At the moment, it is a rare week that passes without one of the corporates snapping up a smaller high street agent.
Countrywide – whose recent purchases have actually included some big players, notably in Liverpool and Wales – plus LSL and Connells have repeatedly made it clear they are on the acquisition trail.
Other keen purchasers include the likes of franchise chain Belvoir, while behind the recent merger of Romans and Leaders was the desire to grow both firms via more acquisitions.
If selling is your exit strategy, now may be as good a time as any.
But just as with selling a residential property, preparation is key.
The five points below are all central to both the valuation of your business and the sale price you are likely to achieve.
- Prepare your business properly for sale – As all buyers (corporate or otherwise) dislike surprises, make sure that you iron out any wrinkles that would be problematic during the due diligence process.
- Premises – Right from the outset, you should consider whether your premises would be attractive to a larger firm, as small or secondary premises could mean corporate buyers either discount their offer in order to take account of the cost of relocating your business to better offices, or only be interested in acquiring your rental portfolio.
- Reputation/Goodwill – Goodwill can be difficult to quantify, as it is usually overstated by the seller and understated by the buyer. But if you have been trading for a reasonable period successfully, and your turnover has been generally consistent, buying firms will generally acknowledge a reasonable amount of “Goodwill” in the indicative offer they make to you.
- Quality of Operation – In normal life, when going out for a first date. you need to look your best in order to impress! Selling a business, it is really not much different. So whilst streamlining your costs is good, do not make the mistake of running your business down prior to sale at obvious cost to both its physical appearance and/or the manner in which it operates. This will lead to a more difficult transaction, and in all likelihood an offer from a buyer that is below your expectations.
- Achieving the Best Price – I will offer up three words of wisdom– Preparation, Timing and Competition. The first two I have touched on already, but as all estate agents know, it is competition (or at least the threat of it) that drives sale prices over and above market value. In other words, it is helpful to get more than one potential buyer biting.
* Peter Nicholls runs Ideology Consulting
Comments (3)
what are people’s recent experiences with valuations for agencies? How are they valuing them? Any info would be great please.
Not had ours done. But i think they look at last three years trading accounts if you do sales. Current sales pipeline and also your lettings book.
If you want to appeal to a corporate and sell out to them, its all about the lettings book.
This is why we started lettings turn of the year. A poster on here said its the best way to add value to your business. The more i looked into it the truer it was.
All the corporates are most hungry for lettings books as it adds regular recurring income to the bottom line which share holders are pleased with – its much more easier to quantify. Sales is constantly starting a fresh fighting for new customers constantly so I don’t think it is valued as highly apart from if you have a long history of trading and a market leading position in your town.