Starting an estate agency

[sunshine500]

Hi,

I am wondering if anyone can give me any helpful advice on this matter.

I am an ex sales manager with 4 years experience within the financial services sector looking to invest a small sum of money in a small business, something preferably within the service sector. Reasons for this is mainly so I have more control over my working day and give me more flexibility in the hours that I work.

I have considered taking on a local estate agency franchise as a very realistic proposition as I have experience in driving sales and take an interest in property but I have no experience within the field. Does anyone working in this sector have any advice for me on whether this is a wise move, what the pitfalls are and how risky this business is as I believe the start up cost is not small and requires at least a 5 year commitment?

Also, if anyone would like to make any other suggestions of service sectors that are reasonably easy to get into with a safe return on investment. Ultimately I am looking for a full time job from starting this business but as mentioned before, am looking for more autonomy in the way I work.

Many thanks.

 

[David A]

Taking on a franchise will certainly put you on the map quicker than going it alone. However, this will be at a significant cost.

Month on month you will be paying around 10% of your turnover to the franchisor (Management Service Fees). This can have a marked effect on your ability to either grow the business, or extract a reasonable living.

For example, if you turnover £200K before paying yourself, you might well find that staffing, premises and advertising expenses mop up £160K, leaving you £40K. As a franchisee this will then reduce by a further £20K due to the MSF.

I suggest that if you are considering this as a business, a good first step will be to get a job within with an existing estate agency - preferably with one that is a branch of a multiple. By doing this you will see how the business works, how targets are set, where and how they gain new instructions.

From personal experience I would say you need to exercise extreme caution before committing yourself to a franchise, as it is ten times harder to exit one than joining one.

 

[sunshine500]

Hi David A,

Thank you for making some sensible points to me regarding the costs. I am literally just exploring the idea of this and haven't looked further into figures so this will certainly be the next step.

The franchise owner is a local chap who says that he is not charging a premium for the business but his aim is to expand and grow his brand so he is happy for someone to use his brand and expertise to start up and will place me in a busy branch to learn the business before signing anything. I do remember him saying that there was a fee but again I will need to clarify this.

I do believe that this is a genuine opportunity and something that sounds about right for my skill sets and ability but my bigger concern is the future of estate agency. Is there any value left in the traditional branch based estate agency as most things seem to be moving online these days and if websites like Rightmove were to start letting private homeowners put their own adverts online, there would no longer be the need for estate agents?... And I've noticed more and more independent agents starting up so I can see that its getting more competitive.

Any other thoughts on this?

Many thanks

 

[c4l]

I wish i could help - but i've little knowledge of it. Even thought of it myself but know too little.

What i do know is that a lot seem to have started local to me - guessing they've experience working for others - maybe not - but i know of a guy who's friends with one of the new start EA's (sub 3 yrs old, now 7 shops!) and he also makes a good living using a sub-company to buy bargain property before it even goes to market and shift it on quickly having refurb'ed it.

Best of luck!

 

[Online Business Video]

EA is not, easy or inexpensive to start. You need to have deep pockets for maybe up to 6 months before you get a penny coming in. You'll have the usual set up costs for offices etc, but you need staff too from day 1 (can't leave the office empty when you're out and about). There's also RM (at least) to consider which I believe is around a grand a month.

Best advice is, you need to know about the business before starting out on your own. Get a job in the industry, learn as much as you can and maybe in a year or so, consider branching out on your own. Not being horrible or critical of your plan, but no matter how good you were in a previous life, if you go into EA with no experience at all, the established players in your market will eat you for breakfast!

Hope that helps.

oh forgot to add - agent for 15 years.

 

[LettingExpert?]

Hey Guys,
I hope you dont mind me getting in on the topic here.

I have seen the demand grow for professionals seeing opening a letting agency as a real option to a career. Based on this and my experience in the industry I have just started to put a blog post together on how I see it.
Its located in my signature

My argument is that with the right research and understanding of the industry there is a career and a business in the letting industry to be made. It is an industry seeing huge growth. I do not think a huge out lay is needed at the start either. I would welcome any feedback on the blog as I have really just started last week.

Happy to answer any questions also.

 

[KeithP]

I used to own an Estate Agency which I sold-up 8 years ago. Now obviously the success or failure of any business depends on the size of your market and your competition so it's difficult to judge if your opportunity is a good one without knowing how large the town/city is that the franchise is based and how many competing Agents there are.

Not withstanding the above, I've listed the primary reasons why I decided to get out of the Estate Agency business. Whilst I'm sure you've already looked at the potential benefits of running an Estate Agency, I can't stress enough that there are some very real problems within the industry that you need to consider. I've tried to list them in order of importance.

1. Cashflow - by far the biggest issue I had was the inability to generate instant cash for the business. It doesn't matter how good your marketing is or how many properties you have for sale, it takes an average of 4 months from taking an instruction to seeing any money from that Client. There is simply no way that you can suddenly improve short-term income.

In my current business, if I need to boost sales then I can run any number of promotions; I can spend more money on marketing and get instant results that put money in my bank account within a few days. That can't be done in Estate Agency. You could buy 6 full pages of advertising in your local paper but it will be months before you see any return on that marketing investment. The first year alone will be damn hard work trying to manage your cashflow and many Estate Agents don't make it unless they've got a large amount of money behind them.

2. Third Parties - you put a house on the market, spend money on marketing, find a buyer, agree a price and then start the sale process. Unfortunately there will be many other parties that get involved in that process and you have no control over any of them and therefore precious littile control over your income.

No matter how good your sales progression process is, you can lose a sale through no fault of your own. You are reliant on Surveyors, Conveyancers, Mortgage Providers and other Estate Agents to do their job efficiently and if they don't it can cost you a sale.

As an example, if you get a newly qualified Surveyor conduct a Homebuyers report on a property you're selling, they can blow that sale out of the water through the use of ambiguous phrasing of minor issues that suddenly appear major to the buyer. The Surveyor is paid regardless if the sale completes so they don't care if your sale falls-through because they made an 'off the cuff' remark about subsidence in their report.

3. Hours - Estate Agency is not a 9-5 job. Most of your competitors will be open in the evenings and weekends so you'll need to do the same to compete. You'll also find that many people want a valuation in the evening or weekend as that's the time they happen to be off work themselves. My average working week was rarely less than 60 hours. Valuations are the lifeblood of your business as without stock, you've nothing to sell so you can't simply send out a part-time Negotiator to conduct valuations - you either do them yourself or you'll be paying an experienced Manager or Senior Neg to do them and that won't be cheap.

There are a number of other reasons why I decided to sell-up but the reasons above were the primary ones and I would strongly suggest you give these issues considerable thought before you commit to this business.

Hope that helps.

 

[tony84]

I personally think high street estate agents will be around for a long time to come.
Online estate agents leave a lot to be desired - service is shocking (high street estate agents can be bad but online ones tend to take it to a whole new level).

With such a large financial outlay, do you really want to trust it to someone at the other end of the country or with a PO box as a contact address? I certainly wouldnt.

Just my thoughts anyway.