Broker’s Corner: When to Grow Your Business Through Acquisition
There are tons of milestones a broker will experience when trying to grow a real estate business. They’ll hire their first employees, land their first big clients, and maybe even attract investors. One of the biggest — yet least discussed — landmark events a real estate exec may experience as they grow is making their first acquisition: either by acquiring another brokerage or by purchasing another real estate-related company.
The start of any acquisition process is recognizing that an opportunity for acquisition exists. From there, it can be a long and complicated process, involving many moving parts (especially if there are many companies involved). However, one of the keys to succeeding at an acquisition is ensuring that it’s done at the right time. Here are some keys to ensuring your brokerage is ready to acquire another company.
Before a broker acquires another real estate company, they need to make sure they’re financially healthy enough to do so. This means that the acquiring company needs to be generating significant revenue, have investors behind it and feel generally fruitful. They should also be at the point where they’re looking at diversifying income streams and expanding offerings (as well as a potential customer base). If a broker feels in the right place financially to acquire another company, then it’s important to take some time to look at the financial landscape to determine how much to actually spend on the purchase.
A company may have the money to buy another real estate firm, but do they have the sufficient human resources, time and energy? Company leaders should look at their organization’s capacity and make sure it allows the acquisition to be viable. Once a brokerage acquires another real estate company, the two don’t just automatically grow and meld together. It’ll take time to integrate two organizations, including combining teams, learning about new clients, sharing resources, streamlining processes, and more.
Before a brokerage purchases another business, it’s important to make sure the other company is available for purchase. This means it has to be open to being bought and within the designated price range.
Good, Natural Fit
If a brokerage has the capacity and money to buy another business, they need to first make sure the company they want to acquire is the right fit for their organization. When a brokerage buys another company, it’s important to ensure that it adds value to the business and supports what you already do. Real estate professionals should also consider acquiring a real estate company that’s not a brokerage, but one that handles services, resources and clients that will expand their business and help them grow. This can make an organization competitive with bigger players in the real estate market. It can also help reduce costs if the acquired company provides services the acquiring company is regularly paying for.
One example of a company that was able to do this successfully is Chime Technologies, whose Chime CRM is the premiere real estate operating system. When Chime was ready to grow, they considered their strengths and weaknesses, and looked to expand in the areas where they could be stronger. That meant finding a company that focused on seller leads. Chime looked at companies who were creating outstanding technology for generating seller leads — and decided to acquire GeographicFarm to help make Chime a more well-rounded, competitive company in the industry.
In addition to two companies being a good fit, they should also be able to blend together “naturally,” or seamlessly. The combination of two brokerages may not be simple, but it should feel right when finished — so brokers should make sure they’re acquiring an organization that will ultimately be able to become one with theirs.
At the end of the day, acquiring another real estate company can be a huge step for a real estate professional. However, it’s not a simple one. By ensuring that an organization is properly prepared for an acquisition — and that the company they’re acquiring is the right fit — brokers can ensure that an acquisition goes smoothly and is a productive step toward growing a larger, more fruitful real estate company.