuals with over 100 people in my profitsharing group which has declined to around $1200/year. Certainly not enough to do much with. There are certainly some things I like about the Exit model though I don't like the name... Seems to final.

Linda: All those things you are doing in a short amount of time is your business plan and if you don't plan to stop then your exit plan is defined by life.

Brian Wray: I've been in the biz 7 years this last April however from the moment I got into the business I've been structuring the business so that I could exit. Our lead generation program is web based so the leads come in with or without me. The names of our sites are location oriented rather then me oriented so someone can take them over in a sale or on a referral basis. The company I've established is BuyerTours Realty LLC mainly because I'm not a big fan of Ego Centric names like John L Scott, Keller Williams and the like. I wouldn't buy someone else's name or if I did I would probably want to change the name of the business (but that's just me). I have hired people to every position in the company from web design, SEO, Broker, Sales Managers, and Office Manager. I retain the title of CEO however my work is to work on the business. I started with virtually zero money, no real estate esperience, however a background in online marketing and business building and ultimately even if you never sell or exit your business it needs to be built from day one with an exit otherwise you'll never have a chance of getting something in an exit strategy.

Kimo: Agreed

Gene: Most businesses do own the owner rather then the other way around. Probably one of the best books to put the concepts in perspective is "The E-Myth Revisited" by Michael Gerber and for those who work in the business, "The E-Myth Manager".

Any legitimate business plan incorporates an Exit Strategy from the beginning. Running a business without it is like jumping in a plane without knowing your destination and then hoping you end up somewhere good.

Every broker believes in residual income, otherwise they wouldn't have agents working under them. Exit Realty is not multi-level, it is single level residual income; the business model affords each agent the opportunity to build their own agent base, just like a broker, without all the responsibilities and aggravation.

All franchises have individual failures. McDonald's shut down over 100 locations this past year; does this mean McDonald's is a flawed franchise model or could it be that the franchisee failed to follow the recipe? The agent who made over $50,000 in residual income most likely failed to anticipate a downward market and lived beyond their means; just like many other independent agents and brokers did in this market. Just because they failed doesn't mean the franchise model did. I think most agents would be very pleased to make an extra 50k for helping their broker's business grow. Just because a person acquires money doesn't automatically make them a good business person. Each office is independently run, there is no guarantee that broker will follow the successful recipe, so make sure to interview the broker carefully before joining any office.

I think taking a chance on NRT paying big bucks for a small office might be a risky Exit Strategy considering their recent cut-backs. Even if they do offer to pay; how much is an independent office really worth without your good will?

As far as the name Exit goes... I had a problem with that too, at first, but when I heard the story behind it I found out how genius it really is. It's all about branding. The word Exit is everywhere. We're all in the business of branding ourselves. That's why we put our face on our signs, in our ads, on our business cards, even here on Active Rain and other social networks. We want people to recognize us as a trusted resource, and that's what branding is all about.

I opened my Exit office 9 months ago and have already gone from 7 agents to 13 in this short time. Five of the 13 are Top Producers in our market. This would not have happened without Exit's business model. The support and training from the top down has been unbelievable. I have watched too many agents work their entire life and they still can not retire with any certainty, Exit has an Exit Strategy that is simple and just makes perfect sense if you want to truly build a business that is not; only as good as your last transaction

Todd,

Glad to hear that you are doing well considering the market. I'm a big fan of any model that gives agents a chance to get out of the rat race of chacing the next deal and Exit certainly has a good model for doing that. I like to think of it as a Career path in real estate. If your business is about you as an agent doing deals then the potential for challenges down the road is high. What happens if you get into an accident and can't work for 2 or 3 months or longer... How do you provide for those who have come to rely on that support... It does seem like you would need to get your agent count up quite a bit more to actually make money but it looks like you are pointed in the right direction in terms of owning a franchise.

Recently I've had talks with a few different national firms on their franchise models but none of the traditional models is that exciting given our web based focus and multiple markets we compete in... Exit included. As a result we continue to work on our model and look at other models that may come our way.

All the Best,

Glenn

JUN

I like Lisa's strategy, since that's mine so far...I have only been in this business for 4 years, and have no end in sight, so haven't thought of an exit strategy. I love real estate so much, I will probably not ever want to quit until I'm old and gray...I think that looking for an exit strategy, short of winning the lottery or selling about 50 million dollar properties, I'm very very far from that point.

SEP

What I like about the multi-level strategy is that it gives people with a good business who are doing well a way to build a more consistant and solid basis of income simply by having a few other agents join the company. Agents I have talked to recently who are showing up in their agent community as successful often have other agents asking them where they should hang their license. It is a natural result of doing well. These people would then be able to invite others to join them, provide some mentoring without having to be a broker or form a team on their own, and have a monthly check which is more consistant than counting how many closings they have that month! Not only that, but there's always the possibility one wants to go on vacation for more than three days or even is laid up with a broken leg or whatever. So as not to totally burn out, the underlying consistancy of the "upline" check is fantastic.

But it's equally attractive for out-of-sight top achievers. I talked to an agent who is projecting $200,000 in income this year and wants to go after $300,000 next year. I pointed out to him that at some point soon, after he finishes exploiting all his natural ability and organizes for utmost productivity, he's going to top out. But after that... he really can't produce that much more on his own. He will have to create the team under him and then he starts devoting a lot of his time to managing. Now he is at the mercy not only of the unpredictable in his own life, but in the lives of all of his team! Pretty soon his own productivity goes down. But with the multi-level strategy he can exponentially create his success in others without all that investment of personal time and money in each agent. Some will wash out but the ones that stick will be part of his future success to a level no one agent is able to meet. As the process continues, many others will be putting their effort into building their group...which adds to his group with very little effort on his part. Community and connection make it happen.

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