The Elite Real Estate Podcast

The Deal Whisperer: How Norma Rawlings Turns Brokerage Exits Into Winning Moves

• Jimmy Nelson

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What happens when a lawyer with an MBA decides the real estate industry needs someone who actually understands what a brokerage is worth? You get Norma Rawlings.

In this episode, Jimmy Nelson sits down with the President of BrokerVMA to pull back the curtain on the world of real estate mergers and acquisitions. They get into why most broker owners are emotionally unprepared to sell, how acquisition is actually the fastest recruiting strategy nobody is talking about, and what the gap really looks like between what brokers THINK their business is worth versus what the market will actually pay.

If you own a brokerage, work inside one, or ever plan to, this conversation will change how you see the business you are building. This one has heat.

🔗 Connect with Norma Rawlings and BrokerVMA: 👉 https://brokervma.com/

🎙️ Listen to the Elite Real Estate Podcast: 👉 https://www.buzzsprout.com/2387116

▶️ Watch on YouTube: 👉 https://www.youtube.com/@theeliteedgenetwork

#RealEstate #RealEstatePodcast #BrokerLife #MergersAndAcquisitions #RealEstateInvesting #BrokerageGrowth #EliteEdgeNetwork #RealEstateCoaching #ExitStrategy #BrokerVMA #NormaRawlings #JimmyNelson #RealEstateBusiness #SuccessionPlanning #RecruitingThroughAcquisition #EliteRealEstatePodcast #BrokerOwner #RealEstateTips #BusinessGrowth #HumanPlus

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 Elite Edge Network is where human intelligence meets AI. We help entrepreneurs communicate better, scale smarter, and build businesses that support their lives—not consume them. Coaching, systems, and AI working together. 

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SPEAKER_00

Well, hello, hello, everyone. Welcome back into the Elite Real Estate podcast, where we're joined here by famous guests, and I'm super excited to get our guest in today and have her join us today. Norma Rawlings. How are you, my friend?

SPEAKER_02

I am fantastic. Thank you, Jimmy. How are you doing?

SPEAKER_00

I am incredible, and I'm super happy to have you in and on the camera today. So I'm very excited. We were trying to figure out how to get this thing done. And now we're able to get it done, and you're here today. So I appreciate you joining us.

SPEAKER_02

It is it is my pleasure. And I as I said, I I don't know, I'm I'm not quite your hundredth podcast. So uh what am I like 95th or 96th? You've been at it for a while.

SPEAKER_00

Yeah, yeah. So you're you're climbing up there. Maybe we'll have to have you come back for the 100th first.

SPEAKER_01

You know, every every uh every 50 or so. It's fantastic. That's longevity. You showed those benchmarks at this game.

SPEAKER_00

Well, Norma, I'm again, I'm super excited to get you on today because what you do is very, very interesting. You know, we talk about real estate agents a lot. Real estate agents typically don't have a retirement plan, right? We're just gonna open lockboxes until it's time to not open lockboxes anymore.

SPEAKER_01

Yes.

SPEAKER_00

But you've discovered a way that to help agents with that.

SPEAKER_02

Yeah, for sure. So what I think what happens is we we start down a certain path and we we find that we're good at it and we start to create some success at it. And we never we often never think, what is at the end of the day this going to be worth? And so I am privileged to work with entrepreneurs every day, which I know you thoroughly enjoy. And it means that I can help them actually turn their business they've created over all those years into value at the end of the day, because when you have a roster of agents, a team, a brokerage, you're creating value that someone else can benefit from when you're ready to exit. So that is one of the things that I do, and I do it with great pleasure. It's it's it's as I say, it's a privilege to help business owners and entrepreneurs who've spent their life creating a business figure out how to monetize it when they no longer want to run it anymore.

SPEAKER_00

Yeah. And that it's an incredible thing because it we've had I've had this conversation. My wife is a dental hygienist, and the dentist she works for originally retired. So a new dentist bought the practice, and then that's when it kind of hit me like he's just buying the data, right? He's just buying clients, he's buying a business, but that's and that then I was like, oh my gosh, that's real estate.

SPEAKER_02

It's it's so true. And what's interesting about it is if your agents are sticky to you and you have some systems in place and some processes that let you repeat cash flow year over year, which any successful brokerage typically has to have when they go to business, you know, within the first couple of years, then that's exactly what you're selling is you're selling repeatable cash flow, just like just like your wife's dental practice, right? It's like she she sees that repeatable cash flow that was sold from one dentist to another.

SPEAKER_00

Yeah, yeah. And I that's when it really like sparked in my head like, wow, this is like this is what we could do with real estate.

SPEAKER_02

Yeah, no, it's very true. And and it's it's all about what is of value to the buyer, right? What does the buyer of a real estate brokerage look for? And what they look for is sticky agents, right? Agents that will transition with you. Because typically, typically, Jamie, if you're selling, you're gonna have to stick around for at least six months, maybe 12 to transition the agents over. So you look for that loyalty, but you also look for is there a is there stable cash flow from this, you know, from this group of agents year over year? Because if there is, the buyer will pay the seller for that. And so it's a nice legacy to think that yes, it's earned me a living over the years, right? So hopefully it's it's provided more money than your expenses, but also that it's going to provide you with a capital payout when you decide that you no longer want to run the brokerage anymore.

SPEAKER_00

Yeah, yeah. And it for most real estate agents, most real estate agents are just operators. We just get in, we do this business, but you have an MBA, you went deep into the real estate. So, what does having that legal mind for you do when you're sitting across that table from that broker who thinks their brokerage is worth double what it actually is?

SPEAKER_02

So when I went to law school, I was amazed at the arrogance of the law students right out of the gates, Jimmy. Like it was it was one of those situations where you walk in and you go, these kids are all like 22 and they think they're all that. Whereas when I went to get my MBA, totally different personality type, much more engaging and humble and business oriented and excited and enthusiastic. So I actually have phenomenal friends from when I did my MBA, and I don't have any friends from when I did my law degree, difference in personality, which is, you know, I mean, it's it's the stereotype sometimes is accurate, right? But what I find is that the legal training coupled with the business training allows me to sort of look at your real estate brokerage, you know, somebody's real estate brokerage and say, okay, this is what we have to do in order to create a compelling package for a buyer that they are going to see the value, they're gonna pay you for the value, and they're gonna be able to succeed with what you have built. Because a lot of it is if you think about all the time and energy you spend building your practice, there's a legacy there. You care about your agents, you care about your clients, you care about your community. It's obvious, right? The investment that you make into the Detroit and area. And so you want to find a buyer who's gonna continue that legacy and not just dishonor it by dismantling it or being disrespectful to your agents or or not continuing what you've built. So it's a lot of call, you know, finding the cultural fit and and finding the right buyer who has enough cash to pay you money on the, you know, up front. And then and yeah, you need to be able to trust the buyer that they'll pay you out over the next few years, the remainder. So I think the the law and the business together help me analyze that better than if I did not have uh the law and the business degree. But again, it's I I thoroughly enjoy working with entrepreneurs. There's there's no group of people that sees the world the way entrepreneurs do, right? Like a salesperson or entrepreneurial mentality. I always tease, you know, on a Monday you can have a horrible thing happen. And most people by the Wednesday are still wallowing in how horrible it is. And you and I both know the entrepreneur is like, how do I turn that challenge into an opportunity?

unknown

Right?

SPEAKER_00

Exactly.

SPEAKER_02

Just it's just a totally different mentality, and I find it very energizing.

SPEAKER_00

Yeah, it is very energizing. And you're right, like you know, again, as real estate agents, we've we have deals that just start to fall apart, right? Inspections, appraisals, whatever happens along the way. But if you don't keep that mentality, that upbeat of like we're gonna get this thing closed anyway, we're gonna find a way to get through this, then it then you can't operate that way, right? And it's like they they call it operating in chaos.

SPEAKER_02

Well, and and you if you have the mentality that is easily defeated, then you don't succeed in real estate sales. Because to your point, a real estate salesperson is always like, okay, how do we make this happen? Okay, how do we remove the hurdles, remove the barriers, so that we can ensure that the outcome occurs? And it's that can-do attitude that I think is prevalent in the, you know, the people who succeed in this profession are people who have that ability to look at what other people would think was a was a an impossible challenge and say, I got this, I'm gonna figure it out. I'm just gonna keep banging my head against the wall and pushing until something happens, right? And as you know, sometimes you get a headache when you do that, but that's okay because you're still trying to make it work rather than just dealing, you know, accepting defeat.

SPEAKER_00

Yeah, we're gonna work our way through it. One way or another, we're gonna work our way through it.

SPEAKER_02

Because you have to, because anything you try to do that is sales related is it, it's you know, very few of your deals, I'm sure, Jimmy, are easy, right? Like some of them are easier than others, obviously. And some of them you you can't make work. But most of the time, any deal you put together, there will be challenges. And so you have to be able to work through those challenges and bring that creativity and that can-do spirit to the table to make it work. We find when we when we put a buyer and seller together, we're always looking for mutually beneficial agree like arrangement, right? So it's like if one person's winning and the other's losing, that's bad. Whereas if both people feel like their interests are satisfied or protected or at least partially met, then they're aligned to work together to make the deal happen. And that it's it's again, when you get two entrepreneurs together with that attitude, it's very energizing. And what happens too with the best deals I've done, the seller and the buyer on closing are telling their agents, everything's staying the same and it's getting better. Right. And that's that's the that's the that's the perfect apex transaction where an agent says, okay, you know, I don't have to worry about insecurity or change, but I have more referral sources, I have more leads, I have mortgage and title that are right available for me, things that make it better for the agent. I have a larger scale. I have, you know, an international scale or a North American scale rather than what I had before. So the sense that you can create stability and an improvement, those are the best deals.

SPEAKER_00

Yeah. Yeah. Like I coach and train a lot of agents too. And that's one of the things that I try to do. It's and not or, right? It's and not or. If we can do this and that, that you know, and whether that's with a client, you know, that you're selling a house or whether that's with, you know, you're what you're doing at scale with massive brokerages is is different. So just like a quick dirty.

SPEAKER_02

It's the attitude. It's the attitude of and not or. I like that. I haven't heard that before, but I like it. It it's yeah, you're trying to do more so that your customers are become raving fans of you, right? You want them to say, Jimmy is the best guy I have dealt with in this space. You need to call him. Like that's that's what you're trying to achieve is that sense that the your customer is just so pleased with what you've done for them.

SPEAKER_00

Yeah. I this is recorded too, so that I'm gonna keep that. I'm gonna clip that part out. That Jimmy is the best for you. I'm gonna clip that one out. But so, like just like a 30,000-foot view of what you do without getting too much in the weeds. So, like, how do you what's your valuation like? Like, how do you look at the value of what the what a brokerage is or a large team or whatever the case is to put a price tag on it?

SPEAKER_02

So it's similar to when you go to talk to someone in Detroit about the value of their house. And what often happens, I'm sure, to you is they think it's worth a million one. And like you just told me about that waterfront property, it's actually worth 900,000. And so you you have to sort of bring them comparables to say, these are the last 10 houses that have sold in this area, and and this is sort of the range. So it's the same thing with valuations. What we do is we we start with educating the real estate broker as to what metrics a buyer is going to look at. And having a great desk and a fabulous location and really good branding, those are good things. But the the metrics in real estate are target into the last 12 months of cash flow and the number of agents you have. So when you sort of look at the whole picture, having the great brand and the great furniture and the great location, all assets. But if if you're not making cash every year, those three things are not going to cause there to be a lot of value in your brokerage. You have to have repeatable cash flow that the buyer feels they'll be able to replicate. And so when we look at evaluation, we say, okay, how many agents do you have? How productive are they? What is your company dollar or gross margin that you generate after you pay, you know, agent commissions, third-party brokerage commissions? So you take your gross commission income minus those things. What company dollar are you working with that you then use to pay your expenses? Because that's that's going to be a limitation in a sense. How much do you have to work with each year? And then you look at profitability or cash flow. How much cash flow does it generate? And obviously, Jimmy, we add back stuff like, you know, if you're a member of the Dearborn Country Club, then we typically will say, you know, yes, that's nice for you to have personally, or if you have, you know, let's say you have Lyme season tickets or Red Wing season tickets. Those are all completely fine business expenses for you personally when you're owning. But a buyer is not going to have to replicate that, right? They're they're just looking at your core business expenses. So any of those expenses that you run through your brokerage get added back to the cash that the brokerage is going to generate. And a lot of entrepreneurs will run through as many expenses as they can legitimately and discretion with discretion to reduce their taxable income. What I'm looking at with a valuation is when that's all added back, how much cash does that business generate consistently year over year? And then what I typically will do is I'll say, okay, I have to put a multiple on that. So let's say, Jimmy, that your brokerage earned $300,000 in cash pretty consistently year over year. Let's say that was the number. Then I would say, okay, how many agents do you have? Oh, you have, you know, you have 45, 50 agents. Great. How long have you been in business? You know, what's the reputation like? You look at all the other factors, and then you say, I think I'd give that a three times multiple. So that 300,000 in repeatable cash flow means your brokerage is worth $900,000, give or take. And that's sort of the the metric is you you look at about 15 different metrics, but it all boils down to for a buyer, what cash flow can they expect will repeat for the next three years?

SPEAKER_00

It makes sense. And and then you're right, about uh about pulling comps, right? Running comps of comparables and trying to figure all that stuff out. So that's where it could get tricky because you know, people have spent years building this business, right? And building this brokerage and building all this stuff and putting their blood, sweat, and tears into it.

SPEAKER_01

Yeah.

SPEAKER_00

So it does feel like it's worth more.

SPEAKER_02

Of course. It's your it's your third child, it's your it's your baby, it's something that you, it's very near and dear to you. And it's interesting, it's interesting because we'll have some people who undervalue their brokerage. And that always, I find that always interesting, where they'll be like, I don't know if anybody wants it, Norma. You know, it's not, it's not and I'll say to them, look, you you have, you know, 30 years, 20 years of being in business and you have repeatable cash flow. It's definitely worth something. So there's the one extreme, and then there's the other where, oh, Norma, you know, I looked at I looked at what Zillow's trading at, you know, in multiples, and I figure I'm worth at least three million dollars. And you say, you have 10 agents. In no world does that happen. Even even if those agents are, you know, the the 10 most productive agents in in the state of Utah, you're still not worth three million dollars. So so you have both extremes. But what is what is enjoyable is we'll often have a broker come to us and say, I'm thinking of selling and I want to know what I'm worth. And that's a really enjoyable partnership because what I'll do is I'll put together a valuation report and show it to them and say, these are all the metrics. And I've often had a broker say to me, okay, Norma, I'm not worth as much as I want to be, but you've shown me the roadmap of what I have to work on, you know, expense, norm, like like bringing expenses down, payroll and occupancy, Jimmy, are often out of whack right now because in COVID, they all it all changed and we had banner years. And then as things sort of slowed down in 23, a lot of people haven't been able to bring their expenses down in line with the decrease in revenue because they're under contract, right? So payroll and occupancy are often expenses that when I do a valuation report, a broker will say, okay, Norma, I'm gonna work on reducing my occupancy cost, reducing my payroll cost, because then my cash that I spit out every year is significantly higher. And it's not unreasonable to think that you can increase that value by 50% or even 100% with changes to those expenses. Because as a real estate brokerage, it's the last 12 months that are the most relevant. So three to four years of history is important for trends, but the last 12 months gives you a sense of what cash your business is generating.

SPEAKER_00

Yeah, yeah. It's a very interesting topic because again, like we look at expenses, like you said, season tickets and the cars and the this and the that. It's like, well, those are expenses that nobody wants the expenses. Everybody wants to know what you're have coming in.

SPEAKER_02

Yes, yeah, yeah. And that's why your gross company dollar is so important. It's the the money that you have to then pay your business expenses is a relevant consideration in any valuation. And so if you have a million dollars in company dollar coming in, but you only generate $50,000 in profit once you write everything off. My job is to say, okay, what in that $950,000 that we that we took off in expenses is discretionary. What amount of that can be added back so that for a new buyer, it becomes cash in their pocket and thus it justifies a higher price for your brokerage.

SPEAKER_00

Yeah, yeah, I love it. And you there was something on your website. So when I was looking some things up, so there's something that stopped me on your site, and it was the difference between a good deal and the right deal.

unknown

Yeah.

SPEAKER_00

So talk to me about what brokers like emotionally get wrong when they try to sell the thing they built.

SPEAKER_02

So we had a Texas brokerage. Uh, we have a Texas brokerage, luxury brokerage, great operation, profitable, incredibly desirable. And they had an offer, Jimmy, for a couple million dollars. And that was the target price that we figured it was worth. And and the desire was for the brokerage to sell. But the cultural fit was so off that I recommended they not take the deal. And and it seems counterintuitive because they wanted to sell, they got their price, the terms were reasonable. Why would I tell them not to sell? And I said, my worry is that you've spent decades building a certain culture for yourself and your agents, and the buyer's culture is totally incompatible with everything that you value. And so even though, yes, you could take the money and run, so to speak, when business owners build something, it's not unemotional, right? It's it's a labor of love in many ways, and you want your legacy to continue. So, with that specific brokerage, we're currently in talks with a different potential purchaser that has aligned cultures. And it makes such a difference because they're going to treat your agents well, they're going to respect the the way your brand resonates with your luxury clientele. They're going to appreciate the premises that you're in, they're going to honor the continuation of sort of the the brand personality. And that it's it's really interesting over the years. I've seen real estate brokers take less money from someone who's culturally aligned with what they've built. And I always think if the cultures don't mesh, it's a bad, it's just a bad transaction. Because your biggest challenge is you have to transition your agents. And you think about it if your agents, Jimmy, love you and you bring in a complete jerk who has No, like doesn't treat the agents with respect and doesn't operate the same way you do, and you know, it's sharp practice. Those agents aren't going to stick around. They're going to leave within, you know, three, six, twelve months. And then you're going to have this hollowed out company from what you built. So we always look for a cultural alignment. And that that applies to commission plans, right? You know, EXP versus Remax versus like a Sotheby's, they all have a different approach to agent commission based on, you know, the the way that they sell and the type of product that they buy and sell. And it's hard to mesh two different cultures. And frankly, it makes you look at the real Remax deal and scratch your head. Because Reels method of collecting commission and Remax's method of collecting commission are completely polar opposites. And the cultures within each of those brokerages are polar opposites. So I I'll be interested to see how they try to create the synergies that they want with that deal because two totally different cultures, two totally different approaches to the customer, far more productive agents under the Remax versus real, and just a you know, a totally different perception by the general public. So a lot of, and again, way out of my pay grade, way out of my pay grade, Jimmy. But but you do look at it and you say, if if a deal like that crossed my desk, like my Texas guy, I wouldn't recommend they do that deal.

SPEAKER_00

Yeah, it's interesting because you have the cloud base versus the franchise, right? And I don't know how that's gonna meld together because maybe it won't. I you know, it's like that's two totally different aspects of what we're dealing with. It's kind of like if Netflix would have bought a Blockbuster and kept it as Blockbuster.

SPEAKER_02

Right. Excellent analogy. Excellent analogy. It's it's it's the whole, I mean, so much right now, prop tech, right? So much real estate meets technology. AI, I've heard you mention in your podcast in the past, it is a game changer in many ways. It's making us the agents who know how to use AI are more productive than the agents that don't. There's still that desperate need for human connection, though, and and authenticity and a sense of you're that you're genuine. I I don't know about you, but I find the in-person and it's funny, in-person stuff that I do now. So I play I play beach volleyball with my daughter every week. I play court volleyball, I go hiking. When you and I are outside meeting people in person, it's so much more powerful than anything we do online, and certainly anything we do with AI. So that whole balance in the real estate industry right now between personal connection and personal network versus technology, you've done a really nice job of talking about in a few of your prior podcasts. It's it's a live issue. And and real and re-max, if you look at it, real is a technology-based brokerage. Remax is not. Remax is very much old school, the balloon, the connection to their customers. And I don't know, do those are is it possible for those two to find a win-win? I don't know. Whenever we do a deal, we always need a win-win. We always need both parties to be getting what they need out of the transaction. So again, way out of my pay grade, but uh, but at my level, I always look for that win-win and and I I don't see it there.

SPEAKER_00

Yeah, it's it's it's like I said, it's gonna be interesting, you know, how that plays out. And then again, we've you've we've got anywhere buying, you know, all the all these acquisitions that are happening.

SPEAKER_02

Yeah, compass buying anywhere. And and again, talking about complexity. Oh my goodness, how do you how do you deal with nine different brands, a bunch of them competing in a bunch of markets across America? It's just hard. I I and there seems to be a a reduction in leadership, right? So a lot of executives being let go because they're looking to amalgamate and create a more efficient operation. And I don't know, it's it's uh we where we have another transaction where we have a Christie's franchise arrangement being considered, and their ability to incent someone to become a Christie's franchisee, way different pre-COMPASS, post-COMPAS. And it's hard.

SPEAKER_00

It's really hard.

SPEAKER_02

And you're with EXP, aren't you?

SPEAKER_00

Yes, I am.

SPEAKER_02

Yeah, so you're you're happy with that model.

SPEAKER_00

Yeah, I love it. I love the I love it, you know, it gives us the ability to, you know, do so many different things, you know, work from home, work from an office, right? Just different things. And and really the most important thing that I looked at was who I was surrounded with, right? And and I'm surrounded by the best of best. So super happy. Because again, it doesn't matter the brokerage you work for. It really doesn't. If people are gonna use me, whether I'm with free, I was with Keller, you know, it doesn't matter what company I'm with, they're gonna use me because of me. And so I look at it more as who I can surround myself with, right? And those people that I want to be around to help me push my business farther than it than I think it can go. And so that's one of the things that I looked at. I and I coach this on agents all the time. And sometimes it's not a you know, EXP is not a fit. Keller is not a fit, like it doesn't we have to figure out what where you're gonna be most comfortable as an agent.

SPEAKER_02

You know what? It's it's you you raise two points that resonate. The personal connection that you have with your customers means that your business can go anywhere.

SPEAKER_01

Right?

SPEAKER_02

You can you can take your business anywhere because you have that that personal connection that your customers are gonna follow you no matter the brand. And that is brilliant if an agent can create that sort of loyalty to themselves personally as opposed to the brand. And then the second thing you said that I think resonates is if you surround yourself by people who are exceptional, who are great at what they do, I always laugh that I want to be surrounded by people way smarter than me, way more capable than me, way more, you know, people who are gonna push me because the last thing you want to become is complacent. You always want to be pushing to become a better version of what you are right now. So it sounds like uh it sounds like it's a good fit.

SPEAKER_00

Yeah, yeah, it is. It is. And and one of the things that that you wrote a piece called recruiting through acquisition. And it kind of blew my mind because you know, people thinking about buying a brokerage is buying a building and a book of business, right? But you're saying it's actually the fastest recruiting play on the board. So what does that look like?

SPEAKER_02

That's a that's really well said. The fastest recruiting play on the board, that's exactly what it is. It's if you think about how you traditionally recruit, you work really hard to try to convince three, four, five agents a year to move over to your brokerage, right? And during that same time, you inevitably lose one, two, three, four, five, six, seven agents. So at the end of the day, you're either net zero, maybe up one, maybe down one, and it's exhausting. If instead you take that energy and you say, okay, let me look at my competitors in town. Let me look at if anybody's ready to retire, if anybody seems to be exhausted, if anybody seems to be ready to exit for whatever reasons, you know, whether it's health issues, whether it's your wife just retired or your husband just retired and you don't want to do this anymore, whether it's financial struggles, whatever the reason you're we want to retire, you start conversations with, you know, you you think about it. As real estate salespeople, you put a target list, right? You always have a prospect list, a target list. How am I gonna approach this? How am I gonna grow my business? Same thing with with your with your business overall, with your brokerage, you say, I'm gonna talk to 10 brokerages in town that I think would be a good fit with mine. And I'm just gonna sit down and have coffee with as many of them as will have coffee with me, all with a view to opening the conversation to saying, hey, could we partner together? Are you looking at exiting? I'm trying to grow. If you hear of anybody who wants to sell, I'm your person. Because what you want is you want to get that call, Jimmy, from the, you know, the guy down the road who says, Hey, it's Lloyd, and I I I really want to exit. You said, Jimmy, that you want to grow. Let's have that conversation because I've got 10 agents and I think they'd be a good fit with you. And then rather than recruiting four and losing three, you've got 10 in one transaction. And even if you lose a couple, you're still up eight. Like it's it's just it's it allows you to spend less time for way more impact, way more result.

SPEAKER_00

Yeah, yeah. And you know, talking to some of the largest teams and team leaders, and I led one of the largest teams here in the state of Michigan for a while, is you know, this recruiting thing, you're bringing in, you know, to us to grow by two agents a month, we had to bring in 10 because we were gonna lose eight. We just knew that number. And so it's it's exhausting.

SPEAKER_02

It's exhausting. And that churn is difficult to manage because there's a lot of negativity around that. Whereas if you instead say, you know what, I'm literally gonna focus on buying a 20-agent brokerage, then it's a positive, right? It's a it's an additional energy brought to your business and it's also established. So you a lot of times when we recruit, we bring unseasoned agents in, right? New agents and try to train them, which is great. But if you're buying 20, a 20-agent shop, you're gonna already have really good producers as part of those people, your middle uh group, and then you're gonna have a few that don't do much, but all of a sudden you're up by 20. It's it it just you can see, I mean, you can see the growth trajectory changes dramatically. And right now, the more agents you have, the more you're able to do for those agents because you're amortizing those costs over more bodies, and so you're able to give them more benefits as well.

SPEAKER_00

Yeah, no, I love that. And and it's so true because you start to look at how can I increase my business, right? And and everybody says like more agents is more agents fix everything, right? More agents fix everything, and this is a way, instead of again uh bringing agents in and interviewing them, and if you can increase their culture, right? If you can make that culture that they're currently at even better, they're gonna bring more people to them anyway because they're gonna want to.

SPEAKER_02

And then they become that raving fan that you want your customers to be, where they're like, Jimmy is awesome, you need to come over because so many agents agents hate change. So for an agent to change, there needs to be a major problem generally. And so if their colleagues are saying, Jimmy's fabulous, you need to come with us, it it's you know, all of a sudden you have a you have a a second pipeline of agents coming over. Yeah, yeah, quickly, quickly, and they're positive about it. It's not like you have to pitch them, they've already had their their three friends who who joined as a result of you acquiring their brand, and and they're already sold, they're pre-sold.

SPEAKER_00

Yeah, yeah. No, it it's it sounds so good because it does it does shorten that timeline of to your point, like you said, it's you do you you interview an agent, you bring them on, you onboard them, you know, then you start to give them out, then you then you offboard them because they left and went somewhere else. You know what I mean? So it's just like this constant thing of like keep trying to keep everybody happy, yeah.

SPEAKER_02

Yeah. No, recruiting through acquisition is is is very elegant in its simplicity. It's it it just the minute you understand it, you're like, that resonates. That makes perfect sense.

SPEAKER_00

Yeah, it really does.

SPEAKER_02

And it's nice because there's a lot of brokers looking to exit, and a lot of smaller brokerages that just can't make money in this environment unless they have scale. And those are perfect targets for the recruit through acquisition uh strategy.

SPEAKER_00

Yeah. So and so on to that, like walk me through the math a little bit. So if a broker calls you today and says, I think my brokerage is worth X, yeah. What's the gap usually between what they think it's worth and what it's actually worth?

SPEAKER_02

Excellent question. So we have a process that we run. So let's say you said to me, Norma, I want to recruit through acquisition and I want to buy a brokerage with 15 agents. So what we'll do is, you know, you have your 10 conversations, you have your 10 coffees, and let's say one of them calls you three months later and says, okay, Jimmy, I'm ready to sell. What we will do is we'll look at their financials and we'll give you sort of a target price for them and we'll share it with them as well because it's not a, it's not like a listing document where you're saying, okay, well, let's try it at $9.99, but you know, if you get $850, you should sell. It's more of a, this is what the market would look at your brokerage and consider its value. So we try to give you a range, right? So it's okay, it's Jimmy, it's gonna be worth between $150,000 and $170,000. You say, okay, good to know. So then you're able to to structure a transaction with that seller to maybe put, you know, if it's profitable, maybe you put $30,000 down. You agree on a purchase price of $160,000, and the other $130, you pay out over the next three or four years. That's eminently doable, and you immediately get the benefit of 15 more agents.

SPEAKER_00

Yeah.

SPEAKER_02

So that's the that's the basic transaction, is you you will that all someone like me, there's there's about three or four companies in the space, in addition to broker VMA. So we'll give you a range of value and then we'll help you structure a letter of intent that that again is is mutually beneficial. You want your your incentives aligned with the seller's incentives. And usually in this environment, very, very rare that you get money on the barrel head, like very few transactions I see right now where they pay the full amount up front. It's always sort of a portion. It's always like between 10 and 33 percent down, and then the balance over two, three, four, five years.

SPEAKER_00

Got it. And then so if is so if you had someone that was interested in buying, would they come to you first? Like is it because there's not like a listing anywhere, right?

SPEAKER_02

There's no listing. The the market is very confidential. Typically, what we would do is we would meet with you on a complimentary basis and say, okay, Jimmy, what you know, what are what's your target market range? And you would identify, you know, I want to anywhere from 10 to 30 agents. And we'd say, okay, so then your next step is make a list of any brokerage in your community that's 10 to 30 agents and literally reach out to each of them and ask them to have coffee. And so, so you do the legwork. We don't, we don't go out and find them. We, I mean, we have lots come across our desk. So if we know you're looking, obviously we'll send them your way if it if it's a fit, but it takes spade work on your part, but spade work then you're spending it doing one at a time. So you meet with the 10, you have coffee with the 10, you let all 10 know you'd love to have a conversation about merger, partnership, buying them, any sort of collaboration that would be mutually beneficial. And you leave it at that, and inevitably within a within a day, a week, a few months, you're gonna get a call from at least one of them saying, Jimmy, I'm ready to sell. And it's at that point that we come in. So at that point, we say, okay, Jimmy, let's let's figure out what it's worth, right? So we get we get their financials and figure out a range of value so you know that you're not overpaying. And then we help you structure the transaction so that it's again beneficial for them, beneficial for you, and facilitates the transfer of all the agents. We always want it to be status quo for the agents, as we talked about. So nothing changes, but it gets better. And the other thing you want to do is total confidentiality until the closing date, because you do not want any of the agents that from the business you're looking to buy getting cold feet and leaving because they hear rumors about a change in ownership. You want to have the opportunity to to make them stick around over the first six to 12 months of you owning.

SPEAKER_00

Yeah. Yeah. And then is that typical too? Like the the person who buys typically stays around six to 12 months just to try to, you know, ease that ease that merger.

SPEAKER_02

The person who sells, it's it's very rare. We had we had a sad one in the fall. Maryland broker, cancer, you know, cancer back, had like six weeks to live kind of thing. And we we ended up facilitating the sale of his brokerage, which he was really happy about, but he couldn't stick around. So in situations like that, you you deal with what you've got. But in situations where health is not a factor, typically the seller has to stick around minimum three months, more generally, six to twelve. That doesn't mean in the office every day working full-time, but it means presence seen, presence felt, touching each of the agents, you know, with an email or a text or a phone call or a coffee or whatever over that transition period just to make sure that they're happy, there are no issues. They they're they're acting as sort of the transition ambassador to make sure that all the agents transition over and are happy with you as the buyer.

SPEAKER_00

Yeah, yeah. And because again, it it's keeping the agent sticky to that new person then.

SPEAKER_02

Yeah, it's transitioning the stickiness from seller to buyer, 100%.

SPEAKER_00

Yeah, yeah. It's interesting, and and the the model is is interesting because I I I can see how important this is, right? How important this is. If I've built the business and brokerage for for years, you know, I I want it to carry on. And, you know, a lot of times I see it a lot. Kids don't want to get into it, right? If I like it's just like, or do you want to turn it over to your kids or not?

SPEAKER_02

Yeah, and you're absolutely right. If you think about the traditional succession plan, it was corralling one of your children to take over your brokerage, right? That that was sort of your obvious succession plan. And if they weren't interested, you just closed the door and and gave back the keys and and you were done. Whereas now there's all sorts of options. There's there's there's family succession still. It can be a a sibling, a child, a niece, a nephew, you know, whomever. There's management. So your management or some of your agents may want to buy. So there's that internal succession, which we're working with a group right now that they're looking at transitioning it to one of their top agents and two of their managers. Wonderful. That's a great transition. It continues your legacy. They pay you over time. You already trust them. That's great. There's sale to the third party, so your competitor, which is again becoming very common right now. And this is what we're talking about with the recruiting to acquisition piece. There's also succession where you put a general manager in place and you retreat from the business but continue to own it because then you benefit from the ongoing cash flow without having to be there full time. Now that you have to have a certain size brokerage to do that. And then there's sort of a partnership merger situation where you find another brokerage that is in a similar situation to yours, and you say, okay, I want to spend six weeks a year down on Marco Island. Can you cover for me when I do that? And they say, sure, I'm a skier. I want to spend six weeks a year in, you know, Whistler. Okay, great. So you you merge together, you share responsibility, you're bigger as a group than individually. You you benefit from those synergies and you create a partnership arrangement. And that often works really well too. So those are five options that that you know, in a so for in addition to, as you say, the typical, listen, kid, you got to take it over because I built it and you better bloody well continue it.

SPEAKER_00

Right, right. And in to to touch on that piece that you were talking about, you wrote about five succession plans every broker owner should consider, right? So here's what gets me. Most brokers I talk to have zero succession plan. Like most of them just are just doing the business, they're in the business, they're doing the business, and they've built this thing for 20 years, and their exit strategy is basically figure it out later.

SPEAKER_02

Yeah.

SPEAKER_00

How bad is that right now in the industry? So or is it getting better?

SPEAKER_02

It's not bad in the sense that you and I both know when you're enmeshed in your business, it's a lot. You work hard. And and to be, there's that expression about working on your business whether rather than working in your business. And you have to be aware of that before you can ever even change it. So if you're in your business and every decision runs through you, and that's what juices you about your business, like that's what sort of motivates you. Great. At some point, it is probably wise to sort of move up and say, let me work on my business rather than in my business. And it's at that point that you start to think about okay, what do I need to put in place for this business to survive when I'm no longer in it? And that's when the conversation becomes very interesting. And I thoroughly enjoy those conversations. I have all sorts of clients that'll use me as a sounding board. And so, you know, we charge them a flat fee and they'll be like, okay, these are this is what I'm thinking. And I'll say, okay, you know, that's fabulous. These are some ideas to explore so you can create that succession plan. And that's a very fulfilling part of what I do because if you're able to come up with a plan for continuing your business after you've gone or after you've stepped back a little bit and maybe taken on a part-time role versus a full-time role, that is incredibly fulfilling for someone who spent 20 or 30 years building it to see it continue and oftentimes grow in directions that you personally would never have taken. So I I've seen some really nice transitions that just are so heartwarming in the sense of you spend so much time building. And it's so wonderful to see someone you trust continuing that legacy and building it further. It's just, it's a bit so yeah, I I have I've been fortunate enough to have a lot of clients use me as a sounding board for creating succession plans, and it's it's a lot of fun.

SPEAKER_00

Yeah, I'm sure. It circle back to the beginning of this, right? Like when we first started talking, where did this idea come from for broker VMA?

SPEAKER_02

So my business partner and I did our MBA together. And about four and a half years ago, he reached out to me and said, I need you. I said, Hello, Wayne, how are you? And he said, I need you right now. And so we had a we had a breakfast and he said, This is what's going on. He said, I'm doing broker coaching. I'm busy as heck. And all these brokers, to your point just a moment ago, Jimmy, they have no plan for how they're going to sell their business, exit their business, transition their business to the next generation, you know, do a man. He said, They and I don't have the time to help them, so I need you. So that's what the uh the catalyst was for opening broker VMA. And what's crazy is we have been, so he's in Bradenton, Florida, and I'm in Canada. And so we do the entire uh entirety of America and Canada. And from the time we opened the doors, we have been steady. And so there's a need, and it wasn't maybe being addressed as you know as fully as it could have been. And and there's there's three or four other companies in this space that are all very good. We I I again I thoroughly enjoy what I do. I I love helping business owners figure out how to grow or how to exit. It's it's or or valuing them and and helping them create that succession plan or a state planning, you know, device or tax planning so that they can they can eventually exit over time. So that's where it came from is his call saying, I need you. And I think it was it was so funny because we literally he he and I have been friends for for a couple of decades now. And he literally was like, Can we have breakfast tomorrow morning? So it was just one of those, you know, you know how sometimes you you get a call from a friend and you sort of go, okay, well, you know, what but three weeks from now, he's like, No, no, no, tomorrow.

SPEAKER_00

So yeah, that's that's always an interesting phone call, right? I need you now.

SPEAKER_02

And that's the phone call you want from the 10 people that you're gonna target to recruit through acquisition. You want that call saying, okay, Jimmy, we need to meet. And you're like, okay, well, you know, in three, no, no, no, no. I need to come to my office this afternoon. I want to sell this business like tomorrow. And that that's a that's a very gratifying call because it means that the the spade work you did by meeting with those 10 people and having coffee, they're ready to go. They they want they want to figure it out. We we've had situations where we get a call saying, I can't meet payroll next week. We're like, okay, let's just take a breath and figure out, you know, what what our options are and who might be able to put a deal together that quickly so that we can assist you in again, you you never want a liquidation, you never want a bankruptcy because it's just it's it's bad for agents, it's bad for you, and frankly, I think it's bad for the industry. So, so it's like, okay, let's figure out how to manage this crisis. And we've we've had a few of those.

SPEAKER_00

I I can imagine, and I you do see that like with teams that are trying to expand and grow, it's it gets very difficult. Brokerages that are, you know, mom and pops, it's very hard to expand because of the financial backing that it takes. Yeah, right. You've got then you've got Zillow's got their handout, Realtor.com, homes.com, real estate, all the dot com.

SPEAKER_02

Everybody, everybody wants a piece of you, QuickBooks, yep.

SPEAKER_00

Yeah, everybody. And and real estate agents probably have the most holes in their finances than anybody I've seen because it's it's a $20 per discription here or uh subscription here, it's a $20 subscription here, it's a hundred dollar here. What's and you think in your head, well, it's only twenty dollars. Yeah, but if you do that 10 times, right you're absolutely right.

SPEAKER_02

It's it's incremental, and you don't realize the the magnitude of it until you look at your credit card statement and say, how come I'm being charged fifteen hundred a month consistently when I never spent fifteen hundred dollars a month on anything? And as you say, then you start going through all the little charges and realize that you're being gobbled away 10, 20, 50 a month.

SPEAKER_00

Yeah, and it and and we we keep signing up for it, right? We keep if this new AI platform came out, sign up for it, it's only $20 a month.

SPEAKER_02

And I don't know about you, but my Claude, my Claude account started at $38 a month, and now I think it's $140.

SPEAKER_00

So yeah, yeah, and and how how is the AI? So so I'm a I've always been a big proponent of emotional intelligence, and I coach and train from an emotional intelligence side of things. And I we obviously I use AI with everything. It's it's everything. It built the website behind me, it it built it builds everything, right? So what is that what does that look like for you and your business? How has AI enhanced your business?

SPEAKER_02

It it is it is so much smarter than I am, and so what it helps me do is I'll give you a really good example. If I have a client say to me, I run a brokerage in Wyoming and I want to sell, what it does is it helps me analyze who the potential buyers might be for that brokerage that are bigger than my network. So Wayne and I together have a good network, but AI's network is much bigger than mine. So what I'll say to the Wyoming brokerage owner is I'll say, okay, you come up with some potential buyers that you think would be suitable. And I'll come up with some that I think may be suitable. And so an example of where I would use AI is I would use my own network in Wayne's network and say, these are the buyers. And then I would say to AI, okay, this is the size of brokerage, this is what I'm looking for. Who might be a buyer? And inevitably, Jimmy, there are a couple of suggestions that AI makes that I would not have thought about.

SPEAKER_00

It's it's a crazy thing, isn't it? Right? Like I used Claude last night. My son is a freshman in high school and he's studying for his algebra final today, right?

SPEAKER_02

Yes.

SPEAKER_00

And I haven't done algebra in a long time.

SPEAKER_02

Shocking, eh? That we don't use it on a daily basis.

SPEAKER_00

Now, if you want to break down money and finances, I can help you do that. Trying to figure out what X is, I don't have a clue of what you're talking about. But but no, Claude helped me with it last night. I literally just put his papers in. I downloaded the sheets, put them in, and I said, walk me through step by step, like I'm a high school freshman, teach me the steps to do these. And he sat down in front of my computer and was just taking notes and doing his whole thing. And he said, I feel so much better after that.

SPEAKER_02

Which I which is it's when it's used like that, it's such a it's a valuable and gratifying tool because you think to yourself, you know what? They AI did it much better than I could have. And yet you're sitting with your son and you're learning it together. It's sort of like the the best of the two worlds, you know, the EQ and the AI meeting, it's it's great. I I did something similar. I have a 13, my youngest daughter, I have four children, and my youngest daughter is 13. And she was struggling with negative numbers. So she was trying to figure out, you know, if you add negative eight to negative four, what does that equal? And so we did the same thing. We sat down with AI and we did sort of a worksheet and it walked her through it, and she she would do it on her piece of paper and then she'd check, and it was brilliant.

SPEAKER_00

Yeah, yeah. It's it's again, it's taking the it's what you're putting into it, right? So it's it's that's one of the biggest things that I teach in and in my coaching platform is the human plus, right? So I call it the human plus thing where it's it's emotional intelligence first, then we add the AI into it.

SPEAKER_01

I like that. I like that.

SPEAKER_00

If you're working in chaos already, AI just amplifies the chaos.

SPEAKER_02

Oh, yeah, yeah. And you know what else I find, Jimmy, is people don't read what AI spits up. So every single meeting, they're they're recording, and no one ever reads what's being written down. So why are we recording, you know, like like there's a there's a an overuse of it when it's not as valuable. But I the way I always look at it is 10, 20 up front is you, and then 60 to 80 is AI, crunching the numbers, doing the analysis, helping you do the grunt work that isn't a lot of fun. And then the last 10 to 20 is you again because ultimately it's going out under you. So you need to make sure that you're comfortable with what's been created and that it is authentic to you.

SPEAKER_00

100%, 100%. We've got about five minutes left. Where can everybody find you? And what what's the biggest piece of advice you give out to brokers or broker owners?

SPEAKER_02

So I can be found at brokervma.com. So that's valuations, mergers, acquisitions. So brokervma.com is the website and it has my contact information there. Advice to brokers. It's probably the awareness piece we talked about, the whole thing you talk about when you coach, working on your business versus in it, trying to remove the chaos and step above it and say, okay, strategically, what is my plan for the next six months, 12 months, three years, five years? And how eventually do I see myself exiting this business or growing this business potentially through acquisition? And so that from my perspective, the moment they can move up and look at their business with some objectivity and some uh distance, I'll call it, that it increases our awareness of what you're building and the ultimate value it has to you, to your family, and to potentially a third-party purchaser.

SPEAKER_00

I love that. I love that. It's so important, and it's and what you're doing is very valuable to our industry because it's again, some things will just lock the door and leave and it's over. Yeah, you know, and and you're giving them an exit plan and a strategy, not only just an exit plan, but a strategy that makes sense. And again, looking at the culture fit, does it make sense? All those things, because it's got to be a win-win situation, like you said earlier.

SPEAKER_02

Yeah, well, well said. And it's it goes back to that your wife, uh, the dental hygienist and the dental practice. If you think about what we consider having value as a company, you often think about what machinery do you have, what inventory, what real estate, right? But a dental practice is literally customers coming in the door and cash flow. And your analogy, I think, is apt. It's it's the same for a real estate brokerage.

SPEAKER_00

Yeah, I love that. I love that. Well, thanks for joining me. I'm gonna have to get you back on because I feel like we could do this for like another two hours.

SPEAKER_02

Episode number 100. Episode number 150.

SPEAKER_00

Yeah, we'll get you back before the 150, but we'll get you back.

SPEAKER_02

That's impressive. That is your your persistence and the longevity in this industry is very impressive.

SPEAKER_00

Well, thank you very much. I really appreciate it. And again, thanks everybody for joining us today. Norma, thank you for jumping in with us today. I appreciate it. And uh, we'll talk to you guys all soon. Thank you very much.

SPEAKER_02

A pleasure