During my 30 years as an estate agent (prior to becoming a business broker), I would often advise clients as to how best prepare their home, in order to maximise the eventual selling price. Common sense you might well think – and of course you would be right.
So, would it surprise you to learn that a not insignificant number of the estate agency owners that I meet in my role as a business broker seem to be at best, surprised – and at worst, mildly irritated at the prospect of planning /readying their business for sale.
Strange really, when you consider the amount of effort owners put into their businesses over a great many years in order to make them successful, after all you would think that selling a business (for most people) is a pretty significant landmark and worthy of significant planning and preparation in order to achieve a successful outcome.
So for those of you presently reflecting on your future in the property business, I thought that I would give a little insight (based upon my experience as a broker) as to the top 5 most common questions (below) asked by buying firms when I commence initial discussions regarding the sale of a client’s business.
- “Why does your client want to sell?” Buying firms want to be aware of the seller’s motives, intentions and vision for selling – in order to formulate their options and approach. So, for example if you are tired or burned out, they will sense it. Alternatively, if you are underfunded or losing ground to your competitors, they will see this in your last 3 years accounts.
My advice – In life I usually find that honesty and humility serve people well, so transparency from the seller in most cases usually leads to trust from a potential buyer. If it doesn’t, then you are most likely selling to the wrong buyer who will not prove to be a worthy custodian of your business or portfolio in the future.
- “How involved does the client want to be after the business has been sold?” Deals come in all shapes and sizes – earn outs, straight sales, staged payments etc, so think about whether you wish to be committed to the business post completion well in advance. The attitude of buying firms can vary enormously in this regard, so your attitude can easily “shape” negotiations.
My advice – Everybody is different, more often than not with a different vision of the future post sale. So, think carefully about your circumstances and likely commitment projecting forward. Clearly, key factors such as age, energy, family commitments all play a part – but it helps to be honest with yourself before answering this question.
- “How dependent is the business on the seller?” If your business is overly dependent upon you personally there will be more strings attached to the deal, and you will almost certainly be required to stay involved longer than you might wish in order to ensure that not only the business successfully transfers, but also goes on to sustain in the future.
My advice – Understand the importance of delegation where feasible by looking to involve other staff members where possible. Doing everything yourself may satisfy your operational insecurities in the short term – but will not however help staff development and demonstrate to a buyer that your company can thrive without you.
- “Are our two businesses compatible?” This should be the most obvious question to both buyer and seller would you not think? Well not always, as buyers and sellers are often driven by quite different motivations. So, whilst the hard numbers might well work on paper – differing cultures may well not prove sustainable into the future.
My advice – As a seller is hard cash your only consideration, or do you care about less tangible goals such as long- term legacy and/or staff welfare and retention post completion? Either way, consider how you will feel about the future consequences of the sale well in advance.
- “Will sales clients and landlords transfer without a hitch once the business is sold?” Aargh, the million- dollar question relating to the future loyalty of the seller’s client base, and perhaps more pertinently, the value of the company itself.
My advice – The integration of the selling firm’s client base into the acquiring firm’s existing portfolio is I believe the most important (and often under discussed) area of negotiations. As full payment of the agreed sale price is commonly linked to the number of landlords/selling clients that successfully transfer. So, given that this is a prime area of common interest between buyer and seller – both sides need to think through (and talk about) how this is handled effectively as both parties will lose out if they make a mess of things.
For more helpful information and general advice about selling your estate agency business, please see the section on this website headed Business Sales