If you’ve had enough of this year’s trading conditions and have decided to quit, or maybe you’re ready to move on to pastures new or are looking to retire, or the tenant fees ban has been the last straw, you need to consider just how match fit your business is before you put it on the market and try to sell.
As someone that is actively seeking to buy other estate agencies at the moment, it never ceases to amaze me at the lack of preparation that agencies undertake to show themselves off in their best possible light.
The starting point is for businesses to take a close look at their costs and see where they are shelling out cash unnecessarily. This really has an impact on profitability and can make their bottom line look worse that it needs to.
They need to build their pipeline and show they have future potential.
They also need to look at all their processes, from staff recruitment to client account management and compliance. If the business isn’t running smoothly, it could lead to reputational issues further down the line.
No one likes buying a business that has legacy issues that could rear their ugly head in the local media.
Plus they need to be realistic about price. If they haven’t got a lettings book or have only one branch, it will be a lot harder to sell. The costs of due diligence mean that buyers of these agencies don’t look at companies unless they have at least five branches for sale, unless a smaller business is very profitable.
It’s also important that a company finds a buyer that will really look after the business they’ve built – and the staff that are staying behind. Just like property sellers don’t like buyers slating their décor or planning to rip the house apart, nor do business sellers like people who come in and trash their brand or tear apart their hard work.
If you are planning on selling, my advice is to do your homework. There are a few businesses like ours who are currently on the acquisition trail and we will all have a different proposition. Decide where you feel most comfortable, who feels the right fit, and judge them by their track record. How have they successfully integrated other brands into their business before?
Like any good relationship, you need to be compatible, so it’s worth thinking in advance about what that looks like. You never know, you may have a match that’s made in heaven!
Headcounts chopped by big agents
Talking of acquisitions, Connells announced back in February that it was intending to expand this year – but it appears to have made very slow progress. Other than the purchase of the three-branch Optima Property in Cambridgeshire in September, there’s no sign yet of the growth that it was trumpeting.
In fact, looking at its Q3 records for this year compared to last, all evidence appears to the contrary. It states that staff numbers are down from 7,400 to 6,800, i.e. 8% – which hardly indicates a company showing great signs of progress. It coincides with a downturn in sales from 72,000 properties a year to 66,000.
Branch numbers for both years are given as ‘nearly’ 600 – which is very vague.
It looks to me that they have managed to maintain healthy profits by laying people off. That would have cut their wage bill considerably.
Over at LSL, following its massive restructure and reduction of Your Move and Reeds Rains branches from 404 to 280 (both owned and franchised), headcount is also down significantly – by 9.5%, from 4,763 FTE for 2018 to 4,308 for H1 2019.
Inevitably, this has impacted shares which dipped to 188p in August but have rallied to 238p today as I write.
It’s a very interesting time for estate agents, with Countrywide and Leaders both facing big debts that need to be serviced. Let’s hope the post-Brexit bounce materialises and that we can all move forward after the General Election in what has become a very uncertain estate agency world.
Portal wars heat up
OnTheMarket has started to really shout about its successes. And so it should. The amount of quality qualified leads that we get from them far exceeds those from Rightmove.
Ian Springett, who runs OnTheMarket, says that in September agents received around 34 leads per £100 compared to Rightmove’s 16 leads.
The real difference is the quality of those leads. With Rightmove we get so many time wasters, whereas the majority of people who come via OnTheMarket are genuinely interested.
Given that we all still feel handcuffed to Rightmove, despite its excessive costs in the current economic climate, it makes sense to me that these should be the two portals of choice – and that any spare ad spend would be better channelled towards social media, where we are finding incredible success by putting ads in front of people who don’t even know they are looking!
- Paul Smith is CEO of Spicerhaart
Nonsense – I can name a numerous people who have recently bought one-branch businesses. This can be a successful strategy and can still make perfect sense. It depends entirely on the size of the business and the aims of the business owner.
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Get a proof reader Paul.
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Why would anyone take note of anything Paul Smith says. Spicerhaart has been on the rocks for years with useless arms under them, Darlows, HRT. Poor
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Er
Is Humberts available?
I’m sure you would have some pretty keen staff just waiting for a bit of Xmas cheer, Come on Paul dont talk about buying agents here’s one willing you to do the right thing.
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History shows Connells Group are ruthless when it come to staff cuts …….there has been a huge talent drain of late form the Connells brand-less so Sequence-whys that you wonder ??
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I’m often puzzled why some folk are more obsessed by what their competitors are doing – rather than looking at their own businesses!?! Anyway, last time I looked, Connells were making £50m profit and had the highest market share – so must be getting some things right? How do those profits compare with those achieved by Spicerhaart?
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According to Smith if you want to sell your business you have to be successful = why would you want to or even have the need to sell? What your business is worth is what you have that is an opportunity for someone to take on and if it is in the doldrums, then the fee you will get is like everything in life = what its worth. SpicerHaart acquired many other agents that did not have what he is lecturing and were offered to by a third party.
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Instead of buying more Paul, try and control what you have and make them number one in the area. Don’t spread yourself thin.
All your branches I deal with are struggling to keep their heads above water.
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