Someone who has worked much of their adult life to build a business doesn’t just close up shop, lock the doors, and walk off into the sunset to vacation on an island, leaving all their assets and customers lined up at the door, earnestly waiting to get in. inside
No, that would be crazy.
What they’re doing is leveraging the value of what they’ve built while creating an opportunity for someone else to benefit from their hard work – by selling that business.
As real estate agents, we are no different. Of course, not all of us own a brokerage and lead a team, but that doesn’t make our business any less valuable. No one has articulated this concept better than Nick Crowther, an agent since 2006, author Golden transmission and CEO of City & State Real Estate in Portland, Oregon and Vancouver, Washington.
In 2010, when a successful agent at his brokerage was phasing out, Crowther took the opportunity to buy the agent’s certificate of business. Since then, he has bought five or six other agents’ businesses. They were so profitable that he developed a framework of how to make it a win-win for both agents.
“It was huge at first because when I started doing it, you know, who was I? Four years in business and we were doing $8 to $12 million in sales per year. And taking those clients, I mean, it was… when I teach it, I say it’s a way to grow exponentially through referrals. And so it turned out. Because then I didn’t have 22 thousand people in the database. I mean, I had 150, right? And so it wasn’t a big deal for me to call the client list. You know, I would just start at the top and work my way down. And in two weeks I talk to everyone. But suddenly… the first database had 300 people. So, by the time we adopted Renee’s database, which was 2010, I’ll bet it doubled our business.”
In our recent two-part series (part one and part two) on Passage™Crowther’s presentation of how to take on or sell a retiring agent’s business is like a game of Monopoly broken into segments, neatly categorized for all players involved, along with instructions and advice on carefully crafted strategies at each stage of the game.
There is now no shortage of agents who are reportedly dealing with burnout after a record two years of selling properties across the country. We’ve seen this before.
According to NAR, 338,000 realtors retired between 2007 and 2012 after the Great Recession and the market crash. And while we can’t predict the future, many agents may be about to retire altogether.
However, unlike a game of Monopoly, Crowther strongly recommends that when deciding whether to take on the job of a retiring agent, you should never start with just “rolling the dice.”
Step #1: Choose the right agent
“If you’re a retired agent and you’re interviewing different people, if you can’t honestly say, ‘I’m going to hire this person to sell my house when I’m ready to sell it,’ then don’t do it—that’s the wrong adopter,” Crowther says. . “You have to have full faith that this is who I hire when I need to buy or sell. If you don’t have a license – if you don’t do anything at all in the future, it just has to be someone you would hire. Otherwise, why would your clients work with them?”
Krauter says the best place to start your search is in your office. Managers usually know what stage their agents are at in their careers, and letting them know you’re interested in buying someone’s business creates incredible opportunities to connect with an agent you already know, and it’s less of a gamble because you most likely had a working relationship with them. On top of that, you’ll get access to broker analytics so you know what you’re getting yourself into, whoever you choose to partner with.
There is also no limit to the number of players in this game. Who you choose may even be someone who is currently actively selling but is in the process of phasing out. You can agree to take on some salespeople or take on any business they no longer want to do, and when they’re ready to give it up, you’ll be the one who gets the golden handover.
Step 2: Make sure it fits well
Now that you’ve found your match, you need to meet. See how they sell themselves and if that is similar to your marketing and communication style. Another important thing is that you look through their database to gauge the number of repeats and referrals they have. Krauter says it should be at least 50% of their business.
He recalls a conversation he had years ago with a top agent in his office. While this agent was consistently in the top three, his referral percentage was only around 5%. For Crowther, that was a red flag.
“Because what’s the value of a relationship with these people if they’re not going to come back and work with him? And they do not refer. His business was very, very good at getting new leads in the door and closing them. But there were not many attempts to build relationships and maintain relationships in the long term. This is a red flag to me. The higher the percentage of repeats and referrals, I think, the more value you will have in having them recommend you and their endorsement,” Krauter says.
Step 3: Draft a crystal clear contract
Like Monopoly, the rules are clear when it comes to how much money players earn for all trades. The same applies here. Krautter recommends a three-year agreement between you and the retiring agent. It’s basically a referral agreement with a 70/30 split in the first year, with you getting a higher percentage. The second year is 80/20 and the third year is 90/10. It leaves no room for confusion and lives up to everyone’s expectations. Krauter advises against paying lump sums because you never know how the market will decline three years from now, and either side could end up losing out.
It is very important that this contract be very specific in several areas. One is the participation rate of the retiring agent.
There are three general levels.
- Totally Done – Retiring Agent is just that. Ready. They leave, never to be heard from again.
- Consultant – The retiring agent continues to take the first calls with important clients before they refer them to an adopter.
- Delegator – A retiring agent remains more involved in customer service.
Crowther prefers numbers two and three.
“I would say, generally speaking, the more interested, helpful and supportive the agent that retires is, helping you and increasing the value of that client list and adding people to it, keep paying them for that. I mean, my dream is for them to help me do more. I’d rather pay 25% forever and have 10 new clients a year that I wasn’t going to get than get 100% of a limited database. I think the more they support and participate, the more money there can be in the long run.”
Second, you need to clearly state what exactly you are accepting. Whether it’s just A-list clients or the entire database, Crowther says it needs to be flagged. But it prefers to accept the entire database.
Marketing is equally important and should also be included in your agreement. The contract should specify how the retiring agent and the adopting agent will market together, and even the frequency with which the retiring agent will, for example, do videos with the adopting agent.
“It’s one thing to say, ‘Hey, I promise to stay in touch with your people and sell to them,’ and it’s another thing to say, ‘I’m going to call them twice a year.’ They will be invited to one educational event and one customer fun event per year. We’ll send them monthly market updates by email, and monthly, quarterly, semi-annually, annually, whatever it may be,” Krauter says.
And don’t forget tangible items like lock boxes, signs, phone numbers and websites. Krauter offers to pay a fixed price for them.
Finally, it is important to note that a retiring agent has other responsibilities. They must agree to retain the license for the duration of the contract, to inform the adoption agent when they are contacted by clients, and to re-support the adoption agent when the need arises.
Step #4: Make an official statement
You can’t expect adopted clients to automatically know you’re replacing a retiring agent. The retiring agent must be committed to this part of the process for the golden transfer to work properly.
The first step is for the retiring agent to make personal calls to their core group of clients to announce their retirement and that they already have someone who can help them. Nick’s script for this challenge looks like this:
“I’m getting out of the business, but I wanted to make sure you have a great agent to help you. So, I contacted Nick and he will take great care of you. I have known him for 10 years. He is amazing. It will call you, track and touch base. And, you know, let me know if you have any questions or needs, but you’re in good hands.”
After that, customers receive an email with a similar message. The adoption agent sends it, but the letter uses the stationery and return address of the retiring agent. It is written in the voice of a retiring agent and includes contact information for an adopting agent. After the letter is sent, the same message is sent by email to all clients of the retiring agent.
For now, Crowther suggests making a public announcement on social media, perhaps via a Facebook or Instagram live video.
The final step for the adoption agent is to make a follow-up phone call to the same core client group that the retiring agent previously called. By doing this, the adopter fulfills the retiring agent’s promise made in the scenario above. The whole idea here is to make it as likely as possible that the retiring agent’s clients will stay with you.
Coming soon: the second edition of The Golden Handoff
Crowther told us he’s currently working on a second edition of The Golden Handoff, adding what he’s learned since the book’s 2015 release. He hopes to have an updated version available by the end of this year.
If you want to create a steady stream of referral income for yourself, all you have to do is follow the steps that Crowther outlines in his book. When buying or selling an agent business, you can both be winners. Because you don’t start by simply rolling the dice, you have a plan of action that will keep you ahead of the game until the retiring agent is out of the game.
Header image source: (Kerry Allen/Unsplash)