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How Do You Go About Selling a Real Estate Photography Business?

November 1st, 2018

REPBForSaleA reader that would like to stay anonymous asked the following question:

I would like to pose an anonymous question to the website and followers, “Have you ever tried to sell your photography business?” What are the steps in that process; who is the ideal buyer; and how do you know how much to price it at?

Here are some of my thoughts on selling a real estate photography business:

  1. Typically businesses are sold based on the yearly income and other factors the owner can document, so documenting how much income your business generates is key to its value.
  2. Another factor determining the worth of your company is how organized you are. That is, can you document and train someone else to generate the same income you are now generating?
  3. You may be able to find someone that will give you cash for your business and you just walk away but my guess is that you are more likely to find someone that will work for you on a contract basis, to be trained and then work toward taking over the business while you manage the company and pay them out of the proceeds of their work. Then after some mutually agreed upon time or amount of money paid to you from the company, they take over completely.

Does anyone have some first-hand experience with selling a real estate photography business?

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5 Responses to “How Do You Go About Selling a Real Estate Photography Business?”

  • The question can be answered in many different ways depending on your reasons for wanting to know. Do you have a business that you want to sell right now, in a year or three or if you are setting up a business that you are planning to sell some indefinite time in the future.

    If it’s the last reason, try to separate yourself as much as possible from the business so customers internalize that they are doing business with Acme Photo and not John Smith. That can work the best if you have 2 or more people involved so customers are used to dealing with multiple people. All communications should emphasize the company name especially email addresses so it’s important that the company has a company domain. Calls should be received at the company’s main telephone number rather than customers getting used to reaching you on your mobile phone. The same goes for texting. Get customers used to sending email to the company email address rather than texting. Try to focus on growing the company initially so that is can support at least a few full time people. If customers are willing to have any photographer assigned to their jobs, it’s easier to pass on more value to the person buying the business. They’ll also feel more confident that you aren’t offloading the business to them with plans to compete.

    If you want to sell right away and you’ve been trading as a sole proprietor all along, it can be very difficult. You are mostly handing over a customer list, some historical paperwork and gear (if any). To be successful in selling the business you may need to do what Larry suggests: Start looking for somebody you can bring on board that is interested in taking over after a training period and enough time to get your client base comfortable with their work.

    What your company is worth, what you think it’s worth and what somebody will pay you for it are all different numbers. What the company has been earning is a big factor, but also how long it’s been profitable is another. If your books are complete and accurate, it makes it easier for somebody to evaluate your revenue and profit claims. It also looks much better if you aren’t just working out of your check book and keeping receipts in a shoe box that you hand over to an accountant at the end of the year to get your taxes done. You should have an estimate of how large your market area is and what percentage of the total jobs you are booking. Somebody just getting started may be all fired up to grow and will want to see that there is potential to do even better than you have been doing. If the market you are in is small and you have all of it already, the possible revenue is going to be close to it’s maximum. If you are in a big market and are only servicing less than 1%, there could be massive potential for a new owner to grow the business. If your customer base is steady and loyal, they aren’t just using you because you are the cheapest around, that can be another bonus to a buyer. Another good reason to not compete solely on price.

    What to charge can be complex. Money costs money so the price of the business has to promise a return on the investment. Not only will a buyer need to earn a living, they should also be earning enough to pay interest and principal on the the price they have paid you so they can put that purchase price back into savings or repay any loans they had to take out within a reasonable number of years. It’s working in reverse to determine what the business can sell for. If you contemplate a buyer that is a local competitor, they might be in a better position to pay a higher price since they would be expanding their customer list to some extent (assuming your customers aren’t biased against them for some reason).

    There are attorneys and CPA’s that specialize in advising business owners on what their business is worth and what they can do to get the most for it when they sell. I’d suggest finding one locally and spending the money to do an initial assessment. It would at least let you know what you need to do to prepare for a sale. An attorney can be indispensable in drawing up a sales contract that protects you from claims down the road that you misrepresented the business in some way and make sure that you get paid. If you sell your business on terms, you absolutely need to have an attorney draw up the payment contract and remedies in case the buyer defaults, dies or disappears. You also want to spell out any non-compete terms. Even in states that don’t uphold those for employees will uphold them when a business is sold. You want to spell out that while you might be selling a certain type of photo business, you may continue or return to a photography business in a different genre. Let’s say that you plan to continue doing portrait work part time. An RE photo business might also earn some income making portraits of agents so you may want to limit the non-compete clause to photography of homes only. You could then take the money, buy a set of TS lenses and get into photographing hotels and vacation rentals. You don’t want that to land you in court since even if you win the case, you have lost just by having to show up and pay an attorney to defend you. If you are including equipment, you may want to specify that it is being sold as-is with no warranty. If the shutter on a camera body dies on the first job they do, you don’t want to have to buy them a new body.

    I’ve sold two businesses and each one has been it’s own adventure. There are books out there that can help, but getting professional advice based on your particular business and what you want to get out of it is invaluable. I sold my first business on my own and made way too many mistakes. I spent the money on the second transaction to have somebody looking over my shoulder and pointing out all of my new and improved mistakes before I chiseled them in stone.

  • Ill be 59 in a month, and I’m starting to think about it.

    When I decide to sell the business, it will be by taking on a partner. First year, they are my assistant, absorbing the way I do things. During that time, I send them on certain shoots, depending on the comfort level of the client. Toward the end of the year, I take more time off.

    At the end of the year, I announce my retirement, and hopefully, since the clients have known the other photographer for a year, its a smooth transition. I would encourage the new photographer to keep the business name for another 12 months. He/she can then hire their own assistants, and, maybe a year later, change the business name.

    Im still working through the business value, but it will be a percentage of the income that I can document over the last 8 years.

  • I don’t actually shoot real estate but I was a Business Development Consultant in a previous life.

    One of the key questions to ask is are you actually selling a business, or are you really trying to sell a job?

    Do you have employees who do the work?
    Does your business own any assets beyond old camera equipment and your car?
    Does it generate a profit after ALL costs are deducted from turnover? – Remember, the money you pay yourself as salary is not profit, it’s a cost.

    If the answers to the above are “no” then the reality is that you don’t have a business, you have a job. People don’t pay a lot to buy a job.

    Client list? Not so valuable. Firstly your clients know you are retiring. You will sell to the highest (only) bidder. You’re obviously going to endorse your replacement so that isn’t going to carry much weight and they are unlikely to have any real loyalty to your replacement.

    Also your client list (or at least potential clients) isn’t a secret – it’s every realtor within reasonable driving distance of your home/office. Call them up and say “I hear Bob Smith is retiring/selling his business off. I am not sure if you use him but….”

  • @Dan Marchant

    It sounds more like somebody could be selling an education/apprenticeship, a personal introduction and recommendation to a known list of people that purchase photography services and one less experienced competitor if it’s something like Randy is describing.

    Selling a sole proprietor service business is often going to be a lot like selling a job, but if that job already has a built in workflow and some paperwork to learn from, it’s a lot easier for somebody that may know how to do the work but really doesn’t have the experience on the business end. I’ve had to pick up things as I go along that are specific to RE photography that would have been really great to know from the start. If I could have worked with somebody for a period of time before taking over their business, it would have been a good leg up since starting with even a handful of regular clients means being able to pay a lot of bills right out of the gate. Franchise operations are much like that too. Making hamburgers and fries isn’t hard, but complying with health codes, knowing how to keep track of service intervals on the equipment and the best ways to attract good employees and keep them can all be expensive lessons to learn. With a franchise, most of that is distilled into three ring binders and there are also courses and conferences before and after start up to help make sure you are successful. The restaurant is a tangible thing, but it will feel like buying a job and one with long hours for quite some time.

  • @Ken Brown

    Your right, it’s all those things…. but my point was that those things aren’t worth a significant amount of money.

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