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They're Not Closing !

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In the small town of biggleswade we have at least 10 EAs, despite the credit crunch they're all still open for business, I must say the folk in their look pretty glum though thats the norm.

How bad do things have to be for them to close ?

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As any normal business would do, you dont just close because times are getting tough or you've had a bad few months.

I would guess that to run an EA, you dont need much in the way of working capital so you costs are quite low anyway.

With the amount of money they've probably made over the last few years, I'd say they could go with out for a while...??

Maybe this time next year will be different

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I'll bet that costs are quite a lot.

When you consider that most EAs are on the high street usually in good locations rents and rates wont be that low.

You'll have to find money to cover maybe 6 or so employees plus cars for some of them.

Electricity doesnt come cheap.

Even toner for the colour lasers arent cheap for all the glossy brochures.

Reeds Rains, Hunters and loads of others are franchises all need to pay the franchise fee each and every month.

Paying the company that puts up the for sale boards.

Figure in costs for Rightmove.com or vebra and the website maintenance for the agency and costs could become immense.

Does an EA have a rough breakdown of costs, and what could be done to bring these costs down?

Is it possible to run an agency entirely using the Internet? - so not incurring all the costs associated with a high street.

Is it also possible for an internet agency to be run as a one man band?

Edited by Yorkshire Lad

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Some may have enough money in the pot to keep going for a few months but the problems start coming as they lose the commision driven staff, No sales, No Comms, No Staff, No Buisness..... No point ;)

This will be a very different UK this time next year.

Bosh

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I'll bet that costs are quite a lot.

When you consider that most EAs are on the high street usually in good locations rents and rates wont be that low.

You'll have to find money to cover maybe 6 or so employees plus cars for some of them.

Electricity doesnt come cheap.

Even toner for the colour lasers arent cheap for all the glossy brochures.

Reeds Rains, Hunters and loads of others are franchises all need to pay the franchise fee each and every month.

Paying the company that puts up the for sale boards.

Figure in costs for Rightmove.com or vebra and the website maintenance for the agency and costs could become immense.

Does an EA have a rough breakdown of costs, and what could be done to bring these costs down?

Is it possible to run an agency entirely using the Internet? - so not incurring all the costs associated with a high street.

Is it also possible for an internet agency to be run as a one man band?

Yes that is true, but the Original post was refering to a small town and as such the rents are probably low.

Electricity in the scheme of things will cost, no more than £200 a month- big deal

Who says a company puts the boards up? Maybe they do it themselves

Advertising on websites, will equate to next to nothing, plus it is the owner who would pay for this directly.

You could say that rightmove is an agency run entirely on the internet??

Give it 6-12 months and you'll see some closures I'd say.

You also need to consider that, even if prices drop, EA will still get a cut, just not as much

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Yes that is true, but the Original post was refering to a small town and as such the rents are probably low.

Electricity in the scheme of things will cost, no more than £200 a month- big deal

Who says a company puts the boards up? Maybe they do it themselves

Advertising on websites, will equate to next to nothing, plus it is the owner who would pay for this directly.

You could say that rightmove is an agency run entirely on the internet??

Give it 6-12 months and you'll see some closures I'd say.

You also need to consider that, even if prices drop, EA will still get a cut, just not as much

Dont forget a 25% fall in turnover does not equal a 25% fall in profits. I know for many it will be obvious but consider

Pre crash

Turnover £500k expenses £400k = £100k profit

Post Crash

Turnover £375k expenses £400k = loss of £25k

So unless overheads fall by the same amount a turnover it will have a very real effect on the bottom line

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Some may have enough money in the pot to keep going for a few months but the problems start coming as they lose the commision driven staff, No sales, No Comms, No Staff, No Buisness..... No point ;)

This will be a very different UK this time next year.

Bosh

Unless my memory is failing, I recall seeing in the papers during the last big downturn that one third of EA's in the UK had gone out of business.

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Biggleswade, allegedly a busy street. Shop window ideal for pinning up house details. £14,500/year.

http://www.rightmove.co.uk/viewdetails-209...1&tr_t=rent

So rounding it down, £1200/month for rent

Each member of staff, minimum wage without commission is £11,500, throw in NI and that's another £1000/year per person. So £1000/month per basic employee.

So just a shop, with 3 cheap people stood in it with the lights out is over £4k/month.

Call it a minimum of £5k/month .... but more likely £10k/month as there'd be the Manager and all the other costs mentioned in other postings above.

Edited by ScaredEitherWay

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Unless my memory is failing, I recall seeing in the papers during the last big downturn that one third of EA's in the UK had gone out of business.

I recall Prudential Property Services spending £25m on computers for their branches in the early 90's, then folding soon afterwards. Out of the ashes came...... Halifax Property Services - eventually.

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Unless my memory is failing, I recall seeing in the papers during the last big downturn that one third of EA's in the UK had gone out of business.

The difference last time was that a lot of banks, building societies, and insurance companies built up estate agency businesses during the boom of the mid-late 1980's. They did this by buying up local independent firms for astronomical sums - I knew a guy who was set up for life by selling out to the Nationwide.

Of course, come the crash of 1989, the business model went tits up! The big chains either went bust or were flogged off piecemeal for peanuts - in many cases back to the original owners!

This time there seem to be fewer big chains and more local independants - at least in my area. I'm seeing a lot of branch closures among agencies that have expanded from one branch to several over the last few years. Unfortunately a lot of these will be stuck with leases that have been personally guaranteed by the partners when times were good and 'nothing could go wrong'. Add into the mix the loans inevitably taken out to expand a small agency and things start to look bad.

They are still in denial however.

I bumped into a local agent I know the other day and he said things were absolutely dire. His view seemed to be though, that things would 'bottom out' later this year. When I reminded him that in the last crash this took 4 or 5 years he blanched visibly.

Such good sport....!

:lol:

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Is it possible to run an agency entirely using the Internet? - so not incurring all the costs associated with a high street.

Is it also possible for an internet agency to be run as a one man band?

Possible yes, but in my opinion very unlikely to succeed.

You could run it as a one man bad but success on the internet is based very much on advertising yourself heavily at the start to build up the brand. How many really successful/profitable websites can you name? Amazon for example only started to turn a profit about 3 years ago, basically because for years it pumped huge sums into advertising and image building.

Take Rightmove for example, a relatively successful site but backed by big business with it's fingers in other pies and with the ability to take a hit on profits in the short term to build a dominant position in the future.

The group's four main owners - the mortgage bank HBOS, the life insurer Royal & Sun Alliance and the estate agents Connells and Countrywide

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In my town no EA has closed yet, but word is that one big agency is on the rocks and is starting to try some underhanded tactics that is p***ing off the other agents. so, give it time...just like house prices, businesses do not just suddenly shut up shop...they have leases on premises etc., so will do their best to stay open until it is clear that the costs of being open are greater than the costs having an empty building. The local free property paper has shrunk from Sunday Times to local daily rag in no time.

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A lot of agents do lettings as well as sales, so will continue to make money from that. Sales-only estate agents will have it worse.

Office rents can be pretty cheap. In small towns, long-established local agents sometimes own their own premises, renting out the flats that are usually upstairs.

The problem is going to be keeping staff, really. No sales = no commission.

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I recall Prudential Property Services spending £25m on computers for their branches in the early 90's, then folding soon afterwards. Out of the ashes came...... Halifax Property Services - eventually.

During the boom Prudential went on spending spree buying up lots of smaller EA's, my dad knew an EA that sold his at top price and retired at the time.

Pudential as you say closed down in the bust - probably in order to expand so quicky had taken on lots of debt, I think it's the debt that finished them as IR climbed.

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I also know a fella who made a mint from selling out in the last boom.

Some big insurance company paid millions for his small chain of offices- with super canny timing the buyers took on the offices just as the slump hit- the original owner ended up buying the whole lot back for a song three years later- using the Insurance companies own money lol.

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  • 399 Brexit, House prices and Summer 2020

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      • down 5% +
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