Shark Tank is a show on ABC that my wife and I watch because of the real world lessons it provides. If you haven't seen it, the format is five millionaire/billionaire entrepreneurs questioning budding business owners looking for investment in their companies. These hawkish entrepreneurs pepper the owners with tangent business questions, quickly getting to the bottom line if it's worth for them to personally invest in their company.
Even if you've been in your commercial appraisal career for a while, I think it would be an interesting exercise if you were on the Shark Tank being questioned. Even if you don't own the firm, the questions still apply to your appraisal career. Like it or not, market pressures are prodding appraisers to be more entrepreneurial - quick and agile - able to adjust to change. Our market is evolving at the expense of the traditional appraiser "technician." It's my opinion that to be the best appraiser, you have to be a great appraiser (technician) AND entrepreneurial.
So here's your chance to swim in the shark waters.
Mark Cuban - "You're asking $200,000 for 20% of your company, you haven't proven to me that your firm is worth $1 million. For that reason I'm out."
Kevin O'Leary (Mr. Wonderful) - "What's stopping me from creating a better appraisal firm to out compete you in your market? For that reason I'm out."
Robert Herjavec - "If you can tell me right now your profit margin and specific plans for increasing revenue, I would consider investing in your company."
Daymond John - "Due to Dodd-Frank, your commercial appraisal product looks like a commodity to me. For that reason I'm out."
Barbara Corcoran - "You don't seem very passionate about your appraisal profession. For that reason I'm out."
So four of the five sharks are out. One shark is left. How do you answer Robert? Can you answer the percentage and dollar amount of your profit margin, per appraiser, for the overall firm? Has it been trending upward in the past few years? What is the sweet spot for how many appraisers you should have? Should you have all newbie or all senior appraisers, or perhaps a mix? What product provides the largest profit margin - restricted use, summary, self-contained, expert witness, tax appeal, consulting or eminent domain? What are you currently doing to remain competitive - specialization, additional education, expert public speaker, participation in the Appraisal Institute? In other words, why are you different than any other appraisal firm on a "list?"
Do you even feel like you can control your appraisal volume and profit margins? Guess what, you can! The secret is systems and technology. Invest in those heavily because Robert's next question is "what will you do with my money?" Think carefully before you answer, because there's blood in the water.
If you would like to join a discussion about this topic or Appraisal Best Practices go to our blog or contact Jeff Hicks.
