Do your title sales reps think a CD is something that plays music? Or that a PSA is a ‘Public Service Announcement’?
The more title companies we sell, the more we learn about what buyers value most.
How your reps perform is something that is not lost on buyers. They look. They care. A proper due diligence process leaves no stone unturned, (especially those that gather moss).
Buyers want to know whether the volumes of the business they are evaluating are sustainable. Historically, a buyer would look at the last three years financials as a starting point. They then dive in to where the business comes from. Will the orders continue to flow? Is a lot of volume tied to an individual sales rep or two? What are the reps’ profiles? Does the business run 90 day ‘no order’ reports? Do they analyze profitability by rep? How about the conversion rate? What about 3 month, 6 month, 1 year trends? Does the owner or management team control the key relationships which the business depends upon? How much influence does the escrow officer have? What they are really asking is “will the business stay if the rep goes?”.
Buyers look to ‘cut fat’ and know that this is not a time for mediocrity. Glad handers will no longer cut it.
Some of the best buyers are drawn from our Private Equity panel. They are not always familiar with the nuances of title and one of our tasks in representing sellers is to translate the classic title business model into terms the decision makers we know at Private Equity firms can relate to and understand. They are used to and like seeing businesses with ‘recurring revenue’. To title people, a realtor or lender who sends repeat orders is ‘recurring’, but Private Equity looks at it very differently. Recurring revenue and re-occurring revenue are two very different things. Part of our job is to explain how talented salespeople and escrow officers drive consistent revenue by maintaining strong relationships with real estate agents, lenders, lawyers, mortgage brokers and others.
There are many kinds of title businesses. Some need to have multiple branches staffed by sales reps to maintain a hyperlocal presence. Others have few if any sale reps but drive business through the door via JVs, complex and deeply rooted lender system integrations and more. Using technology or a commonality of interest to attract and keep business can be achieved with support from staff who are not ‘sales’ reps.
Buyers value anything that is ‘sticky’ and adds to the probability that orders will continue to flow.
Are title sales reps becoming obsolete? If they are relying on past relationships and the ‘good old days’ where all they had to do was show up with donuts, go to endless happy hours, or golf with their clients every so often then the answer is YES -and good riddance. If they know their product, understand how to make the process work better and help solve the inevitable problems which arise in the course of a transaction, then the answer is an emphatic NO. They are then a key part of the process that makes closings work.
Selling a title company is anything but simple. It’s important that there be clarity as to WHERE the business originates, HOW it is maintained, and WHO keeps the train running. These questions drive valuation and structure. An owner who can demonstrate that the orders will continue to flow once he or she is no longer in the picture stands the best chance to get the most cash at closing, and a favorable overall transaction structure.