The real cost of expanding or diversifying your agency
The motto ‘speculate to accumulate’ is true – growing or diversifying to capitalise on market conditions is a great way of increasing profits and building a more secure business model. The whole idea of growth, however, is to increase profitability and not see any new income wiped out by set up costs and bigger overheads.
If you’re a sales-only agent thinking of branching out into lettings, or a small lettings office looking to expand its managed portfolio, balancing the books to ensure any growth pays its way will be key.
Agents have two choices:- expand at an in-house level or use a bespoke outsource partner to facilitate growth. Coming to this decision will have a massive impact on profitability and also on professional standards. Now, as we face the homeward run into the end of 2016, is a good time to weigh up any expansion plans you have for 2017.
Too many agents will look at the obvious costs when growing their business but there are smaller and less obvious costs that can make an unhealthy dent on bottom-line figures. The following should all be factored in to your expansion plans. Remember, many of these costs will be lost or reduced significantly if you partner with a lettings-specific outsource company.
Here’s our top 6 considerations when expanding or diversifying your agency:-
Recruitment – lettings and property management is an industry full laws and legislations. Specialist staff are needed but the pool of talent is small. You may have to pay a premium for qualified staff, fork out for a specialist recruitment agency or go down the uncomfortable route of poaching. Also factor in your time – sifting through CVs and interviewing will take up time you could be spending winning instructions or renewing tenancies.
Training – you’ll want to have confidence in your lettings staff so the most up-to-date training is essential. Training doesn’t come cheap – especially if you’re starting from scratch by transferring a sales person over to lettings. Don’t forget ongoing training for all lettings staff so you’re satisfied they’re abreast of the ever-changing rules and procedures.
Industry bodies – landlords and tenants do look for a letting agent who belongs to the leading trade and professional bodies – it’s increasingly becoming part of their decision making process. Belonging to industry organisations also ensures you receive real-time information and news about the lettings sector. Factor in membership fees for both your agency and individuals.
Staff set-up costs – congratulations! You might have snagged a brilliant property manager but you now have to provide a desk, a computer, a fuel allowance, stationary, a mobile and perhaps even a car. There’s also the increased use of resources – a higher consumption of electricity, and more wear and tear in your office. If you’re expanding on a grander scale, you’ll additionally need to think about the leasing/purchase of a bigger premise and higher running costs. Compare business electricity prices and get the best rate possible for your business!
Public repositioning – if you’re moving from sales-only to dual agency, your budget will need to cover a degree of rebranding. You’ll need to change to your website to reflect lettings, perhaps invest in lettings or property management-specific software, hire a new or additional accounts person with specific experience, re-write and re-publish your marketing materials and alter your office signage to advertise your lettings services.
Incentives – if you’ve gone to the trouble of employing good staff you’ll want to keep them and make sure they perform on a daily basis. A good rate of commission, profit-related pay, promotions with higher salaries and incentives will help keep staff motivated and focused.
Despite the outlay, expanding or diversifying your agency will pay dividends and with an outsourcing partner, you can slash the investment and effort needed to capitalise on the current lettings market.