Steve Gerken (Staged Homes)
Business Turnaround Graduate
Who is Steve Gerken?
My name is Steve Gerken and I’m the owner and managing director of company called Staged Homes. At Staged Homes, we stage and style homes for sale and we help homeowners sell their house faster and for more money. Started by a lady called Katrina Maes in her garage with a house lot of furniture and went out on the road and knocking on doors of real estate agencies. Katrina was often laughed out of the real estate agencies by real estate agents thinking, “Well who would hire furniture to sell their home?” It was such a new and noble concept back in the early days. However, now today it’s almost a given and an expectation that your house will be staged or styled when you’re presenting it for sale to the market.
How Did You Find The Business?
It was actually through one of our real estate agents that we’d sold houses through that Staged Homes came up for sale in their commercial part of their business. We’d been staging our own properties for sale and they came to us with the opportunity and said, “Look, would you be interested in an already established, already existing property staging business with all its own staff, all the time, resources, customers, clients, systems, and also its own warehouse.”
One of the motivations for the previous owners to sell this business was they were looking at either systemizing it in a way that they could step out of the business and allow it to run itself or that they go through the next growth phase and they stay in the business and look to generate another 25-30% more revenue and turnover. And it was at that point for them that they really had looked at, “Well, it’s a change in lifestyle for them.” They had worked in the business for 12 years growing it and they were really looking for new opportunities beyond what the business was offering so they made the decision to sell.
Why Was It A Fit For You?
At that point in time, I actually had a problem in my business of flipping homes for sale, which was around cashflow. So I was really keen to look at this opportunity to bolt on a cashflow generating engine to what I was really doing with property. And that’s where my journey with Staged Homes began.
I didn’t put a single dollar of cash into buying this business. How I structured it was I used a combination of vendor finance and bank financing. It didn’t matter which bank I went to or which institution I went to. There was always the shortfall to get the deal across the line. At the end of the negotiation process I basically sat down with the previous home owners and said, the only way we can really formulate this deal is if you leave some money back in the business.
And essentially what I did was using some of Dominique’s principles which she teaches around legitimacy and principles of least effort. Was I structured and wrote the actual vendor finance terms for the previous owner thinking about, “Well, if I was in their shoes, what would I want to see on paper when providing finance to someone purchasing my business.”
One of my concerns before taking over the business was about how accurate the information was that was being presented to me. Everything from financials to the competitors in the market and also the scale and profitability of the business and also how well the staff actually knew their roles and functions in the business. I basically sat down and looked at, “Okay well, if I actually look into the financials, who do I need to give me help and assistance with that?” Through that process, I got to a point where I was comfortable enough to make a decision. That I had enough information in front of me to know that what was being presented to me was probably 80% accurate. One of my concerns was is that the person who worked in the sales role owned the relationship with all of the real estate agents and that was a big concern for me when I first bought the business.
What I did was when I had purchased it, settled on the business was I brought in a second sales person into the business so I could understand the sales process from an outsider’s perspective and really map out and get down to the nuts and bolts of how our sales process worked. And it’s through the mapping out and documenting that sales process we’ve since bought, built, nurture sequences, introduce CRMs into the business, looked at value ads that we can do for our regular clients. All sorts of things that are in that relationship related to that sales process.
The future plan for Staged Homes is to continue to grow what we have and replicate and systemize exactly what we’re doing, but do it better and more efficient and to a larger market. As we grow our revenue, we’ll grow scale and size and then really want to look at adding on new services to our industry. But one of the other opportunities that regularly comes up in our industry is there are a lot of moms and dads who have set up their own small businesses in the staging and styling industry and are looking to exit that after having established themselves and looking at their future of their businesses. They then need to take on more staff, more stock, warehousing. And for a lot of people, that doesn’t excite them. At this point in time in our industry there’s a number of smaller operators who are looking to sell out.
Choosing The Right Business
What I would say to somebody who’s looking to take over someone else’s business but doesn’t think that they have all the knowledge that they need is to look at what your skill set is and what you’re really good at and find a business where that’s the problem in the business and that you can be that solution to that problem. You just need to know how to ask really good and effective questions and you need to ask those questions of your staff, your competitors, your suppliers and of yourself and any business you want to look at like, “Okay, well how can we do that better?” It’s about how effective your questions are to anyone working in your business and to yourself. Take over a business that’s in line with something that you’re really passionate about. Business is not 9-to-5, five days a week. It’s seven days a week, it’s 20 hours a day.
It’s as much as you put into it or as little as you put into it is what will determine your success in business. And if you’re passionate about something, it doesn’t feel like work. Try and find a business that’s going to compliment or solve your problem. If you’ve got a problem in your business now, there’ll be a whole range of reasons that it could be about customers, competitors, suppliers. For example, here at Staged Homes where we’ve been in a downturn market property cycle in Melbourne, where the volume of houses going on the market for sale has dropped by 30%. One of the strategies we’re looking at is actually purchasing a competitor. Our problem is that we don’t have enough work coming in that we can service, but one of our solutions is that we can purchase another business that actually has a customer base that we can onboard.
Negotiating The Price
Ask the question about what’s the profitability of this business been like over time? Most businesses are often sold on a multiple of profit. What you want to do is break down and challenge what that profitability is. You know you’re seeing the best of what’s for sale, you’re not seeing the worst. You really need to know what levers can you pull and what have you got to negotiate with. Think about competitors. Is there a new competitor entering your industry? That’s something that you could try and negotiate down the price with. Is it that cost of labor has gone up and you’re really highly a labor-orientated business so your wage bill is going to go up? You use that to drive down your price, look at your suppliers. Can you source stuff offshore or at a cheaper price points. You know that you can get more profit and your bottom line right from day one but keep that, that’s your gum powder so to speak. Another thing to think about when negotiating as well is this item called goodwill. Goodwill is I guess the reputation of the business. And most of the time, you really don’t want to be paying for goodwill we don’t have to because Goodwill’s based on the past and not future.
My Journey With DG Institute
DG Institute has been an instrumental part of my journey over the last six years and it started off initially around sourcing property off-market and under market value as I transitioned into sourcing property and renovating property and selling property. But what I learned along the way was actually more fundamentally the skills and confidence to take on a business.
And that was a natural progression after doing a number of property transactions to then look for a business. And it was through a lot of the principles that Dominique teaches in her programs that really gave me that confidence to step forward when this business opportunity came up. These have been really instrumental in negotiation with customers, clients, suppliers, business owners when purchasing the business and also in your relationships with your managing staff. Once you understand a lot of principles in business and you can apply them into all areas of your life. And subsequently since buying the business, it’s been a lot of the entrepreneurial type qualities about what DGI teaches and talks about that has actually kept me really engaged and motivated in my business and about how to challenge it to move forward.