Businesses, like real estate, can be planned, built, finished, and sold for a profit. But what if you own a business that buys and sells real estate? It’s not the same. The best you can do is sell the real estate that you’ve bought, and that’s the end of it. No one will buy your business and pay you several times your current yearly profits, as they would other businesses. Stinks, doesn’t it? I’ll go into the details of why this is, but also offer this self-coined truism as a consolation prize:

"You’ll never sell your real estate business, so you might as well automate it."

I. Other Businesses’ Options and Exit Strategies

Other industries have it good, or at least some of them. If you were to start a company that, for example, sells chairs, you would make your initial investment and get to work. You’d test ways to find people who buy your chairs, and you’d develop relationships with retailers who buy from you in bulk and resell your chairs to the public. Once you make enough money to survive, you grow the business by reinvesting profits, borrowing, or raising capital.

Then you get bigger, sell more, make more, and before you know it, you have a track record of several years. You could now sell your business to someone else. But, of course, the more profitable your company is, the more someone will pay for it. Each industry has its own rules of thumb, but for the most part a buyer will offer you a multiple of your company’s yearly earnings (hopefully several times).

Other things besides earnings can increase your company’s sales price, such as systemizing it. If you can show a buyer how your company runs itself without you (the owner) having to do anything, you can imagine how much more attractive it will appear to them. Who wouldn’t want to own business that spits out money year after year without much work? It’s worth paying more for.

People and companies who buy businesses also want to buy something that is scalable. This means that they should be able to grow it without having to hire a ton of people. Law firms can’t do this, because each attorney can only bill so many hours, and in order for the firm to make more money, they will have to hire more attorneys. Compare this to a software business where people can download the products from a website—you could potentially sell hundreds or thousands more copies per year before you have to hire someone new.