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You’ve never had it so good…

But is it a ‘false dawn’? Nathan Emerson reminds us all that the good times don’t last and you need to plan ahead.

Nathan Emerson

Link to Mentoring featureOver the years, increasingly estate agency has become a less profitable venture, though not many would admit this. However, it is a fact that average sale fees on a percentage basis have continued to decline in relation to the increase in the average sale prices over the period. We are theoretically as an industry producing, by ratio, less income per property than 15 years ago and in addition to this many are carrying the same number of staff and higher levels of ancillary support services and products to help deal with the ever-tightening burden of legislation.

The reliance by many on ancillary referral income to balance the books and make a profit is widely known. The business model we operate is, by and large, still in need of considerable thought and overhaul to stay profitable in the coming years.

Link to Nathan Emerson's Comment

Nathan Emerson

I accept many of you reading this will think “what a load of tosh”, “my agency is busy, we are flat out, run off our feet and we are selling and letting everything we can lay our hands on and we have money in the bank – lots of it”. Everyone is busy and everyone is making above average levels of income. The money being paid in the bank is a higher cash value, yet this is only because prices have risen, and demand is high. On a daily basis I speak to agency owners who are having their best financial years ever. Record month after record month and combined with this we have record profits being created.

Hot market

Homeowners are releasing pent-up demand and this, combined with the Stamp Duty holiday and readily available low-cost mortgage finance, has created a market whereby anyone can sell a property so long as they can get one. So we buy them in with ever more attractive fees. We can afford to do this because we have large pipelines, and we are making lots of money. For all intents and purposes, we have the Midas touch, however, for many agencies all is not what it seems.

Everyone is busy and everyone is making above average levels of income. Now is the time to invest in training!

Firstly, many are operating in an environment of false costings with the benefits of business rate reliefs, grants, furlough schemes enhancing the balance sheets. In addition, the coronavirus loans have provided additional liquidity in adding to increasing volumes of completion fees. Having seen first-hand numerous companies which were trading at best solvent prior to the first lockdown in March 2020 and yet today they are showing healthy balance sheet as a result.

Things are so good for many that most agencies have admittedly forgone prospecting and long-term marketing. All the prior investment abandoned as they are too busy dealing with the onslaught coming through the door, grabbing it while they can. As for qualification. well, what is that…? We don’t need it… or do we?

We are benefiting from a perfect storm and whilst trying not to put a damper on things, the underlying issues many agencies had trading in normal market conditions have not gone away.

The last thing on your mind is – training

Now is the time to invest in training. When things are easy, train harder! I challenged a number of business owners recently to look back at their businesses of two years ago and look at the issues and challenges they had. Many realised they still had the same structural needs and if the market were to correct and return to normal tomorrow, then those companies would struggle as they had before.

Liquidity and a healthy cash flow afford you the ability to buy more time. For an industry which traditionally has invested its hard-earned profits in wise investments such as flash cars and every gadget going, now is actually the time to be prudent with the money by investing and building additional sustainable income streams for your business.

For those that have stopped medium- to long-term prospecting, recommence now and start sowing the seeds for tomorrows harvest. For those that have dropped high standards of qualification, slow the teams down, improve qualification and reinstall those basics.

Protect those fees

More importantly, keep a careful eye on your fee content. If you erode your percentage fees now, you will never recover them when the market settles. They become the new acceptable anchor point. 1.25% becomes 1.15%, 1.15 becomes 1%, 1% becomes 0.9%.

It will be hard, and you are being asked to swim against a strong current but when things do slow down which they inevitably will, you will be the ones able to pick up the pace, increase your fees and gain considerable market share whilst others are effectively starting from scratch.

There is an old saying, red sky at night shepherds’ delight, red sky in morning shepherds’ warning! When things are going well, we don’t always want to see the signs. In business there is nothing more damaging than a false dawn… Talk to Nathan:

[email protected]

June 9, 2021

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