Real estate and financial advisory practices sell better when they look like businesses. Track your cost of acquisition, marketing spend, and time-to-sale. Clean books and reducing your own dependence matter most. Buyers want practices doing $0.5M to $2.5M in revenue, though deals happen at any size.
The one major thing is they run it like a business, they don't run it like a practice.
Right.
So there's two different ways of increasing valuations of companies that I talk about. And one is about quantity of earnings, like how much money does the business actually make. And the other is qualitative, like how is the business run? So if we start with the quantity of earnings side, we actually have to treat our book of business like a separate business. Which means that we're going to keep books and records and we're going to keep track of KPIs in our business. So if somebody, once they investigate that business, it's really easy to reproduce those financials and those KPIs. Like what is my cost of acquisition for getting a new listing?
Right.
How long does it take me to sell that listing? What are my marketing costs that I go into it and thinking about that whole practice as a business and the documentation, the financial books and records, things like that, it's a really big piece that not only financial planners, we see it in CPAs a lot too. And that's like the difference between selling just like, here's a client list, I'm going to sell it for a few hundred or a few thousand dollars versus selling for a multiple of earnings. So awesome. That's the one big one.
Yeah. And that's like, you know, real estate B school, we, we teach agents. The B is business school, you know, so we're like the business school for real estate agents. And this is like totally my where agents do not think about any of this stuff at all. They're just sort of like, I've got this outgoing personality. I'm going to sort of figure out how to, you know, sell X number of homes or whatnot. So at what level like is a business sort of like viable in terms of selling? Like, you know, if an average agent is doing, let's call it a $10,000 commission check. So 100 transactions would be a million dollar business. To me that would feel like the only size real estate agent business that would be sellable. But maybe you've seen like small financial advisors with a smaller book of business. So give me some range of the going on.
Yeah, actually. So financial advisors are super high in demand right now. If you want to buy a financial advisory practice or book of business, you're looking at a pretty hefty price tag as a buyer. And that starts even at the smallest levels. So I mean we've sold companies that only sold for $10,000.
Right.
And what I tell people is what you want to think about is really you have two options at the end of your career in real estate or financial advising, and that's you can sell the business.
Right.
And you can get something for it, or you can just shut it down and get nothing.
Right.
So at any level, it is really sellable. You don't have to be at a certain volume. When you get to, I'd say between somewhere between a half a million and probably like two and a half million in commissions and revenue, that's where you had the biggest bulk of buyers. That's where the greatest number of buyers are interested. So that's where the most competitive space, and that's across all industries. But you can really sell at any size if you structure it like a business that can be transferred. And there's different ways you can earn income from it. Yeah, maybe $10,000 doesn't sound like a whole lot, but like, you could earn referral income, or we call it earn out income in mergers and acquisitions in the future.
Right.
So bringing somebody on that's maybe a bit younger than you or just getting into the industry and they're going to come into your business, maybe the down payment's not that great, but maybe you're earning residual passive income well into the future.
Yeah. Okay. So setting it up like a business having clean financials, tracking like all your leading and lagging indicators and all of that, what other things are you seeing in, like the highest multiple sales that go the smoothest? Give me another. Another couple.
So if we jump into the qualitative side, one big thing, and it's. You brought up the E myth.
Right.
So another thing Michael Gerber talks a lot about is working on the business versus working in the business. And one of the biggest drivers in jumping multiples is how much you're doing in an operator seat in your business. So in real estate, it's hard because usually what we're best at is sales and the client relationships and the getting the deals done. But as much as possible to remove yourself from different seats on the bus, and you probably talk about this in business school.
