Deciding whether to sell your business can be a monumental decision. Years of hard work and even harder decisions have led to this moment, and it can be tricky to know where your next move is and what lies ahead. Before diving into the process, there are a number of steps to take and considerations to make to ensure your business is in the strongest position possible.
Kate Ashley Ives, Franchise Director at LSL Estate Agency Franchising, offers advice on how to ensure your business is sale-ready. When it comes to valuing a lettings business, we’re keen to brief business owners up-front on what to expect during the sales process, as well as specifically what will be required of them to get a sale over the line
Go at the pace that is right for you
At LSL Estate Agency Franchising, we recognise that prospective sellers may never have bought or sold a business previously and will have invested years into building their business. We also understand it can be a sensitive subject; some sales happen when the time is right, and others when there may be external factors pushing things along. That’s why our approach is to be as involved and hands-on as required.
It is important to go at the seller’s pace and make sure they are only introduced to an interested franchise partner when they are ready. When the seller is ready, we will introduce them to one of our interested franchise partners.
Make sure your landlord data is organised and compliant.
Sellers need to understand that considerable levels of due diligence will be necessary, so think ahead about some of the information you will need to provide.
From a franchise group perspective, when acquiring, there are a few specific aspects we look for when considering an acquisition. We begin by ensuring the managed properties’ locations match one of our franchise partners’ territories, or alternatively, an area we’re interested in expanding into. If selling is something you are considering, you’ll need to ensure you can produce a report with your property portfolio locations.
There’s also quite a lot of due diligence requirements to consider, so ensuring the business is organised and meeting compliance requirements. Common weak areas we observe within due diligence include a lack of T&Cs for landlords and missing Right to Rent information on tenants. Identifying these areas doesn’t necessarily lead to a broken deal; however, having this in place can speed up the process.
Most deals can be kept together as once weaknesses are identified, by discussing the concerns and enabling corrections before completion. Each acquisition is individual, and we work alongside the seller and our franchise partner to support the deal through to completion.
Ensure the essentials are in order before coming to the market
This can be as simple as knowing your key business figures and costs and knowing how the business operates effectively day-to-day. Deals rarely fall apart, especially if expectations and timelines are managed well.
Any that do fall through are largely due to the inability to make corrections or to provide key details, so ensure you have everything to hand. If the key selling contact doesn’t work in the business day-to-day, ensure there’s a colleague who can assist to keep things moving. Much like a house sale, providing the right documentation and having everything as organised as possible will be crucial.
Make sure rents are at the market level
Finally, if you really want to increase the value of a lettings business, there are a few elements that stand out. Ensuring rents are suitable and at market level is especially important now, amidst the Renter’s Rights Bill proceedings. Lettings businesses that have more fully managed properties than let-only are particularly attractive, along with a decent level of managed fees, due to the higher financial reliability this brings to the business.
Understand the value of your business
When assessing the value of a business, several factors should be taken into account:
Income Streams
Managed Income: Recurring revenue from property management services.
Additional Lettings Income: Additional income generated from associated services.
Operational Structure
Does the business come with an established team and premises?
Are the current owners integral to daily operations, or is the business structured to run independently?
Exit Strategy
Are the sellers looking for a full exit, or is there potential for a transitional period to support continuity?
Financial Transparency
Providing recent business accounts helps validate income and profitability, offering reassurance and clarity to potential buyers.
