The number one thing real estate business principals are asking me at the moment is the question of offering equity to key team members as part of a succession or retention strategy (or just to help them tick the boxes of what they want to do with their lives).
Whether it is a minor or more significant equity interest, you are really talking about whether you want to go into business together or not.
Going into business with someone can be a great thing, and it often leads to success. But, just like any relationship, it needs to be the right fit.
You want to do all you can to avoid the alternative.
When I talk to business owners about going into business together, I use an exercise that international business coach and speaker, Jacob Aldridge first introduced to me.
The aim of the exercise is to identify the drivers of why you want to go into business in the first place.
In my experience, there are five key drivers:
- Income – chasing more income (such as a higher commission percentage)
- Equity – chasing more equity (such as a stake in the rent roll)
- Control – chasing more influence on the decisions made around the place (such as not wanting to have to ask permission)
- Passion – wanting to pursue a particular passion (such as wanting to push a particular way of thinking)
- Choice – wanting more life balance or choice in where your time is spent (such as, will I do open homes on Saturday or will someone else do it for me?)
I ask people to rank, in order of priority, the five drivers above as a way to start a conversation about what is important to them in making this decision.
It offers an amazing insight into what is important to that person at that particular point in time and notes that what’s important may change over time.
For example, when I set up businessDEPOT, it was really important to me to have ‘control’ over how things were done.
These days, probably because I already have more control, this particular driver is far less important to me than it once was, and my number one driver has changed.
You can use this tool as a way to promote discussion and not as a tool to filter who you should go into business with.
You actually want individuals to have different answers – if everyone wanted to have control, it would be a very interesting business environment, that is for sure.
If you are considering going into business with someone, make sure, at the very least, you have discussed why they are going into business or, more specifically, why they are looking at going into business with you.
It’s the discussion that’s the most important part of the exercise, not the exercise itself.