FCB #054: How to Grow & Scale Your Appraisal Business

Introduction

My appraisal coaching clients range from professionals still working for big national firms, those that have just recently gone out on their own and are still in the startup phase, to appraisal firms with 1-2 employees all the way up to 15-20 employees.

All have one question in common: "How do I go about growing and scaling my appraisal business?"

In this newsletter I aim to answer that question, touching on the following topics:

• Your Why
• Your Mindset
• Why Leverage?
• Strategic Planning
• Growth Drivers
• Marketing & Sales
• Recruiting & Retention
• Production & AMS Systems
• Finance & Back-Office Systems
• Final Thoughts

So, buckle up!  Here goes...

Your Why

If you want to stay small -- self-employed and a solo operator -- stop reading right now! However, if you want to grow a business that serves you and your life, rather than the other way around, keep reading.

Building a business isn't supposed to just be another J.O.B., it's supposed to set you free, financially and time wise. A business is supposed to add to your net worth and, hopefully, be valuable and actually sellable someday -- helping you avoid a retirement crisis in your later years.

Most appraisal business owners do NOT have valuable, sellable businesses.  They haven't created valuable assets and their businesses typically are totally dependent on them as key producers and top salespeople, not to mention "Chief Cook & Bottle Washer!" As a result, their only option is to turn off the lights on their way out the door for the last time.

Ask yourself these questions:

• Why am I in business for myself?
• What type of business am I trying to build?
• Is my current business serving me or am I its servant?
• Will I be able to sell my business someday and retire?
• Or am I going to have to work until I no longer can?
• What would a great business look like for me?

Your Mindset

If you've read much of my stuff,  you'll know that I believe business success all starts with mindset: "the established set of attitudes held by someone."

I help teach my appraiser coachees how to switch their mindsets or paradigms...

From:

• No one else can do things as good as me.
• If it's going to be done right, I have to do it myself.
• If I'm going to succeed, I have to work harder and longer.
• I'm afraid to hire because I don't want to train my competition.
• I don't have time to document our processes or build business systems.

To:

• I hire staff who are smarter and better than me.
• I hire vendors who are truly experts at what they do.
• I've learned how to work smarter and more efficiently.
• I've created a culture than ensures retention of top talent.
• Every business system built saves us hundreds of hours each year.

Why Leverage?

According to Todd Tresidder, in his book "The Leverage Equation," there are six types of leverage:

• Time Leverage - Other people's time so you're not limited to 24 hours in a day.
• Technology & Systems Leverage - Other people's technology systems where you set up a scalable business model once and your systems can do the work over and over, thousands of times.
• Communications & Marketing Leverage - Access other people's audiences through magazines, newsletters, radio shows, podcasts, and databases to communicate with millions of people.
• Network & Relationship Leverage - Expands your reach to include other people's connections so you're not limited to your own.
• Experience & Knowledge Leverage - Employs the expertise of others so you don't have to learn everything yourself.
• Financial Leverage - Other people's money so you're not limited by your own net worth. (Note: This is the only category of leverage that has a downside.  All of the other five types have only upside potential if employed.)

Why might you want to employ leverage in your appraisal business?  Again, in the Quick Reference section of his book, Todd shares that...

• One advantage of using leverage is that your wealth accumulation doesn't have to come from your own personal or financial capital.
• Leverage allows you to break the connection between your income and hours worked.
• Leverage releases you from the limitations of conventional financial planning built around working a job, earning money, then saving what's left so you can invest  in a conventional asset allocation portfolio of paper assets -- a slow, low-leverage path to wealth accumulation.
• The leveraged path opens up accelearated strategies using other people's resources so that your wealth growth isn't limited by your own time, money, skills, and abilities.
• Nearly every obstacle you face and roadblock standing in your way is overcome by one of the six types of leverage.

In summary, leverage is both a tool for accelerating your wealth growth, and it's a tool for breaking through the constraints that limit your success.

Best of all, it doesn't have to be risky because only financial leverage both increases risk and return.  The other forms of leverage can accelerate your results while reducing risk at the same time, giving you the best of both worlds.

In my opinion, one of the absolute best forms of leverage for smart, capable appraisers is to build their own real estate appraisal businesses. In those businesses they can maximally employ all six types of leverage. Done right, they magnify and accelerate their wealth building and ultimate time freedom like no other venue.

[ Sidebar: Please buy and read: "E-Myth Revisited" by Michael Gerber, "The Leverage Equation" by Todd Triseddor, and "Buy Back Your Time" by Dan Martell. These three books can dramtically change your life and business for the better. ] 

Strategic Planning

Once you have the right mindsets in place, the next important step to building a great business is strategic planning. 

I implemented a relatively easy and straightforward strategic planning process described in Gino Wickman's two books: "Traction" and "Get A Grip."

I've helped numerous larger appraisal firms implement their own strategic planning processes into their businesses with great positive effects.

There are 11 steps in this strategic planning process:

1. Identify your company's strategic position in the marketplace.
2. Define your unique vision.
3. Determine your company's value.
4. Set your organizational direction.
5. Create specific strategic objectives.
6. Set specific strategic initiatives.
7. Develop cascading goals.
8. Create alignment across the entire company.
9. Consider strategy mapping.
10. Use metrics to measure performance.
11. Evaluate the performance of your plan regularly.

I leverage the innovative, cloud-based Ninety.io software platform to help the larger organizations I coach focus, align, and thrive.

Candidly, a formal strategic planning process like this is only relevant and doable for larger appraisal firms with $1,000,000 to $2,000,000 in annual revenues and the beginning of a leadership/management team.

For the smaller appraisal firms I work with, I use a much simpler process leveraging a simple one-page Strategic Plan. 

Growth Drivers

If you think you're in the real estate appraisal business, you're wrong!

YOU'RE IN THE MARKETING BUSINESS!

You are either marketing for new and diversified clients, or new and better talent to satisfy the increased demand created by your new clients.

Your primary growth drivers are marketing/sales, recruiting/retention, and production/workflow management.

You need some important business systems to engage and capitalize on these primary growth drivers.

• Marketing & Sales - You need to leverage multiple marketing tactics to generate new prospective client leads: email, direct mail, paid ads, social media, SEO-enhanced website with blog, business listing sites, testimonials, etc. You need processes to convert those leads and acquire recurring lender, government and corporate clients and to capture one-off private clients.
• Recruiting & Retention - You need to leverage either recruiting software or agencies or both. You need to build internal HR systems to ensure retention of top talent.
• Production & AMS Systems - You need to drive growth through maximally-efficient line-of-business production software and relational database-driven assignment management systems.

Marketing & Sales

Most appraisers are terrible marketers.  Sorry, but it's true.

If you're smart, you'll hire a professional marketing expert who can help you with your marketing.  This person will most likely cost you between $500 and $1,000 per month.  That will be the best $6K to $12K you will spend every year.

I recommend appraisal businesses allocate up to 5% of their annual gross revenues towards marketing.  Ignore this advice and your business will languish and remain flat line.  And, as I always say, "If your business isn't growing, it's dying!"  Don't make this fatal mistake!  Invest in good, effective marketing! Get the expert help you so desperately need!

There are several places you can go online to find good part-time marketing help:

• Guru
• Fiverr
• Mayple
• Upwork
• GrowTal
• Freelancer
• MarketerHire
• PeoplePerHour

Hiring a digital marketing expert will likely be the best thing you can do to free up your time and grow your appraisal business.  A good digital marketer will do...

• Public Relations
• Paid Advertising
• Email Marketing
• Content Creation
• Keyword Research
• Pay-Per-Click (PPC)
• Content Marketing
• Marketing Strategy
• Marketing Analytics
• Social Media Marketing
• Monthly Marketing Reports
• Website's Inbound Marketing
• Search Engine Optimization (SEO)

Your sales tactics involve two main areas:

1. Getting on approved appraisal vendor lists for lenders, governmental agencies, and corporations, and
2. Winning work from ad-hoc, one-off, private-client RFPs.

You should systemize these two sales processes as soon as possible.  Once I did this, I also hired a full-time "bidder" whose sole function was to quote or bid on the RFPs that came our way from lenders and private clients.  Once I had my bidder fully trained and up and running, this freed up 4 to 6 hours of my time each and every day!

We also created a semi-automated quoting spreadsheet that acted like an artificially-intelligent robot "clone" of me.  With my documented Quoting System, Automated Bidding Worksheet, and a fully-trained Client Services Director (known internally as our "Bidder"), I was now free to fully focus on growing and improving my business!

Recruiting & Retention

My outsourced, part-time "Marketing Gal" expert also helped us set up a semi-automated recruiting process leveraging Zoho Recruit and Zoho People. This included integrating automated, self-serve candidate assessment testing on the front end of the process and background checking on the rear end of the recruiting process.

Once a candidate was hired, with a push of a button, all of their HR information was passed through and populated in Zoho People, our in-house HR system. Your company can leverage an HRMS tool like Zoho People for self-serve onboarding, time tracking, vacation scheduling, etc., making HR management a breeze.

We also leveraged recruiting agencies like XP3 Talent, founded by Michael Matalow, and recruiting strategies as outlined in his excellent book on recruiting: "Hire Train Retain."

Zoho People also has a built-in Learning Management System (LMS), making training across your organization a much faster and better e-learning experience. If you are trying to do all this yourself (DIY) with no process documentation or software systems in place, expect to lose team members with attendant replacement costs.

Replacing key team players is expensive!  Research by SHRM suggests that replacement costs can be as high as 50%-60% with overall costs ranging anywhere from 90%-200%.  So, if an employee makes $60,000 per year, then it costs an average of $30,000-$45,000 just to replace that employee, and roughly $54,000-$120,000 in overall losses to the company.

If you've been in business for any length of time and have experienced talent turnover, you know in your gut this is true. The solution? Spend a fraction of these costs and hire expert recruiting help and pull together integrated recruiting and HR management software like Zoho Recruit and Zoho People.

There are other solutions out there, so do your own research!

Production & AMS Systems

Your core business is appraisal and valuation.  You should automate and systemize this to the maximum extent possible, and outsource all other non-core business processes.  First, research best-of-breed, line-of-business appraisal software like...

• Valcre
• StartDeck
• Datappraise
• Realquantum
• DataComp Appraisal Suite
• LightBox Valuation & Report Writer

In addition to the appraisal report writing software, you need a good comps database and assignment management system. Several of these tools include both. 

Or, there are standalone solutions like Appraisal Inbox.

My firm built our own Assignment Management System (AMS) to track bids, awards, and assignment management using a cloud-based relational database platform called QuickBase.  If I was to do that again today I would use SmartSuite (not to be confused with Smartsheet).

Regardless, your appraisal production process is the key to efficient growth, and both employee and client satisfaction.  Make sure you have the following software tools and documated processes in place:

• Front-end research and data entry
• Assignment Management System (AMS)
• Comp research, verificaton and database
• DCF analysis software and/or outsourced vendor
• Report writing software and integrated templates
• Cloud-based file storage system (Sharepoint, OneDrive, Box, Dropbox, Google Drive, etc.)

Finance & Back-Office Systems

I could write an entire article on these critical back-office systems and related vendors you should have in place and/or be outsourcing to.  These include...

• Facilities Management - Only relevant if you own your own office building, which for most appraisal firms is not the case.
• Finance - Outsourced bookkeeping and accounting service leveraging QuickBooks Online and possibly a fractional CFO, plus a quality CPA firm for tax strategy, compliance, and tax return preparation and audits. A good business banker and line of credit is a must! [ Referral! Contact Mark Wald at www.SPRCHRGR.com and tell him Calvin sent you! ]
• Human Resources - A PEO company that can help you with payroll, withholdings, workers compensation insurance, benefits administration (health, vision & dental insurance and 401K plan administration), HR admin, employee handbook, and possible recruiting assistance.
• Insurance - A good multi-disciplinary insurance agency.
• Legal - Corporate attorney, HR attorney working exclusively for management, and litigation attorney (God willing you won't need this last one!).

Final Thoughts

Growing and scaling a great appraisal business is not for the faint of heart.  It's the hardest thing I ever did.  However, it was also the best thing I ever did, allowing me to scale from 6 to 7 figures and ultimately sell my business for a healthy 7-figure, all-cash payday with no earn out.

If any of this resonates for you and you'd like to explore help from an experienced appraisal business owner turned appraisal business coach, my offer has changed and is as follows:

Appraiser2X Coaching Program - We help appraisal founders at 5 different stages:

1. Pre-Startup - while still employed
2. Startup - initial startup tasks
3. Phase 1 - $250K-$500K
4. Phase 2 - $500K-$1,000,000
5. Phase 3 - $1,000,000+

Coaching Fees tailored to stage:
1. $100/month (one 45-50 minute call per month)
2. $200/month (one 60-90 minute call per month)
3. $300/month (two 60-90 minute calls per month)
4. $400/month (two 60-90 minute calls per month)*
5. $500/month (two 60-90 minute calls per month)*

* With email or phone access in between sessions

I scaled my CRE appraisal biz from 6 to 7 figures and sold it for 7 figures, all cash. Now it’s my passion to help 1,000 aspiring appraisal founders do the same. 

If you might be interested, go to https://www.CalvinCummings.com/Coaching and Book a Free Consult Zoom meeting with me to discuss. 

Until next time, best of success to you!

Thanks, Calvin

Calvin Cummings
Appraiser2X Coach
MAI, Non-Practicing

Appraiser2X Coaching: We help appraisal business owners double their businesses and free time with half the stress.
 

Emails: [email protected] or [email protected] 

LinkedIn: https://www.linkedin.com/in/retirerichguru/

Website: https://www.calvincummings.com/

P.S. Newsletter Update: As I continue to pursue launching my YouTube channel this year, this weekly Founder Coffee Break newsletter is getting scaled back to once a month instead of once a week.  I will let you know when my YouTube channel goes live and I very much appreciate your continued support!  Thank you all very much!