Does a Real Estate Agency sales business hold any value?

What is it with us as real estate professionals that we appear hell bent on undermining ourselves and place little to no value on what we do?

Most real estate agents I know work really hard. Most work 6-7 days per week, are genuine, fair and honest and entered real estate because they love helping people.

We work long hours and often feel like we are a psychologist, marriage counsellor, negotiator, accountant, solicitor, town planer, taxi driver and provide a solution to world peace all at the same time. Yet we seem destined to work long hours whilst sacrificing family and personal commitments without a fair expectation of financial reward at the end.

It’s a common held belief within our industry that a real estate sales business does not hold any value or goodwill and it is next to worthless. I am unsure why we would want to encourage this line of thinking as it is not advantageous to ourselves when it comes time to sell.

A general business, whether it is a takeaway store, newsagency or hairdressing salon etc, all hold a sales value. Commonly it will entail cost of stock and a multiplier upon the profit. Real Estate should be no different and a profitable office must be worth something. However, just like general business, without profit, market share and some structure then the business is unlikely to sell or be worth very little. In real estate, “very little”, is likely to be second hand replacement cost of plant and equipment.

What are the driving factors to ensuring your sales business has real sales value?

The Principal can not be mostly responsible for the income generated by the business. A buyer will not pay a premium if the owner of the business is an active salesperson within the sales department and responsible for a high percentage of the income. This situation creates high risk for the buyer. Ideally, the Principal would directly generate less than approx 20% of the income.

A valuable sales business will hold considerable local market share. They will be a leader within their local market and hold genuine Brand awareness in the minds of local homeowners. A market share of over 20% would be appropriate.

The business must be able to show profit. If you are asking a price for your sales component a buyer will always insist on seeing your profit and loss. A good P & L would compare well with industry benchmarks and for the purposes of selling is best prepared by your company accountant.

Your team will be experienced and consistent, good performing agents with a long history within your business. Once again, a buyer is likely to consider paying a premium when they can budget clearly on achieving a return on their outlay. A stable sales team committed to the brand and culture of an agency and has performed at a consistently high level over a period of time provides the buyer a level of comfort to meet expected targets.

You should be able to demonstrate how your database generates a consistent level of enquiry to the business. Your database is pivotal in assisting a high level of repeat and referral business.

All facets of the business would operate within systems and structure which ensures consistency, accountability and clear instructional guidelines for all team members.  This would include but not be limited to a written set of operational manuals for each department with job descriptions for every staff member.

Real Estate Agency Sales is Queensland’s leading Broker to the real estate industry. Contact us now on 32664242 or email sales@reas.com.au to discuss how we ensure confidentiality in the sale and achieve a premium sale price.

Article written by Kevin Hockey March 2010

Please note – This article is not meant to be considered as advice and all information should be carefully considered before being acted upon. This information should be considered in conjunction with your own specific circumstances.