Well, hallelujah, you are allowed to open your office, your bank balance is looking good and your business has survived the virus. Or has it? Unfortunately, it is still too soon to say.
Let’s consider this example of a small business that usually banks £480,000 per year, half from sales and half from lettings.
John Doe Property Ltd
Cost Savings for March/April
|Staff Savings from 2 Months of Furlough Scheme||£30,000|
(£25,000 for larger businesses)
|Advertising Cost Savings||£4,000|
|Portal Cost Savings||£4,000|
|2 months’ Business Rate Savings||£4,000|
Income for March/April
|2 Months’ Letting Income at 90% of the norm||£36,000|
|2 Months Sales Income at 30% of the norm||£12,000|
Cash Position So Far
|£48,000 Savings – £32,000 Lost Income =||Better Off – £16,000|
|Add £50,000 bounce-back loan|
|Total Cash Position||£48,000|
|Lost Income||Better Off – £66,000|
This example shows easy it is for agents to be lulled into a false sense of security but unfortunately the hard bit is about to start.
After two months of saving money, it is now essential that you start bringing staff back from furlough and get them back to the job of selling and letting houses. The first person to bring back should be whoever does your sales progressing. UK estate agents currently have around £1 billion of fees stuck in their sales pipeline. John Doe will have around £80,000. The skill with which this is managed over the next two or three months will determine how much of it is banked and how much of it is lost.
The next priority will be converting your instructions into sales. In an uncertain market, this too is a highly skilled job. Some vendors might be considering taking their property off the market and will need to be convinced not to. Some firms have been mounting very aggressive touting campaigns over the last eight weeks to persuade vendors to switch agents as soon as the lockdown is over. You may need to work hard to save some of these instructions. Some vendors will still be very frightened about catching the virus and you will need to reassure them that viewings can be done safely.
The buyers will need to be persuaded that now is a good time to buy and you will need to persuade the bargain hunters that prices have remained stable. These are conversations that take time and skill and you will need your best and most experienced negotiators to come back to work immediately in order to do this effectively. You may also need to spend some money on training your less experienced staff and reminding your older staff on how to succeed in a more balanced housing market. It is after all ten years since we last had one.
The most important and expensive thing, however, will be to restart your marketing campaign in order to ensure that you have new instructions to sell in six to twelve months’ time. The importance of this was demonstrated beyond question during the recovery in the housing market that occurred during 2009 to 2010. Forward thinking and well-funded firms got their foot back on the gas just as soon as they saw the first green shoots of recovery and by doing this, they were able to take a huge amount of market share from their less nimble and less well-funded competitors.
In next month’s article, I will look in detail at various ways to do this but it is not too soon to start doing some of the early work now. You could start by getting your best sales people to phone through your database of valuations that never came to the market, withdrawn instructions, past purchasers who may be ready to move again and past vendors who have stayed in the area. This sort of contact must be made by telephone rather than by email. It is also so important that it needs to be done by one of your very best people.
Your objective must be to ensure that your business doesn’t just survive the virus but prospers from it and emerges as a stronger, more profitable business than it ever was before.
Adam Walker is a management consultant and business transfer agent who has specialised in the property sector for over thirty years.
If you are thinking of selling, do give Adam J Walker and Associates a call on +44 (0) 845 226 9053 or email firstname.lastname@example.org. They are business transfer agents and management consultants who have specialised in the property sector for over thirty-five years.