Is your Real Estate Business Recession Proof?
Many Economists are now predicting a recession as a result of the Coronavirus with a number of several Economists believing that the chance of a recession is now well over 50%.
What will a recession mean for Real Estate Business owners?
A recession could result in significantly reduced Income levels.
In preparation for the possibility of turbulent economic times, good businesses are restructuring now to provide the flexibility and ability to keep costs “Variable” and be able to match costs to revenue as it goes up and down.
Our view is that a well-structured Real Estate business can be profitable in any market conditions, including Recessionary times.
In fact, a recession can be the perfect time to grow market share, attract better agents to join you and increase the underlying value of your business if you are positioned to react quickly and positively to the likely change in market conditions.
The key to achieving and maintaining profitability in down markets is reducing costs in line with declining turnover. How does a business effectively match costs to revenue?
Put simply business owners can de-risk the business and guarantee profitability in any market conditions by ensuring as many costs as possible are structured on a variable basis as opposed to being on a fixed basis.
How do you keep costs variable as opposed to fixed?
Two excellent options for Real Estate Business owners is outsourcing and using contracts for administration services that are linked to a volume of transactions as opposed to Fixed employment contracts.
One of the biggest problems facing the industry is the lack of efficiency in administration with a large percentage of business owners breaching the benchmark administration cost of 6% of Turnover.
If you are spending more than 6% on administration, you are throwing away money and potentially placing the business in danger, particularly in recessionary times.
Keeping administration costs to 6% requires a combination of key ingredients such as use of technology, upgrading systems to use best practice and use of variable costs as opposed to fixed costs as often as possible.
If your administration costs are greater than 6% of your turnover, we recommend you undertake a Systems review now to identify how to make your business more profitable with stronger cashflow and Recession proof as possible.
Now is an ideal time to consider outsourcing administration options as a way of reducing administration costs.
Outsourcing for Real Estate companies is a great alternative as the process of selling a property from listing to processing the completed contract is a consistent routine task easily systemised.
If you would like to know more about becoming Recession proof click on the attached link and one of our real estate experts will contact, you.