The three numbers that set the price of your agency

Every owner I speak to tells me their turnover. Buyers do not care about your turnover. They care about three numbers, and most owners cannot tell me what they are.

1. Recurring income

How much of your income comes in every month whether you do anything or not? For most agencies that means management fees. A sales business with no lettings is worth very little to a buyer, because next year’s income depends on next year’s work. A managed book of three hundred properties is worth a great deal, because the fees arrive in January whether the phone rings or not.

Work out what percentage of your income is recurring. If it is under half, that is the first thing to fix.

2. Profit after paying yourself a real salary

Lots of owners show a healthy profit because they pay themselves nothing and work eighty hours a week. A buyer will put a proper salary in for whoever replaces you, and then look at what is left. Often that number is a shock. Do the sum before a buyer does it for you.

3. The owner dependency number

This one is harder to measure, so most people do not. How much of the business would walk out of the door if you did? Which landlords deal only with you? Which instructions come in because of your name? Which decisions can nobody else make?

The lower that number, the higher your price. Every landlord who has a relationship with your manager rather than with you adds to what the business is worth. Every process that is written down rather than remembered does the same.

Putting it together

A buyer will take your recurring income, check it against your real profit, and discount it for how much depends on you. That is the price. Not the awards, not the shop front, not the turnover.

If you want to see where you stand on all three, take the Owners’ Score. It is free and it takes three minutes. And if the answer is not what you hoped, that is the point. You have time to fix it. I did.