This is an extract from Goodlord's e-book, How to grow your agency in 2019. Download your copy today.
Letting agencies are set to lose £200 million in turnover a year when the Tenant Fee Ban comes into effect on 1st June, which means it will be vital to look at opportunities to create new revenue streams. In doing so, it will be possible for agencies to not only plug the gap caused by the Tenant Fee Ban, but actually increase their profits. Landlords and tenants both offer agencies valuable opportunities to create new revenue.
Increasing your management fees might seem the most obvious answer to creating more revenue, but research has found that this scenario is unlikely to be effective unless you can demonstrate the value you’re providing to your landlords. But, given many letting agents are routinely discounting their fees in what has become a race to the bottom, the first way to start compensating for the revenue lost from the Tenant Fee Ban is ensuring you’re charging your full management fee every time.
Start thinking more creatively about how you articulate your proposition to landlords - make sure you are spelling out every single service you provide landlords, from compliance to inventories, and what they would be missing out on for a discounted fee. “Lettings agents have got to become more proactive and demonstrate their professionalism,” says Ian Crampton of Ferndown Estates in Birmingham. “Make sure your agents are aware of the level of work and diligence that goes into protecting them from worst case scenarios.”
Then you can think about adding even more value to your package by adding more services that benefit your landlords, such as rent protection insurance or void period management. “Ask your clients what more you can do to help them. Find out what the issues are that they face and try to build your service around solving these issues for them,” suggests David Thomas of Liberty Gate in Nottingham.
By creating a more compelling offering and showing landlords why your agency stands out from your competitors, you could deservedly demand a higher fee. “People pay more for Ferraris because their engines are better, they go faster and look cooler,” says Samuel Fitz-Hugh of Settio Property Experience in Manchester. “So if you’re charging more you need to do something better or faster, offer something unique or exclusive - and look cooler doing it.”
Although agents will lose most of their existing revenue from tenants from 1st June, the growing number of tenants actually represents a huge opportunity for letting agents to increase their revenue. A survey by renter engagement platform Vaboo found that 70% of renters would be happy to pay more rent for particular service add-ons.
How much agents can make from insurance or utility and media switching services is determined by the take up of tenants, so the key to capitalising on this opportunity is making sure those products and services match up with the expectations of tenants. Understanding their expectations will be crucial to ensure you’re providing services your tenants not only want to buy, at the time they want to buy them, but actually improve their moving experience and increase the likelihood of them giving your agency a positive review online.
Once agencies have a good understanding of the products and services their landlords and tenants want to pay for, they’ll need to identify frictionless ways to offer these in order to increase conversion rates. “A lot of the extra revenue streams you might be able to make money out of are quite time-consuming for a relatively small profit, so a lot of agencies struggle to sell any extra products,” says Thomas.
Technology can make it easier for letting agents to offer products to their landlords and tenants, says Thomas. “It can support us by introducing products to the client so and they can just click a button whenever they want - then that’s an extra revenue stream that we wouldn’t have had if that functionality wasn’t there.”