Archive for November, 2010

Buy an Existing Business or Start One Up? Part II

November 29, 2010

Should you buy an existing business?Purchasing an existing business usually costs more, but can greatly reduce the odds of failing. If you decide to search for an existing business, you’ll need to prepare for careful analysis. Your decision making process needs to be highly analytical and free of emotions. When properly completed, a business analysis will reveal the truth and make the decision to purchase or walk away clear and straightforward.

You may want to seek the assistance of a qualified Business Broker to assist with the business search and purchase, or you can elect to complete the process on your own. Regardless of how you proceed, it is imperative that you demand sufficient information from the Seller and obtain sound legal and accounting advice prior to making a final purchasing decision.

You want to fully understand what the Seller does each day and be certain that you can achieve the same results. Question whether or not the customer base is tied directly to the Seller and the impact the sale will have on the customers. Refuse to accept information that is not validated by business tax returns. Sellers can manipulate income statements, but not tax returns. (more…)

Buy an Existing Business or Start One Up? Part I

November 22, 2010

Owning and operating a business is a great way to take control of your future. Once you have decided to be your own boss, you have to consider whether you want to buy a business that is up and running (a growing concern) or start a business from the ground up (a start-up). Each of the options has advantages and disadvantages. You will also want to consider whether or not you want to own an independent or franchise business.

If you want to build a business from the ground up – otherwise known as a start-up – you’ll need a comprehensive business plan. Your business plan will need to include the means by which you will get customers (a marketing strategy) and how the business will operate on a day-to-day basis. It will estimate the expenses required to build out space and install required furniture, fixtures and equipment. You’ll also want to include sales projections (a Performa) and expenses required to support sales. Here are some other things to include in your business plan: (more…)

Follow Up: The Cost of Existing vs. New Customers

November 15, 2010

Everyone knows that it costs more money to acquire new customers (5 to 7 percent more on average) than to stay in touch with existing customers. Yet so many sales associates don’t have follow up programs in place.

It’s shocking because it’s easier than ever to stay in touch with customers now because of technology as well as companies that do the work for you.

The problem is that sales associates think of marketing as a cost, something they have to spend money on and can cut during tough times. However, the reality is that you spend more money to get a new customer. Think of how much more business you could have if you spent a little time and money on follow up.

Customer follow up should really be seen as an investment. Use some of today’s money to generate a future income stream. Look at the lifetime value of a customer versus the cost to acquire a customer.

Here are a few ideas for sales for following up with customers after a closing and retaining them for life: (more…)

How Much of the Seller’s Financial Situation Do We Disclose?

November 8, 2010

I saw an article published by RISMedia (Real Estate Information Systems) last week which made me pause.  It concerned the necessity and advisability of disclosing the dollar amounts of all liens filed on a listed property if those liens “may make it difficult to close escrow on a property or impede the transfer of free and clear title”. 

The “necessity and advisability” comes as a result of a lawsuit in California (where else?), Holmes v. Summers (October, 2010) in which a court ruled that the Listing Broker could be liable and responsible for costs and damages incurred by a buyer in a failed deal when the existing liens on the property exceeded  the sales price.  The logic seems to be that buyers who spend money on inspections, appraisal and any other due diligence activity are damaged if the Listing Brokers fail to disclose that the property seller is “upside down”, “underwater” or other euphemisms for in a bad financial position and the sale fails to close because of the seller’s bad financial position. That makes sense to me. (more…)

Paying the FMLS Piper

November 1, 2010

Hoooooooooo boy, here it comes. The day of reckoning for agents who don’t follow the FMLS rules of membership is at hand. As every real estate agent in the metro Atlanta area knows, FMLS is one of two major MLS systems providing information about listed properties. Member real estate companies pay a great deal of money to join FMLS and be able to provide access to its valuable information for the company’s affiliated agents.

FMLS has always had a unique method of charging for its services:

  • Brokerages pay a percentage of the sales price after a successful closing. It’s .0012% of the sales price, or $120 on a $100,000 sale.
  • One brokerage with both sides of the sale? One fee.
  • Two cooperating brokerages on the deal? Two fees.
  • No closing? No charge. (more…)