Succession – Planning for the Future

Being in sales doesn’t mean staying sales. This article maps a near perfect succession to a business handover to sales people.

Succession planning is a critical aspect of real estate franchising. A properly managed succession plan provides a path for business owners to ease out of the business at a time that suits them and it provides the franchisor with the assurance that a business will continue when the current owner either retires or sells down.

Mr Barry Plant, founder and director of The Barry Plant Group and until recently also a franchisee of the Group, has just completed a text book perfect succession plan placing his office in the hands of two young guns who have taken it to another level of sales success.

His real estate office in the area of Doncaster and Templestowe (now known as the City of Manningham), a desirable middle class municipality 15 minutes to the east of Melbourne’s CBD, had a long history of high performance driven by Barry’s larger than life reputation.

Four years ago Barry decided that he wanted to put in place a plan that would allow him to spend more time on the Gold Coast. Much more time! He wanted to divest himself of his real estate office while keeping his directorship of the franchisor group. Taking over his office would be stepping in to enormous shoes and there was a real risk that without a high powered and highly recognisable face at the helm that the juggernaut that was the Manningham office, would falter and lose significant market share.

Over the years, Barry had bought people into the business with a view to giving them equity and making them part of his exit strategy, but none of them had worked out. Then five years ago, one of his sales consultants, James Hatzolos, expressed a desire to transition from sales into management with a goal of proving himself and being rewarded with equity. James, 39, had joined Barry’s office when he was 25 years old, running the Property Management department and then becoming a very successful sales agent and auctioneer.

Barry agreed to trial him in the role of Sales Manager. “I’d been watching Sales Managers come and go over the years,” James explains, “and saw what worked, knew what I could improve and, with Barry mentoring me, I made a success of the role.

Barry’s mentoring, while freely given, forced James to think. When he’d go to Barry with a problem, Barry would ask him what he thought the solution might be. I could have become a very lazy thinker if Barry had just given me the solutions, said James thoughtfully. This way, I learned to look at a problem from every angle, teasing out possible solutions.

Sales, Sales Management or Business Management, can you do them all?

But being a sales manager plus a top listing agent was taking a toll. Something had to give. I was ready to burn out and I didn’t feel I could truly take the team to the next level while I was competing with them for listings. So he gave up being a full time listing agent. But this posed a problem in that his income dropped significantly. Barry and I came to an agreement to increase my package to where it was comparable to what I earned as a sales agent. As I was still listing a few properties – usually top end properties for some loyal customers, I agreed not to take commission on them, for all the proceeds to go into the business to fund my package.

Spiro Drossos, 33, had joined the Doncaster office in 2003 after eight years in hospitality. He wanted financial freedom and saw real estate as the vehicle to deliver that. He took to real estate like a duck to water and quickly became a top performer.

Barry saw enormous leadership potential in Spiro. He had long thought that the ideal purchaser for his business would in fact be two purchasers. His office was a big office with a staff of 55, a rent roll of nearly 800 and therefore would require significant capital to buy-into. Sharing the financial and management burden was the logical way to go. He saw great similarities in the two young men; they thought alike, they trusted each other, they were at similar stage in their lives (wives, young children) and their skills complemented each other. He proposed a partnership between them and the date for takeover – July 2009 – was set.

James focussed on building the team, building the culture and building the business. Spiro concentrated on the sales side of the business. He mentored the sales teams, working specifically with the business units as a whole, rather than doing one-on-one’s (James carried out these). He conducted regular training and role playing while at the same time focussing on his career, his public profile and on the agreed strategy of winning awards for himself and the office.

He won the REIV Residential Sales Agent of the Year in 2008 and 2009, was REIA Sales Agent of the Year finalist in 2009 and 2010 and won the REIV Novice Auctioneer competition in 2005. Within the Barry Plant Group he was Top Performer 2008 and 2009, Top Achiever 2008 and 2009, Top Lister 2008 and 2009 and Top Seller 2008 and 2009. Meanwhile the Manningham office took out Office of the Year within the Barry Plant Group in 2008, 2009 and 2010. Spiro’s local profile was huge. The office was a leading office in Manningham and had enough runs on the board – with Barry taking a back seat – for everyone to be confident that it wouldn’t suffer when he finally extricated himself totally from the business.

James and Spiro worked hard to develop a strong culture that settled for nothing less than the best service, the best efforts, the best results. They rewarded their team for their efforts and made sure that every person was comfortable with the change of ownership and would stay in the business.

What was essentially a well planned three year handover resulted in the office not missing a beat when Barry bowed out. Now, 12 months after the handover, James and Spiro are celebrating the fact that they have taken the business to levels of success never seen before in the Barry Plant Group – with $1million in commission written in one memorable month and consistently writing over $500,000 most months.

They have proven they can stand on their own two feet but still talk to Barry several times a week, appreciating the value of years of experience and knowing they have one of the best mentors in real estate.

Things to consider when buying a business

  • First and foremost your heart must be in the business. Money is not a good enough reason to go into business for yourself – you must have a passion for the industry.
  • Look carefully at the area the business is in; does it fit with your vision? Analyse your competition carefully. Don’t be overwhelmed by strong competition but, using your analysis, put together a detailed business plan to build your market share and budget for additional marketing.
  • Appreciate that being a successful lister doesn’t automatically translate into being a skilful business owner. The “hunting” skills of a great sales person need to be balanced by the “farming” skills of a great manager.
  • If you’re a hunter and you can’t make the transition – hire a farmer.
  • If you are buying in with a partner or even joining a franchise group – make sure that you all share the same vision for the business moving forward.
  • Try and work in the company before buying to ensure you are happy with all aspects.
  • Look carefully at the staff. Is the current owner of the company the main dollar producer, or are there a number of people that earn the commission? Try and work out who will stay and who will leave after the takeover as that may influence the purchase price.
  • Listen carefully to the advice of your lawyer and accountant, but in the end go with your gut feeling on what’s best. They are programmed to get you the best possible financial and legal deal – but sometimes a deal that sacrifices some dollars for good will and positive feelings around the changeover is the better way to go. Always focus on the long term.
  • Don’t over-commit financially. After the change of ownership is down and dusted you’ll need sufficient funds to bankroll growth in the business.
  • Factor a few month of below average performance into your calculations. Everyone’s eye will be off the ball for a little while, and if you’ve been a top producer there may be several months when you just don’t have the time to list.
  • If buying a rent roll, make sure it’s “clean”. That is, ensuring that there are not too many arrears, that leases are in place and there that there are no serious landlord / tenant issues. Importantly, ensure that the rent roll is not made up of only a few landlords owning multiple properties. If there are a lot of these type of landlord and they get uneasy by the changeover and take their business, you can lose a lot of income in one hit.
  • As the business flourishes under your ownership, consider giving equity or even just a profit share to the high performers you want to keep.
  • Finally, care about your team and plan to help them grow and develop as individuals.

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Mark Lynch

Mark Lynch is the Business Development Manager for the Barry Plant Group. Prior to joining Barry Plant, Mark was a Franchise Manager with both Ray White and Wilson Pride (now Century 21). Mark also ran a successful Real Estate business within the Wilson Pride network.