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“At this moment rental and property management income is valued highly as
it qualifies as residual income (continuous annually,) as opposed to transactional
[one off ] income. So, expect to pay a multiple of 1.75-2 x annual lettings and property management income and only 0.5-0.75 times annual sales turnover income (averaged over 3-5 years),” Nicholls says.
A buying company will always pay more when they make a strategic purchase as opposed to a portfolio purchase. The best deals are always when it makes sense, when the acquisition represents forward progress for both buyer and seller, he adds.
Marc Daniels at business transfer agents Addisons says, “There are millions of different factors – eg do you have the money? You must have the funds in place. We insist on written proof,” he says.
Staffing issues are a really
big consideration. For example, one business had a £100,000 retirement liability. It may be that the wage bill needs to be reduced.
Marc Daniels Addisons
One of the most important elements is the terms of payment – how much to put down initially? But also, it’s important to know whether the business is profitable, how long the lease is, and is it a match with the existing business, he says.
“Staffing issues are a really big consideration. For example, one business had a £100,000 retirement liability. It may be that the wage bill needs to be reduced,” Daniels explains. “Sometimes it takes a couple of years to turn a business around, and that needs to be factored in.”
Growing the customer base
Tracy Bradley of business transfer agency Haversley believes expansion helps with reaching new customers and brings with it the ability to access new talent pools; with diverse backgrounds and new perspectives. “To create a business expansion strategy,” she says, “it’s vital to set goals, and plan how to get there. The costs and risks involved
in expanding need to be understood.”
“A trusted team is a crucial element, and
they need to be included in drawing up plans,” she adds. “Put reporting systems in
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A smart business acquisition can create economies of scale and help expose you to a new audience. It is also likely to improve your profitability more quickly than self-expansion. Tracy Bradley MD, Haversley
place – decide how and when you will measure progress before you start the expansion.”
Then, before taking the plunge, there are some difficult questions to be asked. Is there a consistent, sustainable increase in profits and good cash flow? Has demand increased and is it possible to capitalise on this?
“I believe that a smart business acquisition can create economies of scale and help expose you to a new audience. It is also likely to improve your profitability more quickly than self-expansion,” says Bradley.
Franchising – building on success
Adopting a franchise can achieve the same aims, but through an entirely different approach, without the need for brand- building and with expert growth management
CASE STUDY – WINKWORTH
Jamie Moore and Kylee Cates, Eaton, East Anglia
Winkworth has continued its expansion plans in the East of England with the opening of a new office in Eaton in the suburbs of Norwich – the fourth Winkworth office in East Anglia in four years for franchisee Jamie Moore. It will be co-owned by Jamie Moore and his business partner Kylee Cates. The launch
support on hand.
Nick Neill, Managing Director at Ewemove,
says, “The big consideration for us is to see that our prospects are truly ambitious and believe in what we do at EweMove. Giving the right people the tools to maximise the scalability of the business is the best way for us as a network to grow and develop.”
“Acquisitions at branch level are something we promote and encourage. Many of our agents have successfully acquired competitor agents or their portfolios,” he says.
But there are different and ongoing costs associated with franchising than the upfront and possibly one-off capital requirement of a takeover. Tim Stephens, director of Humberts, says costs vary depending on size of office, location etc., but a budget of circa £75 per sq ft for a standard level refurbishment (lighting,
Franchisees have opened with budgets of circa £15-£20k. One recently-opened office brought in just under £5m of sales in their first half year and this increased to £8m the following year.
Tim Stephens Humberts
of Eaton follows the opening of the Hellesdon office last year, Poringland, five miles south of Norwich, in 2018 and Southwold on the Suffolk coast in 2019.
Winkworth Eaton will cover the majority of Norwich, including Newmarket Road, the most sought-after road in Norwich, the renowned Golden Triangle, and the highly desirable locations of Cringleford and Eaton.
Jamie and Kylee have taken over
a former hairdressers shop to start the new business. Kylee said, “Eaton and the surrounding suburbs are extremely sought after, and are growing at a fast pace.”
Jamie adds, “Eaton is the perfect fit for our other two offices in Norwich, and a big boost for the Winkworth brand in the city.” Winkworth CEO Dominic Agace says: “Jamie Moore and Kylee are shining examples of how ambitious franchisees can build a highly successful business
and see future expansion in an area they know exceptionally well.”
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