Experts reveal how to plan today for tomorrow’s downturn

Experts reveal how to plan today for tomorrow’s downturn

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Agents in the slumping Perth and Darwin markets are acting as guinea pigs for their Sydney and Melbourne counterparts, who must one day face similar conditions.

Boomtown agencies that want to survive the next downturn have been advised to look after their buyers, gather market intelligence and create flexible business structures.

Agencies that neglect buyers during a boom may suffer the consequences when a slump arrives, according to Byron Wallace, director of Perth agency Peard Real Estate Hillarys, which placed 16th in this year’s Top 50 Sales Offices ranking.

Mr Wallace told REB that boomtown agencies should build up a healthy database of buyers now because buyers will become harder to find once a downturn arrives.

Plans should also be put in place to manage a possible drop in revenue, according to Mr Wallace.

“The months aren’t as big as they used to be, the reps aren’t writing the business that they did, so there’s some forward planning and contingencies that need to be made,” he said.

Boomtown agencies should also pay close attention to market indicators so they spot a downturn ahead of their competitors, according to Glenn Grantham, general manager of Raine & Horne Darwin, which placed 22nd in the Top 50 Sales Offices ranking.

“Some of our success in relation to our competitors is because we identified very quickly that there was a diminished supply of buyers,” he said.

“So it was a case of relaying that information to vendors, backing it up with stats and getting them to understand market trends so they would work with you to get in front of the market with a price that would make their property saleable.”

Mr Grantham told REB that the best intelligence is real-time information provided by agents rather than reports from property data companies that are dated by the time they’re published.

“The lead indicator to be able to see what’s occurring in regard to demand is the foot traffic through the front door,” he said.

“If your competition goes through the roof then prices go through the floor.”

Sarah Cobb, a small business consultant from Cariblue Consulting & Franchising, said agencies should create flexible business structures that allow them to decrease spending in the event of a downturn.

“If our profitability dropped by 20 per cent, what would happen to our costs, what would that do to our cash flow and how quickly would we have to react?” she said.

“If our lead indicator dropped by 30 per cent, how long have we got to scale down the size of our business to be able to survive?”

Ms Cobb told REB that agencies that have cash in the bank when a downturn arrives will be able to snap up rivals at bargain prices.

“Good businesses trade in good times and bad. The downturns sort out the sheep from the goats. Bad times will take out the competition and clear out the marketplace,” she said.

[Related: How to survive the next downturn]

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