Thinking of selling your lettings business? Kate Ashley Ives, Franchise Director at LSL Estate Agency Franchising, explains what to expect from the process – and shares her top tips for making the sale a success.
Selling a lettings business can be a complex and emotionally charged process, particularly for owners who have built their agencies from the ground up.
From understanding the true market value of the business to preparing robust financial records and navigating due diligence, there are several factors that can influence the outcome. According to Ives, careful preparation and realistic expectations are key to achieving the best possible result.
“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,” said Ines. “Before diving into the process, there’s a number of steps to take and considerations to make to ensure your business is in the strongest position possible.”
What will be required of sellers to get a sale over the line? Ines offers the following advice:
Go at the pace that is right for you.
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 with ensuring the managed properties’ locations match one of our franchise partner’s 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 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’re really wanting to increase the value of a lettings business, there’s a few elements that standout. 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.
