Part 2 Transcript: What Makes a Home Staging Business Sellable? (How to Sell Your Home Staging Business)

This transcript was auto-generated and may contain errors in spelling or inaccuracies in the spoken words.

Shauna Lynn Simon (00:08.878)

Welcome back to the How to Sell Your Home Staging Business, a Real Women Real Business Podcast mini-series for home stagers who are starting to think about what it could look like to eventually sell their home staging business or at the very least, make sure that they have options. I am your host, Shauna Lynn Simon, and I'm so glad that you could join me today. In the last episode, we talked about why you don't always get to actually pick your exit date. And if you haven't listened to that one yet, I'd really recommend going back to it because it does set the stage.

For this whole conversation. The main point of it was essentially this that exit readiness is not the same as selling. So just because you're getting prepared does not mean that you're actually planning on selling tomorrow or even this year, even in the next 12, 24, 36 months. You may not even be sure if selling is something that you'll ever want to do. And that's totally fine too. But being sell ready is about building something that

Could continue beyond you. And if that's if that's what you want to choose to do, while making your business easier to run and more profitable to run now. So today we're talking about the next step. We're going to talk about what actually makes a home staging business sellable. And we're going to start with one of the biggest misconceptions about this. And that is that a busy business is not necessarily a sellable business.

I know, annoying, right? But how often do we hear people say, you know, how are things going? you know, I'm busy. Well, busy is good, right? Is busy always actually good? We're gonna talk about that today because as business owners, we tend to look at what we consider visible proof of our success. The calendar is full, the warehouse is empty, and the phone is ringing nonstop. Agents know who you are. You have a strong portfolio, you've built relationships, you've built a reputation.

You've probably spent more late nights than you actually care to admit solving problems that nobody else even knew existed because you just magically make things happen, right? Because we just drive around with trucks full of our the best home stage and inventory at all times so that we can be available at a moment's notice to solve our clients' needs, right? So I mean, all of this is certainly important. Whatever it is that you're doing to run your business, to keep yourselves busy, to keep the phone ringing.

Shauna Lynn Simon (02:23.32)

To have grown the business to the successful business and the well known brand that you are today. But none of this automatically means that a buyer, a potential buyer for your business, can actually understand all of this, step into it, and be able to actually keep it going without you. So this is that shift that we need to make. Business owners and business buyers are going to look at the very same business very differently through two different lenses. So you, as the owner, you see the history. You know what it took to.

Build the business. You know which agents have been with you for years, sometimes for better or for worse. Am I right? You know exactly which pieces of inventory are your favorites. You know what goes well with what. You know which team members can handle the most chaotic install days or the longer days or the most delicate of clients. You know which clients need that extra hand holding. You know the whole rhythm of your business inside and out because you've lived it and you are living it every single day.

But a buyer does not have all that context, nor do they frankly really care about all that context at this stage. When you're helping a homeowner to sell their house, they tell you the story behind the design choices that they've made throughout the house, right? They're gonna tell you why they arranged the furniture the way they did and why certain repairs have been left unaddressed until now. And what do you tell them when they're telling you all these lovely stories that, you know, they just

They don't think that you can possibly help them sell their house if you don't know all the ins and outs and all these stories. And essentially, what are you telling them at the end of the day? Like, listen, the buyers don't care. I appreciate your story. I appreciate the memories you've created here. I appreciate the history of the house. The buyers aren't really gonna care though. The buyer of that house, they want move in ready. And guess what? So does the buyer for your business. So a buyer for your business is gonna be looking at it really strategically and they're gonna be asking certain questions, like how.

How does this actually make money? Can I understand the business model? Can I see what drives revenue? Can I tell what is actually profitable here? Can I keep the relationships going once this owner leaves? Can I learn the systems and processes that they have in place? Can I trust the numbers that they're telling me? And we'll talk a bit further about that in a later episode about.

Shauna Lynn Simon (04:43.81)

Your revenue numbers and why these are considered more vanity numbers than anything else, and don't really tell the full story. They're also asking, you know, can this business continue without the current owner just holding everything together, right? You're holding that whole thing together with duct tape and bubblegum and whatever else you can find to stitch things together. Let's face it, we can be very resourceful as home stagers, as you know. So this is a very different lens than how you've been viewing your business.

And I don't want to say this to, you know, shock you or anything, or I don't want you to feel as though what you've built isn't valuable. It isn't special, but it's sort of like, you know, every child is special, like this is your baby, right? And so of course you're going to see it through a bit of a less objective lens. And what do we tell our homeowners when they're selling a house? We tell them, well, we're going to need you to start seeing things from the buyer's perspective. And we need you to be more objective about how you're viewing the house.

And this is exactly what I need you doing for your business. And this is often why a lot of home staging business owners struggle when it comes to starting the process of selling their business because they're seeing, you know, my phone is ringing, I'm busy, I'm bringing in X number of dollars in revenue. Therefore, my business is super valuable. I own X number of dollars of inventory and they assume that the business is successful, then that value would be obvious. But the value is not always obvious.

To your buyer. It has to be very clear. It has to be explainable. And ideally, it also needs to be transferable. So this does not mean that every staging business needs to look the same. I'm not trying to create a cookie-cutter version of a sellable business because every business is a little bit different. So some staging businesses are going to be more inventory heavy, some are more consult-based, some are owner operated, and some are absentee owner operated.

Some have a large team, some rely heavily on agent relationships, some are really strong in SEO and inbound leads, some have a dominant local brand, some are super lean and profitable, some are bigger, more complex, and have more infrastructure. And all of these are sellable, but they're just a little different. And different types of businesses are going to attract different types of buyers.

Shauna Lynn Simon (07:01.208)

For example, another stager who's maybe looking to expand their territory, expand their business, they're going to care a lot about your current territory, your inventory, your warehouse, your client list, maybe even your team. Somewhere newer to the industry, maybe looking just for kind of a faster way in. They don't want to start from zero. You know, they may want training, they want some systems, they want a brand, they want a business that they can step into. Now, maybe you've got an interior designer.

Who's looking to expand their business and they see staging as sort of a natural extension of what they're already doing. You may be looking at an investor, various different types of investors out there who's interested, but they they're gonna care a lot more about whether or not there is a team or a manager who can run the business without them having to be involved every day. If it's a competitor of yours, they might be interested in your current market share, your relationships, your assets. So the question is not: would anyone buy this? The better question is what

What kind of buyer would this business naturally attract right now? And then the next question, of course, is is that the kind of buyer that I want to attract? Because the preparation that you do now can change that. So if you're saying, you know, that's not really the buyer, this isn't the business that I want to sell, this isn't the buyer that I want, preparation can help to change that. It doesn't necessarily guarantee a specific buyer or a specific price, of course, but it can change how confidently the business presents itself to different buyers.

And it can change how much risk a potential buyer sees. It can change how much the business feels transferable. And it can change whether the buyer sees a business that they can continue or a pile of stuff and relationships that might just poof disappear when you leave. So if you want to learn a little bit more about different buyers that are out there, check out our show notes. We've got a link to a blog there about four different types of buyers. I won't get into all the details on these here, but

we do have a fantastic blog that talks about the specific four different types of buyers that exist. It doesn't mean that there aren't buyers beyond these four types, but these are the main ones that you're going to be marketing to. And you can see what the different buyers are looking for and how your business might fit into that currently. And you can decide if that's where you want to be or not. Okay, so this brings us to another very important distinction though. Owner operated is not the same as owner dependent.

Shauna Lynn Simon (09:22.604)

And we touched on this a little bit in the last episode, but a lot of home stages hear, quote, sellable business. And they assume that it means that their business has to actually run without them. And that's just simply not true. They're thinking, you know, I need a general manager, I need a fully documented operations manual, I need automations, I need software, I need a team that handles everything. And yeah, absolutely. Those things can certainly help in some businesses, but your business does not have to be absentee run to be sellable.

We actually covered this in great detail in the last boot camp that I ran. There was a couple of staging companies in there that were debating about trying to sell the business based on its current structure or growing their team, building their team up further and then selling it that way. And so we're kind of running the numbers on which one makes the most sense because both have their pros and cons to them. So it's not a straight answer necessarily. So your business does not need to be absentee run to be sellable.

So absentee run essentially means that you, as a business owner, are not involved in the day-to-day operations. You're not the one who has to be there to make sure that a staging takes place, that a consult takes place, that a client call gets answered. So that's essentially what absentee run means. An owner operated business can absolutely sell. So owner operated means that you're still involved in a lot of the day-to-day stuff. And there's a lot of buyers, in fact, who actually want to step into that operator role. That's actually a big part of the appeal for them.

They just don't want to start from zero, but they would absolutely be happy to step into the role that you are currently serving in. So this means that as an owner, you know, you may still be involved in consultations, in design decisions, client relationships, quality control, and other day-to-day operations. And that's totally okay. The problem comes when the business is so dependent on you that no one else can actually understand how anything works. So if the pricing logic lives

Only in your head, for example, especially if your pricing logic is like, well, sometimes I do this and other times I do that. And there really isn't what I would call a logic per se. Or maybe the client communication style lives only on your instincts. Well, sometimes I do this, and sometimes I text them, sometimes I email them, sometimes I call them. And don't get me wrong, those instincts actually are super valuable. The communication may need to vary from one client to the next.

Shauna Lynn Simon (11:43.96)

But it shouldn't just be based on a gut feeling because you know the business so well. There should be a reasoning behind it and something that's teachable and transferable. So if the warehouse flow only works because you remember where everything is. Also, if you you're the only one who knows which inventory items are your inventory items, that's going to be a challenge. Or if the team only knows what to do because they text you every five minutes to ask you questions. That is definitely owner dependent, not just owner-operated. That is owner dependent.

So then the buyer is not just buying a business, they're buying a whole lot of risk with this because there's a real risk that comes attached to the fact that you don't already have this in a transferable state. So they are taking a risk, assuming that you're going to be able to teach them what you already know, that you're going to be able to transfer that knowledge over to them and that you're going to provide the support to ensure that that happens smoothly. And buyers, they don't really like to buy risk. Buyers price for risk. They negotiate around risk. They hesitate.

Or walk away altogether because of risk. They ask for way more transition support because of risk. They lower their offers because of risk. So when we talk about making your business more sellable, we're really talking about reducing that uncertainty in the buyer. So can the buyer understand what they're buying? Can they see how the business actually makes money? I'm not talking about just showing them your bank account and saying, see, there's money in it, or showing them last year's revenue.

And saying, look, I made X hundred thousand dollars or millions of dollars or whatever last year. They need to know, like they actually see how the business makes money. Can they see what assets are included? Can they understand the role that your inventory might play in that? Do they understand the client base, the systems? Can they see what would need to happen after the sale for the business to continue operating? And again, this doesn't all need to be perfect. The perfect is definitely not the goal. Clarity, having a clear

Way of being able to communicate this and make it explainable to the buyer. That is the goal here. And that's essentially what we do when we're preparing a house for sale, right? One of the things that we tell our sellers is that we want to take all the questions away from the buyer. We don't want the buyer to have any questions, but I wonder why they do this, or I wonder why this is like this. We want to remove those distractions and take away those questions. And that's essentially what we're trying to do when we're preparing your business for sale. So if we simplify this, okay.

Shauna Lynn Simon (14:10.328)

There are five things that a buyer needs to believe. Number one, they need to believe the business makes money in a way that they can understand. Not just, well, you know, we're busy or we had a great year or there's money in the bank account right now. So, like that must mean that we're making money. They want a predictable and consistent revenue stream. They're going to understand, of course, that there's ebbs and flows due to market conditions, due to seasonality, but you should be able to identify what drives the revenue. Is it

Vacant staging projects, is it occupied consultations? Is it your inventory rental? Is it specific agent relationships? Is it builder work that you're doing, short-term rentals, design projects? I don't want to hear you say, Well, I do all of those things. I get it. Which is driving the revenue and which of those are actually profitable? So you might think, for example, you do some vacant staging projects, they bring in the most revenue. I charge, say, let's say $5,000 for an average vacant staging project.

And that's that's your biggest ticket item. And so that must clearly be driving your revenue. But when you take a look at the profit, your profit margin is minimal on it. Whereas your consultations, they're a lower ticket item, but you're more profitable. Or maybe there's another service that you have found where you're more profitable for it. Whatever that looks like. So what is actually driving the revenue and what is making it profitable? Okay. Number two, they need to believe the assets support the business model.

And this is, yes, your inventory is part of your assets, but it's also your brand, your website, your templates, your processes, your client database, your vendor relationships, the reviews that you have, your Google reviews, your testimonials, your marketing, anything else that helps the business to produce revenue. Because staging businesses are often so inventory heavy. When we think of assets, we think of physical assets like equipment.

Vehicles and the actual stage in inventory. But we forget that our brand assets hold just as much, if not more, value than our inventory. And again, we're gonna talk more about how all these play a factor in the actual listing price for your business and the value of your business. But just know that when I'm talking about assets, I'm not just talking about inventory or equipment or vehicles. I am talking about your brand assets and everything that makes your business valuable because usually you're selling all of that.

Shauna Lynn Simon (16:34.252)

The whole goal of going through what I'm talking about here and preparing your business for sale is not just to sell just your inventory. If you want to sell just your inventory, you can close the doors tomorrow, sell off your inventory, peace out, see you later. But you and I both know that if you sell your inventory, you're gonna get pennies on the dollar potentially. And we wanna make sure that you're getting much, much more than that. Okay, so number three thing that your buyer really needs to understand here is they need to believe the relationships can transfer.

So this does not mean that every client or agent is guaranteed to stay. I have this conversation frequently with both my sellers and my buyers saying, like, well, how do I know that these agents are going to stay? You don't know. There's never going to be a guarantee. Of course there isn't. But if the entire business depends on people only wanting you personally, that's going to create some uncertainty. Now

I get that this can be a little bit tricky because you're like, well, I built my reputation on the fact that nobody does things the way that I do. Great. But if you can say, well, I have documented the process, I have made it so easy for someone else to follow. I know that this person, you know, we're aligned in personality and this person can take this over. Right. So we need to know that those relationships can transfer. It's probably going to take a little bit of transition support and communication on your part to make that happen, but it can be done.

All right, the fourth thing, they need to believe the business can be learned. This is huge. They might have their own home staging certification, formal training in terms of the home staging principles and that sort of thing. Full disclosure, honestly, they also might not, but that they can get from somewhere else. Their training might teach them how to run a business, but it's not going to teach them how to run your business. And that's what they need to know.

that they can learn. And this is where your systems come in. And I don't mean fancy systems. It doesn't need to be full of automations and fancy software. I just mean can someone understand how leads that come in, new inquiries, new prospective clients, how they come in, how they're handled, how are quotes and proposals created, how are jobs scheduled? How is inventory selected? How do you know your team members are going to show up when you ask them to?

Shauna Lynn Simon (18:54.702)

How do you make installs happen? How do you navigate the logistics of it? How are destages coordinated? How are problems resolved? All of these things need to be able to be learned. And if they can't learn them, if they don't feel confident that they can learn them, then they're going to, again, see this as being a big risk. All right, and the fifth thing, they need to believe that there is a clear story. So what is this business? Who is it a fit for? And why does it work?

And I know that sounds simple enough, but a lot of sellers struggle with this because they've never had to explain the business from the outside looking in. I actually recall working with one of my very first business coaches that I worked with. My staging business had been growing like exponentially. And it was time to, you know, invest the in service and support to help me to really level up the business. And this coach he asked me, he said, Well, why do your clients hire you? And I like, because I'm the best, of course. And he really pushed back on this because he's like, okay.

Why are you the best? I'm like, well, nobody does things the way that I do them. And so he had me kind of outlining the different things that I do. And he's like, and that's why your clients hire you. And I started thinking about, you what? I actually don't know why they hired me. I think this is why they hire me. But he encouraged me to do a little bit of market research, really dig into the different things that we were doing, that seeing what other people were doing, what are we doing that they're not doing, and then having some conversations with our real estate agents and understanding why it is that they're hiring us. And

This was before I had done any sort of significant marketing. Yes, I had done some marketing. I had actually rebranded my company and I was doing some marketing and I was seeing the results of it. But I was so glad that he forced me to do this exercise because it it forced me to take a look at what did I do that made the revenue start coming in? Cause I'll be honest, the first couple of years of my staging business were not the most lucrative.

I was barely getting by. I was barely bringing in any any money. And I knew that I had to do a change. And so I did make a pretty major change. I did a whole rebrand of the company and I relaunched it and I did things differently. But this forced me to actually really look at what am I doing differently? How am I doing it differently? What was the catalyst that invoked this change would help me get some of that momentum? And so as a business owner, you know the business so

Shauna Lynn Simon (21:14.712)

Deeply that it can be really easy to forget what a buyer will actually need to understand first about your business. And this is where that preparation that you're doing is going to matter because the goal is not to make your business appealing to everyone, right? When you market to everyone, you market to no one. The goal is to understand what you've built, where the value is, where the risk potentially is, and what kind of buyer would see your business as the right opportunity for them. And if you can do that,

You're already having a very different conversation now with not only yourself, but with potential buyers. It's not necessarily that desperate conversation that you're going to have if you're trying to scramble at the last second, like, I just decided, you know, we talked about it in the last episode. You don't always choose your exit date. So you might have a situation come up where all of a sudden you've got to sell your business and now you're trying to scramble to explain what actually makes it work. And I'm sure you can see from all these things that we're talking about here how this will help you to run a

better business now. I'm not talking about just preparing your business for sale. Again, we talked about this in the last episode. How often have you worked with clients where they're like, I wish I had done this years ago and got to enjoy this. Enjoy your sellable business long before you need to sell it. So I want you to be able to have the right conversations with your buyer and ensuring that they understand exactly why it works and what the clear story to it is.

I want you to be able to have that clear conversation with them because that clarity that they're going to have in that conversation is going to be what creates confidence in their ability to purchase that business. Okay, so your takeaway today is this: do not assume your business is sellable just because it is busy. And do not assume that it is not sellable just because it is owner operated or imperfect. Instead, here's what I want you to start asking: what would a buyer need to understand?

In order to see the value here, and how can I make that more clear for them? What currently lives only in my head? What parts of this business at this stage are truly transferable? What kind of buyer would this business attract right now? Again, go check out our show notes and you'll find a blog there about the different types of buyers and what they're looking for. And lastly, what would I need to strengthen if I wanted to attract a different kind of buyer later or potentially more types of buyers?

Shauna Lynn Simon (23:37.358)

So if you want some some help starting to think through all of this, I've also created an ebook. It's called Is Your Home Staging Business Sellable? Seven Ways to Increase Your Profit Now and Your Sale Price Later. And it's specifically for home stagers who want to better understand what it means to build that sell ready business. So you can go ahead and grab it at slsacademy.com forward slash sell ready and use the promo code SELL100.

And we'll have that in the show notes. That link will be in the show notes for you as well. And as we continue through this series, we're going to keep going deeper into some of the areas that affect that sellability, including your numbers, your inventory, your systems, your buyer conversations, and the actual sale process. And now, if you're already realizing, like, okay, listen, Shauna Lynn, I know I need more help figuring out what this looks like for my business, we've got you covered there as well, because that's exactly

what we work through inside the sell your staging business boot camp. You can learn more about that at slsacademy.com/sellyourbiz So slsacademy.com/sellyourbiz Now both of the links, of course, are in the show notes, but for right now, I say start with the free ebook. Use that promo code SELL100. Get that book for free.

And learn exactly where your business stands right now. If you were to list it tomorrow for sale, is it actually sellable? Now, in the next episode, we're going to talk about the numbers that buyers actually care about and why your revenue alone does not tell the full story. And this is where things are going to get really interesting. So I hope that you will tune in to the next episode. And thank you so much for joining me today. I hope that you have found the insights today valuable. And I wish you

A very prosperous sale for your business as well as the preparation of getting that business sell ready. Happy staging.