Estate liquidation firms and tag sale companies are other names for estate sale businesses. The goal of an estate sale business is to accept complete responsibility for finding purchasers for the majority of the assets in a home or business in a single or multi-day event. Estate sale businesses are generally used by clients who need to swiftly dispose of the contents of an estate, which could be due to the death of a loved one, divorce, or simply to accelerate a quick transfer.
How much can you earn from an estate sale business?
Source: stepbystepbusiness
Estate sale revenue varies greatly, with higher-value things generating greater revenue. Most estate sale companies charge their clients between 25% and 50% of the total worth of all items sold, for a commission of 38% on average.
According to the Federal Reserve, the average American family’s net worth is approximately $750,000. After deducting the value of the real estate, the net worth is around $100,000.
With a 25% commission, each estate sale should provide $25,000 in revenue. You’d make $300,000 in your first year if you handled one per month. Expenses and overhead will result in a 50% margin, resulting in an annual pre-tax profit of roughly $150,000.
Once you’ve established your brand, you might be able to handle three estate sales every month. At this point, you may rent an office space and recruit employees, reducing your margin to 30%. You might earn more than $1.3 million in annual revenue if you can attain a 38% commission rate. You’d make a handsome $400,000 profit assuming a 30% margin.
Remember that larger estate sale companies can close 10 or more estate sales per month and earn more than $1 million in annual profits!
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How much should you charge for your services?
Estate sale firms charge a commission ranging from 25% to 50%, depending on the size of the estate, the value of the merchandise, onsite security, the type of objects, and the need for additional services such as post-sale cleaning. To determine what to charge, consider the fees you’re likely to incur if your client’s estate is successfully liquidated. For example, if the client requests that you dispose of any unsold things and clean the premises, you might charge a greater commission.
It’s worth noting that many estate liquidators provide 15% to 20% daily discounts to encourage sales. This means that things sold on the final day of the estate sale are subject to a lower commission. Hence, before you settle on your compensation rate with your client, keep the estimated sale price in mind.
You should also look at what your competitors are charging to ensure that your rate is competitive. Once you’ve determined your costs, you can use this profit margin calculator to calculate your markup and final price points. Recall that the prices you employ at launch should be subject to modification if the market warrants it.
What are the costs involved in starting an estate sale business?
It may take some time for your sales commissions to cover your initial costs. Before you start seeing a return on your first estate sale, you may need to hire a part-time employee or two and run ads. There may also be expenses for designing your logo, developing your website, and renting office space if it is not in your house. There are additional license and permission requirements that vary by location, as well as bonding and insurance fees. Still, the estate sales business is a line of business that you should be able to start with less than $10,000.
Who is the target market?
Your customers will be those who want to sell most or all of the contents of their house or business. One customer profile would be the heirs of a recently dead parent’s inheritance. Another example is a homeowner who wishes to downsize rapidly due to the death of a spouse or financial difficulties. For example, a couple going through a divorce.
The industry credo comes from the four D’s: Death, Divorce, Debt, and Downsizing. As a result, at least some of your clients may be emotionally raw and require sensitive treatment. Diplomacy is thus a crucial personality quality. It should also be highlighted that, while the term “estate” implies that the majority of your clients will be rich, this is not always the case. Estate sale firms can handle jobs of any size.
How to Start an Estate Sale Business
Estate sale businesses are in high demand as more people need to sell their belongings due to downsizing, divorce, death, or relocation. Estate sales are also a great way to find unique and valuable items at bargain prices. But how do you start an estate sale business that is profitable and reputable? Here are some steps to follow:
1. Gain Experience and Knowledge
Before you start your own estate sale business, you need to learn the ropes of the industry. To become an estate sale expert, you can work for an established estate sale company, attend estate sales as a buyer or seller, or take courses on estate sale management. You also need to familiarize yourself with different types of items such as antiques, collectibles, furniture, jewelry, art, and more. Additionally, you need to know how to research, appraise, and price items accurately and fairly. You should also be able to handle sensitive situations with clients who are going through emotional or financial difficulties.
2. Plan Your Business
Like any other business, you need to have a clear plan for your estate sale business. To start your business, you should conduct market research to determine if there’s an opportunity to turn your idea into a successful business. Write your business plan, which is the foundation of your business. Pick your business location and choose a business structure and name. Register your business and get federal and state tax IDs. Estimate your startup and ongoing costs, such as equipment, supplies, advertising, insurance, taxes, and licenses. Finally, outline your goals, objectives, strategies, and financial projections in your business plan.
3. Form Your Business Entity and Register for Taxes
You need to choose a legal structure for your estate sale business, such as a sole proprietorship, partnership, LLC, or corporation. This will affect your liability, taxation, and paperwork. You also need to register your business name with your state and obtain an Employer Identification Number (EIN) from the IRS. You also need to register for state and local taxes, such as sales tax, income tax, and payroll tax.
4. Open a Business Bank Account and Set Up Accounting
You must open a separate bank account for your estate sale business to keep your personal and business finances separate. This will make it easier to track your income and expenses, file taxes and apply for loans or grants. You also need to set up an accounting system that records your transactions, invoices, receipts, and reports. You can use software like QuickBooks or Wave to simplify your bookkeeping.
5. Get the Necessary Permits and Licenses
Depending on your location and the type of items you sell, you may need to obtain various permits and licenses for your estate sale business. For example, you may need a general business license, a resale permit, a sales tax permit, or a certificate of authority. You may also need to comply with zoning regulations, health codes, and safety standards. You should check with your state, county, and city agencies for the specific requirements in your area.
6. Get Insurance for Your Business
Insurance is essential for protecting your estate sale business from potential risks and liabilities. You may need different types of insurance policies depending on the nature of your business activities. For example, you may need general liability insurance, professional liability insurance, property insurance, or workers’ compensation insurance. You should consult with an insurance agent or broker who specializes in estate sale businesses to find the best coverage for your needs.
Conclusion
Starting an estate sale business can be a rewarding and lucrative venture if you follow the right steps. You need to gain experience and knowledge in the industry, plan your business carefully, form your business entity and register for taxes, open a business bank account and set up accounting, get the necessary permits and licenses, and get insurance for your business. By doing so, you can build a reputable and profitable estate sale business that serves your clients well.
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