Identifying opportunities to create new revenue streams will be one of the keys to running a profitable letting agency in 2022.
Increasing your agency's revenue doesn't need to be complicated. In fact, it could be as simple as saying no to discounts on your management fees (it can be done!) and offering your tenants and landlords extra services that are integrated into their experience to increase your conversion rate.
Charge your full management fees every time
Increasing your management fees might seem the most obvious answer to creating more revenue, but 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 generating new revenue is to simply ensure 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 - both of which Goodlord can offer and advise on using in the best way too. “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.”
Offer your tenants additional, optional services
Tenants represent a huge opportunity for letting agents to increase their revenue - even since tenant fees were banned. 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. You could also choose to work with industry suppliers like Goodlord that are in a strong position to negotiate top deals with tenant service providers, so it can become a hassle-free experience for you too.
Understanding your tenants' 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.
Increase your conversion rate
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.
This changes when using a technology solution that makes it easier to offer products to tenants and landlords, while agents easily earn a commission in too. “It can support us by introducing products to the client so and they can just click a button whenever they want," says Thomas. "Then that’s an extra revenue stream that we wouldn’t have had if that functionality wasn’t there.”
