Too much focus on income, not profit

Too much focus on income, not profit

08 February 2013 by Staff Reporter 1 comments

Simon Parker and Steven Cross

Principals aren’t focusing enough on their profits or controlling overheads, according to the head of one real estate group.

Paul Davies, managing director of One Agency, a national licence-based network, told Real Estate Business that principals are giving too much attention to income.

“I think a lot of the industry gets this wrong, they don’t focus enough on the profit factor, they’re focused mainly on generating income," he said. “But most of that income is dissipated into running the business, which means little profit and in some cases, no profit.”

Mr Davies said overheads must be carefully monitored and controlled if an agency is to be successful.

One Agency’s 50 offices work on a flat-fee basis, and are encouraged to keep all costs to an absolute minimum.

“For survivability and sustainability, agents need to look at their bottom line and see how they can run their business more efficiently and economically," he continued.

“Agents have got to look at their bottom line. I was an agent for 30 years, so I’m not stabbing in the dark."

And one of the biggest costs a principal faces relates to running a shopfront, he said.

“We don’t even suggest all our franchisees have a shopfront, in many cases it’s an unnecessary cost. We suggest that our principals try operating with no shopfront, and then open one if things don’t work out.

“If you open one and then close it, your competition will eat you for breakfast.”

However, Mr Davies admits that some areas require a physical office.

“I’ll admit, it makes sense to have a shopfront in some rural areas, or areas with an older demographic. But we just suggest agents give it a try [not having one].”

Simon Parker and Steven Cross

Principals aren’t focusing enough on their profits or controlling overheads, according to the head of one real estate group.

Paul Davies, managing director of One Agency, a national licence-based network, told Real Estate Business that principals are giving too much attention to income.

“I think a lot of the industry gets this wrong, they don’t focus enough on the profit factor, they’re focused mainly on generating income," he said. “But most of that income is dissipated into running the business, which means little profit and in some cases, no profit.”

Mr Davies said overheads must be carefully monitored and controlled if an agency is to be successful.

One Agency’s 50 offices work on a flat-fee basis, and are encouraged to keep all costs to an absolute minimum.

“For survivability and sustainability, agents need to look at their bottom line and see how they can run their business more efficiently and economically," he continued.

“Agents have got to look at their bottom line. I was an agent for 30 years, so I’m not stabbing in the dark."

And one of the biggest costs a principal faces relates to running a shopfront, he said.

“We don’t even suggest all our franchisees have a shopfront, in many cases it’s an unnecessary cost. We suggest that our principals try operating with no shopfront, and then open one if things don’t work out.

“If you open one and then close it, your competition will eat you for breakfast.”

However, Mr Davies admits that some areas require a physical office.

“I’ll admit, it makes sense to have a shopfront in some rural areas, or areas with an older demographic. But we just suggest agents give it a try [not having one].”

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