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Written by: Howard Tillerman
Howard Tillerman is the Chief Marketing Officer for Step By Step Business and an award-winning marketing professional.
Edited by: David Lepeska
David has been writing and learning about business, finance and globalization for a quarter-century, starting with a small New York consulting firm in the 1990s.
Published on July 28, 2021
Investment range
$2,000 - $15,000
Revenue potential
$300,000 - $1.3 million p.a.
Time to build
0-3 months
Profit potential
$150,000 - $400,000 p.a.
Industry trend
Booming
Commitment
Flexible
When opening your estate sale business, keep these essential aspects in mind:
The Blue Raven Approach to Estate Sales with Alyson Flynn
Before you start an estate sale business, you’ll want to understand the market dynamics first. That way, you can determine if venturing into the industry is worth your time and effort.
Weighing the rewards and pitfalls of any business allows you to know what you’re getting into. Here are some pros and cons of starting an estate liquidation business:
Estate sales, which involve the liquidation of all assets connected to an estate, is a market with great promise.
Though the US is home to 15,000 registered estate sale liquidators, that works out to just one company for every 8,500 households((https://www.statista.com/statistics/183635/number-of-households-in-the-us/)), suggesting unmet demand.
Trends shaping the estate sale market include:
Challenges in the estate sale industry include:
Among those who work for an estate sale company is an auctioneer, whose job is to invite bids for each item sold in an estate sale.
Startup capital for an estate sale company ranges between $2,000 on the low-end and $15,000 on the high-end. Most estate liquidators spend $8,500 on average to get their business off the ground.
A significant portion of this money goes toward buying equipment, branding, advertising, and marketing.
You’ll need a handful of items to successfully launch your estate sale business. Here’s a list to help you get started:
You may also need to lease a storage facility to keep unsold items for off-site estate sales.
Here’s the cost breakdown.
| Start-up Costs | Ballpark Range | Average |
|---|---|---|
| Licenses and permits | $100 - $100 | $100 |
| Insurance | $100 - $400 | $250 |
| Computers and equipment | $1,000 - $5,000 | $3,000 |
| Office supplies | $50 - $100 | $75 |
| Branding, marketing, and advertising | $500 - $7,000 | $3,750 |
| Website and software | $250 - $2,000 | $1,125 |
| Hiring | $0 - $400 | $200 |
| Total | $2,000 - $15,000 | $8,500 |
Estate sale revenue varies widely, as you’ll generate more from an estate that has high-value merchandise.
Most estate sale companies charge their clients somewhere between 25% and 50% of the value of all items sold, earning an average commission of 38%.
According to the Federal Reserve, the average American family has an estimated net worth of about $750,000. Setting aside the value of the real estate, the net worth drops to about $100,000.
At 25% commission, this means that every estate sale should generate $25,000 in revenue. If you handle one a month in your first year, you’d make $300,000 in annual revenue. Costs and overhead will leave you with a 50% margin, leaving you with an annual pre-tax profit of around $150,000.
Once you build your brand you might handle three estate sales every month. At this stage, you might rent an office space and hire staff, reducing your margin to 30%. If you’re able to achieve a 38% commission rate, you could generate more than $1.3 million in annual revenue. Assuming a 30% margin, you’d make a tidy $400,000 in profit.
Keep in mind, larger estate sale firms are able to close 10 or more estate sales per month and generate more than $1 million in annual profits!
The estate sale business has relatively few barriers to entry. The most notable obstacles include:
At this point, you have an overview of the market. Market research will give you the upper hand, even if you’re already positive that you have a perfect product or service. Conducting market research is important, because it can help you understand your customers better, who your competitors are, and your business landscape.
You’ll now want to develop your business idea further by working out the following aspects:
Your success as a professional estate sale company depends on your ability to identify opportunities faster than your competitors. Some of the best ways to identify business opportunities addressing an existing market gap or pain point, or turning your estate sale passion into a business.
You’re likely to succeed in the industry if you:
You might aim to fill a market niche with your estate sale business. For instance you could target baby boomers reaching retirement age or families looking to downsize amid the economic downturn.
While the estate sale business primarily involves liquidating a client’s estate items, it can be segmented based on the type of product, sale method, and target market. Below are the most common types of estate sale businesses:
In most cases, it takes just one day to complete an estate sale auction, though some estate sales last up to three days.
Apart from liquidating items, you can also incorporate other services into your business, including:
Estate sale companies charge 25% to 50% commission depending on the size of the estate, value of the merchandise, onsite security, type of items, and the need for other services, such as post-sale cleaning.
To determine what to charge, it’s best to evaluate the costs you’re likely to incur for a successful liquidation of your client’s estate. For instance, you can set a higher commission if the client asks you to dispose of any unsold items and clean the property.
It’s important to note that many estate liquidators offer 15% to 20% daily discounts to drive sales. This means items sold on the last day of the estate sale attract a lower commission. So, be sure to consider the expected sale price before you reach an agreement on your commission percentage with your client.
Further, you’ll want to check what your competitors are charging to ensure that your rate is within the industry standard. Once you know your costs, you can use this Step By Step profit margin calculator to determine your mark-up and final price points. Remember, the prices you use at launch should be subject to change if warranted by the market.
Identifying the right target audience for your business is one of the most critical elements of your marketing strategy. The main reasons people would want to liquidate their estate are the four D’s: death, divorce, debt, and downsizing. Thus, the primary target markets for your estate sale business will be heirs apparent, the recently divorced, debt-ridden families and people looking to downsize.
In the early stages, you may want to run your business from home to keep costs low. But as your business grows, you’ll likely need to hire workers for various roles and may need to rent out an office. You can find commercial space to rent in your area on sites such as Craigslist, Crexi, and Instant Offices.
When choosing a commercial space, you may want to follow these rules of thumb:
Here are some ideas for brainstorming your business name:
Once you’ve got a list of potential names, visit the website of the US Patent and Trademark Office to make sure they are available for registration and check the availability of related domain names using our Domain Name Search tool below. Using “.com” or “.org” sharply increases credibility, so it’s best to focus on these.
Finally, make your choice among the names that pass this screening and go ahead with domain registration and social media account creation. Your business name is one of the key differentiators that set your business apart. Once you pick your company name, and start with the branding, it is hard to change the business name. Therefore, it’s important to carefully consider your choice before you start a business entity.
Here are the key components of a business plan:
If you’ve never created a business plan, it can be an intimidating task. You might consider hiring a business plan specialist to create a top-notch business plan for you.
Registering your business is an absolutely crucial step — it’s the prerequisite to paying taxes, raising capital, opening a bank account, and other guideposts on the road to getting a business up and running.
Plus, registration is exciting because it makes the entire process official. Once it’s complete, you’ll have your own business!
Your business location is important because it can affect taxes, legal requirements, and revenue. Most people will register their business in the state where they live, but if you are planning to expand, you might consider looking elsewhere, as some states could offer real advantages when it comes to an estate sale.
If you’re willing to move, you could really maximize your business! Keep in mind, it’s relatively easy to transfer your business to another state.
Business entities come in several varieties, each with its pros and cons. The legal structure you choose for your estate sale business will shape your taxes, personal liability, and registration requirements, so choose wisely.
Here are the main options:
We recommend that new business owners choose LLC as it offers liability protection and pass-through taxation while being simpler to form than a corporation. You can form an LLC in as little as five minutes using an online LLC formation service. They will check that your business name is available before filing, submit your articles of organization, and answer any questions you might have.
Choose Your State
The final step before you’re able to pay taxes is getting an Employer Identification Number, or EIN. You can file for your EIN online or by mail or fax: visit the IRS website to learn more. Keep in mind, if you’ve chosen to be a sole proprietorship you can simply use your social security number as your EIN.
Once you have your EIN, you’ll need to choose your tax year. Financially speaking, your business will operate in a calendar year (January–December) or a fiscal year, a 12-month period that can start in any month. This will determine your tax cycle, while your business structure will determine which taxes you’ll pay.
The IRS website also offers a tax-payers checklist, and taxes can be filed online.
It is important to consult an accountant or other professional to help you with your taxes to ensure you are completing them correctly.
Securing financing is your next step and there are plenty of ways to raise capital:
Bank and SBA loans are probably the best options, other than friends and family, for funding an estate sale business.
Starting an estate sale business requires obtaining a number of licenses and permits from local, state, and federal governments.
Federal regulations, licenses, and permits associated with starting your business include doing business as (DBA), health licenses and permits from the Occupational Safety and Health Administration (OSHA), trademarks, copyrights, patents, and other intellectual properties, as well as industry-specific licenses and permits.
You may also need state-level and local county or city-based licenses and permits. The license requirements and how to obtain them vary, so check the websites of your state, city, and county governments or contact the appropriate person to learn more.
You could also check this SBA guide for your state’s requirements, but we recommend using MyCorporation’s Business License Compliance Package. They will research the exact forms you need for your business and state and provide them to ensure you’re fully compliant.
This is not a step to be taken lightly, as failing to comply with legal requirements can result in hefty penalties.
If you feel overwhelmed by this step or don’t know how to begin, it might be a good idea to hire a professional to help you check all the legal boxes.
Before you start making money you’ll need a place to keep it, and that requires opening a bank account.
Keeping your business finances separate from your personal account makes it easy to file taxes and track your company’s income, so it’s worth doing even if you’re running your estate sale business as a sole proprietorship. Opening a business bank account is quite simple, and similar to opening a personal one. Most major banks offer accounts tailored for businesses — just inquire at your preferred bank to learn about their rates and features.
Banks vary in terms of offerings, so it’s a good idea to examine your options and select the best plan for you. Once you choose your bank, bring in your EIN (or Social Security Number if you decide on a sole proprietorship), articles of incorporation, and other legal documents and open your new account.
Business insurance is an area that often gets overlooked yet it can be vital to your success as an entrepreneur. Insurance protects you from unexpected events that can have a devastating impact on your business.
Here are some types of insurance to consider:
As opening day nears, prepare for launch by reviewing and improving some key elements of your business.
Being an entrepreneur often means wearing many hats, from marketing to sales to accounting, which can be overwhelming. Fortunately, many websites and digital tools are available to help simplify many business tasks.
You may want to use industry-specific software, such as Prosale, Firstfifteen, and ConsignPro to manage retail point of sale, customers, inventory, expenses, and more.
Website development is crucial because your site is your online presence and needs to convince prospective clients of your expertise and professionalism.
You can create your own website using services like WordPress, Wix, or Squarespace. This route is very affordable, but figuring out how to build a website can be time-consuming. If you lack tech-savvy, you can hire a web designer or developer to create a custom website for your business.
They are unlikely to find your website, however, unless you follow Search Engine Optimization (SEO) practices. These are steps that help pages rank higher in the results of top search engines like Google.
Here are some powerful marketing strategies for your future business:
Unique selling propositions, or USPs, are the characteristics of a product or service that set it apart from the competition. Customers today are inundated with buying options, so you’ll have a real advantage if they are able to quickly grasp how your services meet their needs or wishes. It’s wise to do all you can to ensure your USPs stand out on your website and in your marketing and promotional materials, stimulating buyer desire.
Global pizza chain Domino’s is renowned for its USP: “Hot pizza in 30 minutes or less, guaranteed.” Signature USPs for your estate sale business could be:
You may not like to network or use personal connections for business gain. But your personal and professional networks likely offer considerable untapped business potential. Maybe that Facebook friend you met in college is now running an estate sale business, or a LinkedIn contact of yours is connected to dozens of potential clients. Maybe your cousin or neighbor has been working in estate sales for years and can offer invaluable insight and industry connections.
The possibilities are endless, so it’s a good idea to review your personal and professional networks and reach out to those with possible links to or interest in estate sales. You’ll probably generate new customers or find companies with which you could establish a partnership. Online businesses might also consider affiliate marketing as a way to build relationships with potential partners and boost business.
If you’re starting out small from a home office, you may not need any employees. But as your business grows, you will likely need workers to fill various roles. Potential positions for an estate sale business would include:
At some point, you may need to hire all of these positions or simply a few, depending on the size and needs of your business. You might also hire multiple workers for a single role or a single worker for multiple roles, again depending on need.
Free-of-charge methods to recruit employees include posting ads on popular platforms such as LinkedIn, Facebook, or Jobs.com. You might also consider a premium recruitment option, such as advertising on Indeed, Glassdoor, or ZipRecruiter. Further, if you have the resources, you could consider hiring a recruitment agency to help you find talent.
Hosting an estate sale can be exhausting. But if you develop a system from the start, you’ll find it easier to dispose of all the items on your list. For example, it’s wise to arrange similar items together on the same table or in the same room. It’s also important to conduct research on each item to find the best price it can fetch. Holding an estate sale on the weekend is a good idea.
Also, be sure to check the American Society of Estate Liquidators for more information on how to host an estate sale. You’re now ready to start liquidating and making good money!
Some estate sale items tend to find buyers more quickly than others. Top on the list of fast-moving merchandise includes jewelry and accessories, designer wear and shoes, vintage art and décor items, and home tools and kits.
To determine the value of unique or rare items, research and consult with experts in the field. Use online resources and auction records to find comparable items and their selling prices. Remember that an item’s value is subjective and can fluctuate over time.
While you’re at liberty to do whatever you want with estate sale leftovers, you’re better off buying the items and selling them later at a profit, hosting a public auction to dispose of the items, or donating them to charity.
In most cases, the estate sale company offers a marked price on the items. However, this doesn’t mean that you can’t ask for a discount. In fact, you can get a good deal if you push the sales executive to offer you the items at a discounted price.
Build relationships with customers by providing excellent customer service and being transparent about the items being sold. Offer fair prices and communicate effectively with potential buyers. Use social media and email newsletters to promote your estate sales and keep customers updated. Word of mouth can also be a powerful tool for growing your business.
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