The OBVIOUS ONE Answer to the DISCOUNTING Problem

Wednesday, December 06, 2023

There is quite a lot of discussion going on right now suggesting that discounting is causing a crisis in the industry.

How this has happened, is easily understood.

A number of players in every marketplace will use discounting as their main point of difference, forcing down management fees, creating a discounting culture, and putting pressure on other agencies to bring down their management fees to compete.

Wherever discounting is reducing revenue, and margins and expenses such as salaries, marketing, insurance, and other overheads keep rising, a crisis will always result. Why? The practice is simply unsustainable!

One of the key issues I see is the mindset that most property management revenue reliance needs to be on the management fee as the main ‘breadwinner’, with very little emphasis on other fees.

The question ‘But what’s the management fee for?’ is commonplace in the industry, particularly on the east coast in Victoria and Queensland and to a lesser extent in NSW. Conversely, South Australia, Northern Territory and Western Australia seem to all enjoy having several ancillary fees over and above what is charged in the typical fee structure on the east coast.

I feel that if we are to become (and remain) profitable, emphasis must be placed on adding extra ancillary fees. Continuing to hold on to the management fee as the primary breadwinner with little else to support revenue will eventually put you out of business!

You might say, ‘But adding extra fees… won’t our clients choose to go elsewhere?’

My answer is always the same. You need to understand the ‘Law of the Main Game’ in that landlords place an emphasis on the management fee and to a lesser extent the letting fee, but put little to no real focus or emphasis on anything else. Therefore, if you are generally keeping your management fee and letting fee at the market rate, adding other extra fees can be done quite easily, as long as these two factors are in place:

1. You believe (know) that you are worth it!

2. You know how to justify the extra fees.

Mindset rules supreme in this arena, and once you establish that it is possible to increase and add fees, you will be pleased with the results… once you know how!

A healthy profit margin can be generated by adding ancillary fees and has been proven to work time and time again. It’s up to you to believe it will work for you.

“If you say you can, or you say you can’t, this will become true for you!”

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