One of the most frequently discussed topics across the real estate industry is “Is the sector in a state of growth or decline?”. There are significant changes impacting the industry, not the least being the pandemic – this is well documented.

There has been a quiet revolution over the past three years providing evidence that the number of practising agencies has declined.

While there have been a high number of new businesses, agencies that have re-branded to a marketing or franchise group or changed to an independent agency, the facts remain that there are more agencies who have merged, sold, or closed. 

The compelling evidence to support the number of agencies in decline is by analysing the statistics of the valuations we have conducted over the past three financial years.

screen_shot_2021-11-01_at_1.14.46_pm.png

What these statistics show is an acceleration in businesses selling for a variety of reasons. It does show however, most businesses are making the decision from valuation to sale in a shorter time frame – and the number of valuations is on the rise.

Of the businesses who were no longer trading within twelve months of having the valuation completed, the five main reasons in order of highest to lowest were:

1. Strain and stress of managing a small business
2. Financial duress
3. Sold to a competitor and maintained a sales role only
4. Partnership dispute
5. Planned retirement

The similarities we’re seeing in progressive agencies (a number who we work directly with) for them to sustain long term growth are:

1. Scaling up property management with a benchmark minimum number of properties under management of 400. We expect this to increase to 500 within 12 months.
2. Offering key personnel profit share incentives based upon the achieved KPI’s for the business. This is particularly appealing for salespeople who don’t see agency ownership high on their list of priorities.
3. Business and people culture is their number one priority and to be an attraction based business where people wish to work.

There is no need to wait until you wish to sell your business to have it valued. It is the fundamental starting point for when you are strategically planning to exit the industry within the next 2 - 7 years.

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters. 

Similar to this:

What can go wrong when converting management authorities – A case study

Demand surges for rent rolls off the back of pandemic

Proof is in the pudding - Why small management portfolios fail