Why Brokers Should Focus on Succession Planning

The topic of succession in business is timely, and not just because the award-winning HBO series Succession about one man handing off his billion-dollar media empire to his kids recently wrapped up its fourth and final season.

Entertainment aside, succession is a serious question that brokers need to address, both from a short- and long-term perspective, says Manny Andrade, owner/broker in Toronto, Ontario.

Andrade has owned the brokerage since 2010, while the brokerage itself has been in existence since 1994. The previous owners had simply wanted to sell to a third party and move on, but Andrade sees his situation differently.

Andrade has been in the real estate business since 1987, for a long time as a salesperson, and has been focused more on running the brokerage in recent years. He says he feels an obligation to the 100 salespeople under the brokerage’s umbrella to make sure the business is handed off in a gradual, well-planned fashion, so the legacy and culture they’ve built up lives on after he leaves.

Andrade has ensured that, if something were to happen to him in the short-term, there are systems and operation mechanisms in place so the business is handed off to a designated broker of record.

Even though he’s approaching 60 yeas old, he says he still feel the exhilaration of growing a strong business.

When planning your succession, consider:

  • your brokerage’s future needs
  • the skills required to accomplish those future needs; and
  • a plan with a timeline to develop those skills so, when your successor is called upon, they can effortlessly rise to the occasion.

“Transitioning is a difficult thing to do,” he says. “There’s a lot of planning. I have spoken with my financial advisor. I have spoken with my lawyer. A, you have to find someone who wants [the business]. B, you have to be willing to let go. I think the ‘willing to let go’ is probably the hardest thing.”

Transitioning out of the business and into retirement is an adjustment that needs to be carefully planned for, whenever it occurs.

“You have to be ready for the silence and I’m not sure I am prepared for that,” Andrade says. That’s why it’s vital that a well-thought-out broker succession plan has flexibility built in. What happens in five years if things turned out differently than the broker anticipated? As Andrade says, real estate is an addictive, high-energy business. A broker might decide to remain active in the business or ease out gradually, handing the business off at a slower pace.

Andrade says most brokers he knows don’t have a succession plan in place, or certainly don’t have a detailed one. And that’s a problem.

“You have to consider the brand,” he says. “You have to consider the employees. You want to be fair to the staff. I don’t want to turn my back on them, sell it overnight and leave them with whatever comes next. This is something that, if you don’t prepare for it, you’re going to leave a mess behind for the people who are there.”

The objective is to wean yourself out over time, he says, moving at a pace that allows you to transition yourself out while transitioning the other people in, he says.

Other brokers agree with Andrade that succession planning is a complicated—and sometimes very emotional—process that requires careful planning. It can’t be done overnight.

Sandra Rafferty, a broker/owner in Calgary, Alberta, says the fact she and her husband have been discussing the topic of succession for many years has allowed them to explore and consider their options in greater detail.

She says their son has expressed an interest in taking over the business, which is even more of a reason to have a will in place that specifies their plans and gives power to their children or other key people in the organization to continue the business. With their son getting his real estate licence, they encouraged one of their top agents to get their associate broker’s licence, which would allow that person to step in on the management side if needed.

“We sought guidance from our lawyer and accountant to help develop our succession plan,” she says. “All brokers should create a succession plan as early as possible, even if they start with small steps. It’s critical for any broker who wants to protect the business and ensure its long-term success.”

Key succession steps:

  • create a succession plan and have it in place before it’s needed;
  • document information in detail to ensure operational continuity;
  • update the succession plan regularly and as your business evolves;
  • ensure other stakeholders (such as business partners) are on board with the succession plan; and
  • implement a knowledge transfer plan.

Key people to discuss your succession plan with:

  • your business partner(s);
  • your franchisor;
  • a lawyer;
  • a financial advisor;
  • an accountant;
  • your spouse or family; and
  • your succession candidates or chosen successor.

Rob Rudell, a broker in London, Ontario, says easing out of a brokerage can still mean drawing on its value in retirement.

“The value of a REALTOR®’s business is in his/her database or contact list,” he says. “And what a REALTOR® does to stay in touch with their people will ultimately determine if it has value to someone else or not. The more business you cultivate from your database regularly through contacts, the more valuable your business is. There are likely many different ways to generate money with this information,” he says. So, for instance, a broker can be involved in building a team that can create residual income for when the broker wants to slow down.

There are many ways CREA can support brokers and their salespeople. Your membership gives you exclusive access to professional development resources, a monthly newsletter, personalized training programs, and a variety of tech tools to help your brokerage reduce costs, increase revenues and serve clients better. Learn more on CREA.ca.

The CREA Café team is responsible for the official blog of The Canadian Real Estate Association (CREA). The CREA Café is a cozy place for CREA to connect with our valued members and friends by sharing our thoughts and insights over a virtual cup of coffee.

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