I recently encouraged a client of ours to reduce the amount of money they pay us. They weren’t the first either, I have been doing this for a couple of years now and more and more of them are listening. Am I mad? Why would I do that?
It’s revolves around how Letting Agents’ Preferred Suppliers Lists (PSL) tend to work.
There are around 7,000 Letting Agents in London but across nearly all of them there are only really two models that tend to exist with regard to how much money they allow their contractors to charge.
In Model one, which is by far the most prevalent, The Letting Agent does not make any attempt to control the fees that the contractor charges once they have been brought onto their PSL. Price is discussed to ensure that the contractor is vaguely in the ballpark of fees that their landlords will accept and that’s it.
Model two, involves the contractor agreeing to the Agents price list. If you want to work with and accept bookings from them you accept the prices that they have set.
For most contractors Model one is the preferred route.
After all, they are the ones who know their own business, they know what their overheads are and as such they know what they need to charge to make a profit.
So why have I spent the last 2 years campaigning some of London’s largest Letting Agents to move to the set fees model if it is likely to impinge on our ability to manage our profit.
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Well, it’s simple really and it comes down to one thing – quality of service.
If everybody on the PSL is charging the same then the decision as to who gets the work doesn’t involve price, it purely involves quality of service.
Contractors can not be tempted to push prices up without improving service in a short term bid to increase their profit margin and conversely they can not be tempted to cut corners to reduce prices and win work
So which contractors get the most work?
The best ones.
The ones who employ quality controllers, who have KPIs for all staff members relating to service levels, who monitor customer service feedback scores and who set out QUALITY of one of their 6 key values.
If you get your agents competing on quality you will see improvements in your management retention rate.
A recent survey showed that the 2nd biggest reason why landlords cancel management is problems with suppliers with the two main issues being overcharged or service being of poor standard.
Solving these two problems can easily be done by introducing the standard pricing model. Ensure that all of your contractors are charging the same amount for the same work.
This will mean that your landlords get the consistency or pricing and service that they want and they will stay with you longer!