What is your brokerage really worth?

Everybody tells loan officers the same thing.

"Go independent. Open your own brokerage. Build your business. Own something you can sell one day."

And I get it. Ownership sounds sexy.

But let me ask you something.

Have you ever looked at what independent mortgage brokerages actually sell for?

Not what the owner thinks it's worth. Not how much volume it closes. What somebody is actually willing to write a check for.

Because you can build a company doing $400 million a year in mortgage volume, make a pretty good living, and still have a business that sells for a whole lot less than you imagined.

Why?

Because when somebody buys your mortgage company, they don't automatically own your loan officers. They don't own your referral partners. And they sure as hell don't own tomorrow's production.

What a buyer actually buys

Strip a mortgage company down to what transfers on closing day and the list gets short fast:

• Licenses and approvals, which a buyer can get on their own with time and a budget.
• Systems, software and a website, which anybody can rent.
• A pipeline that closes out in a couple of months.
• A team that may or may not still be there a year later.

The valuable part, the people and the relationships, can walk out the door. And buyers know it. A smart buyer protects themselves by tying money to people staying, instead of paying it all up front for the company itself.

The rebuild test

A retail owner once told me a shop's cash flow sets its price. Here's the problem with that: anybody with a checkbook can rebuild the machine for a lot less than the cash flow suggests. Licenses, a loan origination system, compliance, a website. That's months and a budget, not a multiple.

So a mortgage company rarely sells for what its cash flow makes it look like it's worth. The cash flow belongs to the people producing it.

Do the napkin math

Use your own numbers. Every input here is yours, and the multiple is purely hypothetical. Ask a business broker what buyers are really paying in your market.

So maybe we're asking the wrong question

Instead of asking, "How do I own a mortgage brokerage?"

Maybe we should be asking:

"How do I build the most profitable mortgage business possible, keep the most money, control my future, and create wealth without taking on a bunch of unnecessary expenses and liabilities?"

Sometimes owning the brokerage is the answer.

Sometimes it isn't.

But I think every loan officer deserves to understand the difference before spending years building something they haven't figured out how to value.

Five questions to ask anyone selling you "ownership"

1. How many of your owners have actually sold to an outside buyer?
2. What did they really walk away with, after everything?
3. At what multiple of their real, normalized earnings?
4. How much did they invest, in money and years, to build it?
5. Could they have made the same cash flow on a platform that already exists, without building the company?

If nobody can answer number five with a straight face, you've got your answer.

Build the business. Keep the money. Skip the liabilities you don't need.

That's what Beyond the Branch is about. If you want to see what that looks like with your own production, start my comparison (The Freedom Equation, your personalized mortgage business comparison), run your numbers, or talk to me directly.