Reviewed: 4th September 2017
Advice for estate agents facing potential insolvency
Bricks and mortar estate agencies are facing serious threat of insolvency, as online competitors take their share of the market. According to accountancy firm, Moore Stephens, almost a fifth of estate agents in the UK are showing signs of financial distress.
Data held by Companies House showed that 4,928 out of 25,560 estate agents researched, displayed early signs of insolvency. The decline in popularity of high street estate agents correlates to a rise in the number of online property firms, whose business model enables buyers and sellers to manage much of the process independently.
Overtaken by online property websites
Websites including Purple Bricks, eMoov, and House Simple, have caused disruption in an industry once dominated by high street operators. The services and expertise offered by traditional firms were previously largely unthreatened, with digital competition only a distant possibility.
But the streamlined, flexible, and cost-effective packages now offered to the property-buying public have overtaken ‘conventional’ estate agency services in popularity. Smaller independent agents are at particular risk of insolvency under these circumstances, as larger high street competitors with higher marketing budgets also crowd them out of the market.
Challenges facing high street agencies
A number of specific reasons why high street agents are struggling include:
- Higher operating costs when compared with online competitors, including staff wages, rental of premises, heating and lighting
- Less scope to reduce fees as a result - being forced to operate on tighter profit margins
- High levels of investment in online estate agencies – this has considerably boosted the sector, providing the public with a viable alternative to the high street
- Bricks and mortar agencies lagging behind in technological terms, failing to evolve sufficiently over time
- Consumers becoming accustomed to the shift towards technology and changing markets
So with growth of the online property sector showing no signs of abating, what can struggling high street estate agents do to avoid insolvency?
Obtain professional help
Seeking professional help early on increases the chances of rescuing a business. Licensed insolvency practitioners have contacts with lenders that may not have been previously considered, providing access to vital funding that could stave off insolvency.
Additional finance
When speed is of the essence, the alternative finance market can meet the needs of a struggling company. Having grown considerably in recent years, a number of flexible options are now available for businesses needing quick access to cash.
Invoice finance is one such option - it offers a regular source of working capital every month, based on the value of sales invoices. Real Business Rescue has contacts with over 50 alternative lenders in the UK, and can assist with applications for funding.
HMRC Time to Pay
For estate agents owing arrears of tax or National Insurance, HMRC offers an instalment plan called Time to Pay (TTP). A Time to Pay arrangement can be suitable for businesses whose financial problems are temporary, and that need a little breathing space to regain financial control.
Company Voluntary Arrangement (CVA)
This is a formal arrangement that restructures unsecured debt over a fixed term. All creditor legal action is halted, and directors remain in control of their company once a CVA has been agreed. A single monthly payment is made and distributed to creditors included in the agreement, rather than paying each creditor individually.
Pre-pack administration
Pre-packaged administration, or ‘pre-pack,’ involves the quick sale of business assets to a third party, or sometimes the existing directors, who go on to operate a ‘new co.’ To be eligible for pre-pack administration, the underlying business must be deemed viable by a licensed insolvency practitioner.
Voluntary liquidation
Not the ideal solution for any company, but one which can help directors avoid allegations of misconduct, or wrongful trading, if they have continued to trade when their company was insolvent. Entering Creditors’ Voluntary Liquidation (CVL) means that all assets are sold to repay creditors, and the business closed down. A CVL places creditor interests to the fore, and is designed to minimise their losses in insolvency.
If you are a high street estate agent experiencing financial decline, Real Business Rescue can offer the professional assistance you need. We are industry experts, and will help you develop a plan of action to deal with this stressful situation. Our extensive office network comprises 75 offices across the UK with a partner-led service offering immediate director advice and support..
Further Reading on Articles about Business Liquidation Bankruptcy
Keith Tully
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