In my experience, most agencies have the ability to achieve higher fees if they offer a reasonable (or better) service to their clients.
As long as this factor is in play, they are able to earn more from the same rent roll with the same number of properties.
But we also know this cannot be achieved with the common mindsets that are seen in so many rent rolls. Negative mindsets can stop this fee improvement opportunity dead in its tracks because if they’re believed, they become the ‘truth’. 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 is: If the agency down the road is cheaper, why haven’t your owners already left? Simply because their focus and relationship is 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 are to leave.
4 - But we need to improve our service levels first
In my experience, as long as your owners are generally satisfied then you’re ready to increase your fees. If you are regularly losing business through mismanagement and are in a state of chaos, then don’t touch your fees. You will cause damage if you ask owners to pay more when they’re already unhappy.
5 - We need to survey our owners first
My response to this is not much different from the one above. If your owners are generally happy, you’re ready.
6 - My property manager(s) simply won’t allow it
I find it amusing that property managers who don’t own the business can dictate how a profit margin cannot be improved. I’ve heard of a property manager threatening to resign if the fees are increased, believing their clients would not pay or that 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 would likely 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 but your property manager’s mindset hinders the process, 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 your fees:
- Your service levels are poor.
- Owners have had too much turnover of property managers in the last 12 months, meaning their peace of mind has been disrupted.
- You’ve purchased a rent roll in the last 12 months. These owners need more time to ‘bed down’, get used to your service and gain more trust.
- Your owners have been with you 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 things that can stop you are simply mindset-related.
What you believe is true for you. You just want to ensure that what you believe will be profitable for you and your agency.