In my experience, most agencies have the ability to achieve higher fees if they offer a reasonable service (or better) to their owners.
As long as this factor is in place, we know they’re able to earn more from the same rent roll with the same number of properties.
These mindsets can stop this fee improvement opportunity DEAD in its tracks because if they’re believed, they become the ‘truth’ (for that person).BUT we also know it cannot be done with these common mindsets that are seen in so many rent rolls.
And it’s believing them that does the financial damage.
These are the ones we commonly see:
1- But I have too many ‘money-tight’ owners!
We hear this one all the time from agencies all over the world, not just in Australia. The point is that these owners are with you for a reason and they also value peace of mind with the management of their property. Sure, when fees are increased there might be some complaints from this owner-type, but at the end of the day, most will still choose to pay and stay.
2- Our owners will go to the discount agency down the road.
My answer to this if the agency down the road is cheaper, why haven’t your owners already left and gone down the road already?
Simply because their focus and relationship are with you and they are not thinking of anyone else!
When you wish to increase fees, these owners are still not thinking about your competitors and in the end are happy to pay more and stay with you, instead of pulling up their management and going somewhere else where they could be in a worse situation.
You might think this is an issue, but in reality, it isn’t.
3- Our owners have been with us for years. We’ll upset them!
If an owner has been with you for a long time they obviously really trust you. Simply adjusting your fees will not change this at all!
The longer they’ve been with you the less likely they will leave is what we have found in reality!
4- But my owners are ethnic and money-tight!
Sure, culture plays a part in the way people think about money, and some cultures more so than others. BUT all owners are with you for a reason. They all want peace of mind!
At the end of the day when it comes to improving fees, there might be some minor differences that can be identified as culturally driven, but it doesn’t really change things.
Having done this process so many times in many culturally-based rent rolls I’ve learnt one thing:
Increasing your fees will still be successful, regardless.
5- But we need to improve our service levels first.
It is my experience as long as your owners are generally satisfied then you’re ready to improve fees.
If you are regularly losing business through mismanagement and in a state of chaos then don’t touch your fees!
That move will cause damage if you ask owners to pay more if they’re already unhappy.
6- We need to survey our owners first.
My response to this is not that much different from the one above. If your owners are generally happy, you’re ready!
7- My property manager(s) simply won’t allow it!
I find it amusing how property managers who don’t own the business can dictate how a profit margin cannot be improved and I’ve heard of a property manager threatening to resign if the fees are in fact increased, believing their clients will not pay or they believed the company wasn’t worth the increase!
Perhaps look at it this way.
Let’s say your property manager makes a mistake and it costs your business $50,000 to rectify it. You and I agree that this would cause significant financial distress and likely would result in the property manager being dismissed.
However if you stand to earn an extra $50,000 a year by increasing and improving some fees and your property manager says you can’t and hinders the process because of their mindset, perhaps would you treat this loss of $50,000 the same way?
Food for thought!
The real reasons you cannot increase fees.
Having successfully navigated this process over and over again with agencies in Australia, New Zealand, and now in the USA, here are the real reasons why you cannot increase and improve your fees:
● Your service levels are poor.
● Owners have had too much turnover with property managers in the last 12 months, meaning their peace of mind has been ‘upheaved’.
● You’ve purchased a rent roll in the last 12 months. These owners need more time to ‘bed down’ and get used to your service and gain more trust.
● Your owners have been with you for less than 12 months. Like the last reason, they’re still building trust with your agency.
● Owners are still in a fixed-term management agreement.
Other than that, the only reasons that can stop you are simply mindset-related.
Mindset says what you believe is true for you. You just want to ensure that what you believe will be profitable for you and your agency.