Guide to Selling Your Letting Agency

Selling a business is usually a once-in-a-lifetime event. For most things you do in your professional life you receive training and, through repetition over time, come to acquire expertise. Selling a business is different. Most people who sell one only do it once, and it is usually a business they created from the ground up.

When you look to sell what you have built, the value that others place on the work of a lifetime can come as quite a shock. Some businesses can be valued at little or nothing when the time comes. It does not have to be this way.

This guide sets out what a buyer looks at, in the order it tends to matter, and what you can do about each of it. Be prepared, though. It is not something you can accomplish overnight. The further in advance you start, the better the results you will achieve.

Written by Ben Goldsmith, who buys letting agencies. What that means, and what I have bought.

The numbers

01 How profitable is the business? Letting agencies are often valued on a multiple of turnover, but a buyer is really pricing profit, and how quickly he gets his money back.
02 Is your letting agency on the up? Buyers look at three to five years of trends in turnover, profit, costs and market share. A business in decline needs an explanation.
03 Strong, clear financials Submitted accounts can be nearly two years out of date. A serious buyer wants management accounts, detailed profit and loss, and the balance sheet.
04 Are you making recurring income? The greater the share of your income that comes from recurring fully managed work, the more your agency is worth.

The landlords

05 Do you rely too much on a few landlords? A book that depends on one or two large landlords is a riskier book, and a buyer will price that risk.
06 Are your landlords tied in? The most effective way to reduce a buyer’s risk is management agreements with real notice periods, starting with your largest landlords.
07 What does your reputation look like from outside? A buyer will read your reviews before he ever speaks to you. Most agencies only hear from their most motivated customers, and those skew negative.

The file

08 Is the client account reconciled? Any buyer will have an accountant audit the client account. Do your own audit first, so that you know what theirs will find.
09 What skeletons will they find in the closet? Due diligence goes through everything. Compliance found by the buyer, rather than disclosed by you, is what reduces an agreed price.

The business without you

10 Can you make yourself less important to the business? If the business is you, it may be worth very little without you. A transition plan solves most of that problem.
11 How well systemised is the business? A systemised agency delivers the same result every time, and hands over cleanly. An unsystemised one is work the buyer has to do himself.
12 Does every task belong to someone? Every task in the agency should be identified and allocated to the right person at the right level, and written into their job description.
13 Do you have a system of key performance indicators? A buyer needs to see how the business is doing, and how that compares with how it has been doing. KPIs are how he sees it quickly.
14 How long is left on the office lease? You cannot predict whether your buyer wants the office or intends to close it. But you can find out what an extension would cost before you need to know.

The deal

15 Do you know what you are selling? A share sale hands over everything, including the liabilities. An asset sale lets you choose, and completes far more quickly.
16 Do you know how you are selling it? Most of the price is usually paid over time, not on completion. Understand the structure, and the tax, before you start negotiating.
17 Is your solicitor experienced in business sales? Selling a business is a specialist job. The wrong solicitor will let the buyer tie you into conditions and clawbacks you do not understand.
18 Do you want to sell to one of the big boys? A generous headline price from a corporate buyer is not the same as money received. Many sellers never see anything beyond the initial payment.

Where to start