By Sean Mallon

If you’re planning to sell your estate agent business and want to realise the best price in the shortest possible time, you’ll need to put some time and energy into preparing it for market.

The same advice you’d give to clients selling their home applies to your own business sale. If you get your paperwork in order, spruce up your appearance and put your best foot forward, you might just tempt a buyer who’ll make all the effort seem worthwhile.

Show what your business is made of

In the months before you bring your business to the market, spend time pulling together the paperwork you’ll need to begin negotiations. Most buyers will want to see three years’ worth of audited accounts together with profit & loss and balance sheets. It makes sense to prepare a seller’s pack with these and other key documents such as details of your lease, client numbers and a business dashboard, if you have one.

The value of your business will be based largely on the level of your profits but values may vary dramatically, especially between sales agencies and lettings agencies, and between young businesses and those with a strong local following, good connections with developers and multiple branches.

It will make a difference if you can build your pipeline and show potential for expanding your market share: businesses demonstrating growth will always seem like a better prospect to buyers.

In terms of valuation, it is as subjective a topic as ever. However, the old adage of one year’s fee income can still be taken as a good guide for single site operators. Larger, multiple site operators will more likely be looking at a multiple of 2 to 3.5 adjusted net profits depending on their performance, assets and potential.

Give your business a make-over

A thorough spring clean is the order of the day. Make sure you give yourself plenty of time so the business is ready to go the moment it hits the market. It goes without saying that your premises will need to be smart, inside and out. Clear the clutter, refresh displays and redecorate if necessary.

Extend your efforts to your digital, marketing and advertising output. Your website is likely to be the first port of call for most potential buyers. If it’s slow, shabby or dated, you’ll be sending out the wrong signals – so it may be worth investing a little capital to get this right. A well-designed website will also form part of your net assets.

Make it easy for the buyer

You’ll impress buyers and speed up your sale if you can assemble all the things needed to ensure a smooth transition. Put together a handover pack containing a simple operations handbook, information on staff, including hierarchy, contracts, pay and bonus structures, a health & safety policy and any supplier details. This may sound daunting, but if you start preparations early and tackle the documents one by one, you’ll soon gather everything you need. Much of the information will, or should, already exist, so it may just be a case of compiling rather than creating.

You’ll certainly need to review your standard letters and agreements with vendors, landlords and tenants. Use a solicitor who specialises in the residential market as legislation and regulations are constantly being updated. Individual transaction files should also be checked to ensure they are complete and in order.

It is true that the majority of buyers in the estate agency marketplace are the major chains.

However, we have seen an uptake in individual buyers coming to the market over recent months. These include a lettings agent sold two months ago in Cheshire to a buyer with 15 years’ experience as an accountant who was looking for a wholesale career change.

The benefits of finding an independent buyer are that the transition periods are much less, often weeks or months rather than years should you sell to a national chain.

Essentially, if you are looking to exit promptly and do not fancy a drawn-out exit, then it is best you seek a direct independent buyer rather than a “trade” buyer. However, you will narrow your marketplace in doing this and may sacrifice with a lesser sale value but with far less tie-ins.

As of today, we have 297 buyers registered looking for estate or letting agents, and 85% of these are independent purchasers not involved in an existing estate agency operation.

* This article is by Sean Mallon, managing director of Bizdaq