Some estate agencies are facing severe financial pressures with staffing making up 80% of their costs, a business sale consultant has warned.

Lucy Noonan, founder of Atomic Consultancy, (pictured) says her company has come across some agents with staff costs that make their business unprofitable.

“Our advice to all lettings and estate agency businesses is that they should have no more than 40% of their overall costs in staff. In some instances, we are seeing this peak at up to 80%, which makes businesses much less profitable,” she says.

Increases in national insurance only inflate the price of employing, Noonan adds.

Mutiple increases

During the last five years, standard multiples for lettings and estate agencies have been 1.5x managed incomes and in some parts of the country, businesses are now selling for 2x their managed income, she says.

“Currently the demand for businesses is high, but this could change if buyers struggle to borrow, which will in turn affect market value,” she warns.

“We are seeing a real trend forming here, with businesses such as Preston and Baker and Smart Homes, selling their lettings portfolio whilst the value is high, and retaining their estate agency portfolio.

“This is a clever decision that mitigates risk, whilst maximising value in these uncertain times.”

Noonon, who founded Atomic after a 20-year career in the property industry, including stints with Hunters, Belvoir, LSL and until October last year, the fast-expanding Lomond Group where she was Mergers and Acquisitions Director.