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TheBusiness Location of properties


Is the portfolio itself closely grouped or widely spread? Closely grouped clearly means they are more cost eff ectively managed. Buyers often ask for a postcode breakdown of managed properties to establish proximity and groupings, relative to offi ce locations.


ARLA membership


Not essential for sales by any means, but a defi nite plus for some buyers. This reassures them about the way the business is run. Membership of other bodies such as the RICS, NALS and SAFEAgent also demonstrate that certain standards are being met.


Quality staff


When a business is sold, the Transfer of Undertakings (Protection of Employment) Regulations 2006 or ‘TUPE’ as they are more commonly known, will apply. These regulations require that the staff is transferred to the new owners under the exact same conditions enjoyed under their previous employer. With that in mind, buyers will look for well-trained and motivated staff – a very good selling point.


Landlord profi le


Are you reliant on a small number of landlords owning a large portfolio of properties under management? From a buyers perspective this increases ‘risk’ considerably.


If one or two of these key landlords leave after the sale, the business would be badly aff ected. A good spread of landlord clients is a better proposition. Much better having one hundred landlords with one property each, rather than just two with fi fty each!


Formal Contracts


“That landlord has been with me for years,” and “I’m sure there is a contract in the storage room somewhere,” are things clients have said to us. You may indeed have understandings or informal contracts with some longstanding landlords, but if you are selling, make sure you formalise all agreements. It is, after all, good practice, but easy to let slip sometimes. Make sure everything is up to date.


Fully managed


The core business from a buyer’s perspective is the ‘fully managed’ element of the portfolio. Try and make sure your portfolio is predominantly fully managed. It will help maximise the consideration for your business.


Accounting


Nice clean accounting. Equally applies to any business for sale, but more so in management and lettings businesses where lots of clients’ money is being handled. Make sure your house is in order! If you have just passed your year-end, then ensure accounts are prepared quickly so that they are available for scrutiny.


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Widely spread managed property Time spent on the road servicing far fl ung managed properties is time consuming and aff ects profi tability. Try to keep them close to your offi ce base. Is that single property you manage miles away really needed?


Systems


Buyers love to see good information systems and record keeping. Add to this the ability to easily produce detailed/diverse portfolio information to buyers and this will signifi cantly ease the burden of due diligence. Many software packages will provide this, but not always. Modern technology awareness and use is also crucial, are you visible online?


BUYERS DON’T LIKE: DSS/Student lets


Some very good and profi table lettings businesses have been built around this type of market, and indeed this may be the best commercial option in some locations. However, many mainstream buyers have told us that they are not interested in businesses that operate with this type of portfolio. This may not necessarily reduce the consideration for your business, but could reduce the level of interest.


Let only/rent collection


This is of course an integral part of most lettings and management businesses. Whilst the let only or rent collection revenue is important there have been occasions when some buyers have ignored this when assessing their off er.


Rental guarantees


We have, on the odd occasion, come across businesses that have self-guaranteed rents to landlords, on the basis of their very careful tenant vetting procedures. In today’s economic climate this strategy is high risk and to be avoided.


Close/Personal Client relationship How close is the relationship of the owner of the business to his clients? The more personal this is, the higher the perceived risk to the buyer. The fear is that, with the owner leaving the business, it could spark an exodus of clients simply for that reason and no other. All businesses are of course built on relationships, especially in property management, but are your staff empowered to deal directly with your landlords, or do they always ring you?


Low profi t margins


Your business may be just where the buyer wants, and the turnover level just right to expand his business, but if your profi t margins are very low he may walk away. Some buyers have indicated minimum net profi t margins below which they will not even look at a business for sale.


Long term commitments on premises If part of the proposed deal requires the buyer to take over premises, they may well baulk at doing so if there is a long lease in place, especially if they have their own premises nearby. In many deals, buyers do have premises close enough, to which the management can be relocated. In that case, it may be you who is left with that responsibility and on-going costs!


Company sale


You business may well be run as a limited company. Many buyers are not interested in buying a company but prefer a ‘trade sale/ portfolio purchase’. It may make very good sense to run your business as a company and you should continue to do so if appropriate, but if you are planning to sell you should be aware of this, especially as there are tax implications on sale. Also make sure that all licences and agreements are signed to your business and not you.


In summary


Hopefully this gives a fl avour of what to expect and to plan accordingly. Above all, be realistic in your expectations. It is a good idea to put yourself in the buyer’s shoes and look at your own business.


Taking professional advice. It could maximise value and smooth the sale. Clients often report the breakdown of previous deals where they have tried to manage it themselves. Professional assistance may well have saved the day.


Hopefully this gives a fl avour of what to expect and to plan accordingly. Above all be realistic in your expectations. It is a good idea to put yourself in the buyer’s shoes and look at your own business.


Get your business in shape to get the most for it. The high-life can be expensive!


Paul Beason FRICS. For further information please contact: paul@alchemy-smeconsulting.com


TheNegotiator ● Xxxx 20XX ● 34 TheNegotiator ● March 2012 ● 31


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