Limeswood Real Estate Brokers — SME Case Study (UAE)

Limeswood Real Estate Brokers is a Dubai based company, and its office is based in Business Bay, Dubai (Limeswood, 2021). The business was established by entrepreneur Muhammad Ali in 2016 and provides real estate brokerage in selling and leasing. The business functions mainly include assisting the buyers and tenants to get the properties in Dubai and also for sellers and owners of the properties to sell or lease their properties. Furthermore, it also manages the properties Limeswood Real Estate Brokers Figure 9: Limeswood Real Estate Brokers’ Logo of owners who are not able to manage themselves.

When the business was established, the only workers in the company were the founder and an assistant, who was responsible for administration work, including placing online advertisements and handling the queries of customers. Over the last four years, the business has been able to grow and currently the business has 29 sales and leasing agents with 3 managers, 1 accountant, and administration staff. The reported monthly sales as per the last quarter of 2021 was AED 2.4 million and the business is currently in a position to hire more sales and leasing agents.

Limeswood Real Estate works with several developers in Dubai, such as Dubai Properties, Emaar, Al-Wasl, Azizi, and many others. The company is in contract with the developers and they charge commission from the developers if it leases or sells their properties.

Furthermore, the business also works for individual owners, and their properties are advertised and sold to potential buyers and also lease their properties to tenants. In this case, the business charges 2% of the total property value from the buyers and 5% of the annual contract value from tenants as commission.

The commission structure of developers varies from developer to developer. Commission from these services is the main source of revenue for the business.

Vision Statement The company’s vision is “to become the market leaders in the real estate and development industry.”

The company’s mission is to become the leading selling agents for all major developers in Dubai and also to provide the best quality services in Dubai.It wants to provide value added services to clients and give the best services to clients in order to become the market leaders in the real estate and development industry.

Organization Structure Managing Director Sales Manager Office Manger

Marketing adminstrator Sales Manager Sales Manager Leasing Manger Figure 10: Limeswood’s Organizational Structure The organization structure is wider than long, and reflects that hierarchy is more spread along the managers in the business. There are three managers in the business, and each has their own responsibilities. The sales manager manages the agents who work in sales and they promote the sales of properties. The leasing manager is responsible for the leasing department in which all agents work for the lease of properties and their revenue generation is from commission, which they get from leasing properties.

The office manager controls the support staff, which includes the administrator, who is responsible for all the filings of documents and coordinating between employees. The marketing individual is responsible for posting and controlling advertisements of the properties on the online portals such as Dubizle and Bayut. The office manager is also responsible for getting the latest deals in the market and staying connected with different developers to get the latest updates on their projects, which are then passed on to the sales and leasing departments, so there is also coordination between the three departments. Furthermore, the managing director revealed that when owners who are in touch with the sales department want to lease their other properties, they pass on the information to the leasing department and the same process takes place when the owner who leases properties wants to sell the property.

The administrator is also responsible for maintaining records of the properties the company manages on behalf of the owners and also coordinating with the repair and maintenance team for property repairs. She also manages renewal of tenancy contracts. However, the business has very limited properties to manage currently and the managing director stated that it will make another department which will only be responsible to manage the properties once the property portfolio is increased.

Effects of the Pandemic During the pandemic, the office was closed for two months and the administration team was working from home to update the advertisements. However, for the 15 days of complete lockdown, there was no sales team working in the field and therefore, the operations were completely shut down. The pandemic, however, did not change the structure of the team and it followed the same structure after the operations began again.

Services Property Management Selling brokerage Rental broerage Figure 11: Services Offered by Limeswood Real Estate Brokers The business works in the service industry and provides brokerage services to its clients. The main revenue comes from commission from the sale of properties and also the commission from leasing the properties. The brokerage services include arranging visits of clients to the properties and giving them all the necessary information of the properties. If a client likes a property, the sales agent gets the necessary documents from them and gets the approval from the owner or developer for leasing or selling with the client’s offer. Once the approval is made by the owner/developer, the documents are arranged by the salesman with support of the office team. For the leasing of property, the tenancy contract is signed by both parties which is then attested by the Dubai Land Department, whereas for sale of property, both parties have to personally visit the Dubai Land Department, where all paperwork is done and the property is transferred to the new owner. The office gets the commission once the transfer is completed or once the tenancy contract is signed by the both parties. The business pays 50% commission to the sales and leasing agents and 5% of the total commission to the manager.

However, if sales agents reach certain targets, their commission percentage is increased.

The business strategies of Limeswood include to beat the competitors by providing high quality services and increasing the market share to grow its revenue. The strategy also includes diversifying the business and providing additional services to clients, such as property management services.

The business has strategy of standing out in the competition by providing quality services and spending more on marketing The increase in market share has been targeted the business to grow its revenue.

Limeswood has diversified by moving to management services of properties and also by covering almost all areas of Dubai Competition Increase of market share Diversity Figure 12: The Business Strategy of Limeswood Real Estate Brokers Operation Strategies Operational strategies are aligned with the business strategies and include improving the quality of services and increasing the capacity by hiring more agents, in order to serve more customers and cover more geographical areas of Dubai. It also includes offering discounts to customers so customer loyalty can be increased, which will help to achieve the long-term goal of being the leader of the industry.

Operation Strategies Improving the quality of services Increase of capacity by hiring more agents Offering discounts to customers to gain customer loyalty Figure 13: Operation Strategy of Limeswood Real Estate Brokers Challenges Limeswood Real Estate Brokers has faced many challenges since its establishment and also expects to face more challenges in future. The biggest challenge it faced since its formation is the pandemic, like most businesses around the world. During the lockdown, the business did not generate any income as there were no operations in the business. Also, the pending payments were delayed further as many people in Dubai had a financial crisis. For example, the payments due from one of the developers were delayed for three months, as they did not have sufficient cash to pay to the real estate companies because they waived off the rent for their tenants. This resulted in a financial crisis for the business, with no new income and also cash flow problems. The other challenges faced by the business include the hiring process of sales agents. Hiring the workers for other skills is not as risky as hiring agents, as the productivity can be achieved by the workers in other fields. But a salesman is of no value to the real estate company if they do not produce any income.

There had been many agents in the company who were hired, given the relevant training. Real estate license costs were also spent on them, but they produced no results for the business and in the end, the business had to dismiss some employees, with no value added to the business by those salesmen. One more challenge faced by the business is the intense competition in the Dubai market as there are hundreds of registered brokerage businesses in Dubai and therefore, the business has to be very efficient in producing sales, which is the reason its marketing costs are very high.

Limeswood has also struggled to maintain its finances effectively, which was reflected by the crisis it faced in the first week of lockdown. The business has generated more than six million in revenue in 2019, but in the second quarter of the year, it failed to meet its expenses after one week of running out of operations.

The finances are mainly affected by increased time taken by the developers to pay the commissions, which increased the cycle of working capital. Also the sales agents who work for developers demand their salaries once the sales or rental deal has been closed, but the company receives the payment after several months from the developers.

Limeswood Real Estate Brokers also expects challenges in the future, considering the current market environment. The major challenge to the company is the lack of confidence in buyers in the Dubai real estate market. The property value has declined significantly in the last five years in Dubai and this has resulted in investors losing investment value. Furthermore, the investors who purchased the properties for investments are facing lower income from rentals as the rental amount has declined over time (Bridge, 2020). It is becoming hard to convince investors to get properties in Dubai as the recent downfall in the market has caused some losses. Another challenge for the business is the changings in laws from the regulatory authorities in which the Dubai Land Department changes the laws related to real estate brokerage and stated that all agents working should be licensed through the department and also all properties listed for advertisements should have pre-approval from them, after getting signatures and documents from the owner. This will result in more paperwork for the business and less properties being advertised as for every property, documents will be required from the property owner.

Limeswood overcame the challenges of the financial crisis by reducing the costs when the business was affected due to lockdown. It made fewer advertisements on the marketing portals and also delayed payments to the marketing portals after negotiating with them.

However, it needs to have more measures in place to deal with the crisis in the future. The company has obtained an overdraft limit from the bank to deal with any uncertainties in the future and also the business is planning to have sufficient retained earnings in place in order to meet any unexpected demands. For the legal requirements, the business is training its sales teams on how to get documents from the owners in order to get the approval for the advertisements. Another problem which the company has been facing is the incompetence of the salesmen for which it has to bear the costs and get no results. For this problem, the business plans to have sufficient training for the new staff by making the new staff assist the senior salesmen. This way the salesmen will learn more and also they will be contributing to some extent by assisting the senior staff in closing sale deals. This would mean that every person in the business will benefit and, even if a salesman does not make any sales, he will be adding some value to the business. The business also needs to improve its finances, which can be done by negotiating with developers on the payment terms that affect cash flows of the business.

Best Practices One of the best practices the business has done in the past is penetrating the market in one of the biggest developments of Dubai. The business successfully established itself in a residential area where the demand of villas is very high and only two real estate brokerage companies including Limeswood Real Estate Brokers are allowed to perform operations in the area.

This milestone was achieved by the business through quality service provided to the customers when they were given the chance on a trial basis in the area by the developer. The developing authority owns the whole area and they have hundreds of villas which are leased to the customers, and when Limeswood entered the market, there were six authorized agents in the area but after two years of operations, the number of companies working in the area reduced to just two, as other companies were not able to produce the results, especially after the pandemic. This is the area where the business achieved the highest success since its existence.

Another good practice of the business is the training of its salesmen which are highly professional and provide the best customer service to their clients. The business has a practice of following up with the clients to get the feedback on the services provided by the salesmen. In 2020, the business asked for the ratings from clients for their services and the average rating received was 4.1 out of 5, which is very satisfactory in this industry.

Providing high quality service is extremely important in the industry, as it helps to beat the competition through referral clients by satisfied customers. The best

practices are summarized as below

¡ High quality services ¡ Quality training given to salesmen ¡ Follow-up with clients

This business, like many others, has had failures since its establishment. The biggest failure has been the hiring practices. The business had several failures in hiring the right people for the job. There have been many changes in the accountants and three accountants have left or have been fired since its establishment. Currently, the business employs 29 salesmen but in total, it has hired more than 60 salesmen in the last four years, and many of those have failed to deliver. This has resulted in losses for the business in terms of hiring and training costs, and also spending on their visas and real estate licenses.

Limeswood needs to improve its hiring process and needs a more efficient way of hiring people. The failure

practices are summarized as below

¡ Not hiring the right people ¡ High staff turnover rate

Limeswood Real Estate started with just two people and expanded over four years to 37 people. It grew consistently over the time, where in the first phase, five sales people were hired who were directly managed by the managing director and later, more people were hired for the sales team. As the workforce grew, there were two separate teams made up of sales and leasing, and managers were hired for each team. The business has also grown through financial perspectives as it grew from monthly sales of less than AED 50,000 to up to AED 1 million during months of good sales. However, it has not grown geographically as it currently has one office in Dubai, but the office size has increased since its existence. The business started with a small office space in Business Bay and now it is in one of the most prestigious buildings of the business center of Dubai, Business Bay, and the office size is more than 3,000 square feet, with four cabins for managers and desks for each of the sales and leasing agents.

The business should have backup cash to meet any uncertainties in future Limeswood should negotiate with the developers to get better payment terms in order to improve its cash cycle There should be performance analysis periodically to analyze the performance of all salesmen in order to determine which salesmen is not performing and then setting suitable strategy to improve the performance There should be an HR department or at least one HR consultant who has experience in Real Estate to hire the right people in future which can be beneficial for the business in future

RECOMMENDATIONS

Figure 14: Recommendations of Limewood Real Estate Brokers

¡ Businesses can be successful with limited resources if the idea is good and implemented with a good plan.

¡ Any business can grow if the resources are utilized properly and if the business is managed well.

¡ Businesses need the right people to perform, and not all people are suitable for the job even if they are qualified or experienced.

¡ It is very important for a business to beat its competitors in one way or the other if it is operating in a highly competitive market.

¡ A business needs to have a good cash flow even if it makes high profits. Poor cash management can affect the business significantly even if it makes good profits.

Limeswood Real Estate Brokers has been an established business in Dubai since 2016, and the business has grown over the last four years in terms of number of employees and revenue. The business has faced several difficulties, but growth has been significant and the revenue has increased to up to AED 1 million per month.

The success of the business is due to its high quality services and effective marketing strategies. However, the business has faced difficulties due to the hiring of wrong people in the business, which resulted in high costs of the business. Also, the cash management of the business has been poor for the business, which resulted in problems, especially during the lockdown period.

The challenges expected in future are mainly due to the recent decline in the real estate market, of which buyers have lost confidence in the real estate market.

Limeswood has achieved success in the past and with effective strategies in place and has expectations of effectively dealing with future challenges.