It is becoming clear that the return to normal life is going to be a gradual process that takes place over many months. So, how should estate agents prepare for this? The answer in short is with extreme caution.
Most of my consultancy work over the past 25 years has involved helping people to grow their businesses usually by speculating to accumulate. However, now is not the time to be doing this. The next few months will be all about reducing costs and conserving cash. The exciting opportunity though is to learn how some of these temporary cost savings can become permanent ones and how they could help you to improve the profitability of your business in the future.
Let’s start by looking at the possible income of a medium size mixed estate agency and letting business.
If John Doe’s income is going to drop by 35%, then clearly they will need to make some pretty dramatic cost savings. So how can these be achieved? Well here are ten possible ways:
There is a huge number of proptech products that will reduce the workload – particularly of your letting staff. Some of my big clients have been able to increase the number of properties that each of their property managers looks after by 300% through the innovative use of proptech. A great way to use the rest of the lockdown period would be to carry out some extensive research into what proptech solutions are available and how they could help you to reduce the costs in your business.
A huge number of companies now offer outsourced solutions for estate agents and letting agents. They will handle tenancy administration, draw up tenancy agreements, take up references, register deposits, collect rent, organise repairs or even handle the whole of the property management function for you on either an open or white labelled basis. Many smaller letting agents will find it much cheaper to outsource some of these functions than to provide them in-house. For sales agents, there are outsourced viewing companies, sales progression companies and reception services. This is another area that you can research and cost whilst you are stuck at home.
The introduction of some simple rules can save your staff a great deal of time and reduce your costs significantly. For example, tenants might be told that they can only report maintenance issues by email, not by telephone. They might also be told that they must attach a photograph of the alleged defect to every email. Landlords might not be given quotes for works with an expected value of less than £250 and only given one quote for work with an expected value of less than £1,000.
4 Service reductions
Small reductions in service can significantly reduce your costs with minimal damage to client relationships. For example, periodic inspections might be reduced from once every three months to once every six months. Rent might be paid once per week rather than every day.
5 Relationships with contractors
Taking time now to compile a list of reliable contractors could save your property management department a huge amount of time, cost and frustration and in the future. A lot of my clients have had very good results from introducing fixed menu pricing for all the most common jobs such as resealing a shower or changing a door lock. This means that landlords and contractors know how much they are going to pay or receive the moment that a job is confirmed. Again, this can save your staff a great deal of time.
Many larger clients have reduced salary costs significantly by setting up call centres. Some of an estate agent’s jobs such as winning an instruction, negotiating an offer or progressing a sale need to be done by experienced and highly skilled people. Other elements such as phoning applicants to get viewings do not require the same level of skills. Are you paying experienced staff to carry out mundane jobs? Could you save money by changing this?
When was the last time that you properly analysed the return on spend from each different aspect of your marketing budget? This is a great time to do this. Check where each of your valuations came from so that you can calculate the cost per valuation. For example, £10,000-worth of leaflets provided 50 calculations which is a cost of £200 per valuation.
Which of your marketing methods is most cost effective? Once you know this, you can debate why it costs you £600 to get a valuation from a local paper when it only costs £200 to get a valuation from Google AdWords? You can then allocate your future marketing budget accordingly.
Accompanied viewings take up a huge amount of time for most estate agents. Could you cut down on the number of viewings in future by insisting that applicants do a virtual viewing before booking a real one. For rental viewings where there is high demand for a property, could you insist that all viewings are booked over a one to hour period to save your staff time?
9 Premises costs
Could you save money on your offices? Could some staff work from home for some or all of the week? If they did, could you manage with a smaller, cheaper building? And are you absolutely sure that it is still necessary to have five physical branches all within a few miles of each other? Could you operate from a central hub and up your marketing budget a little in order to maintain your market share in the other areas?
10 Part-time staff
Could some admin work be done out of business hours by people working from home? Huge numbers of people want work that they can do during evenings and weekends so you can employ fantastic people at very competitive rates. Could you reduce your overall salary bill in this way?
I hope that you will be able to use some of these ideas to reduce the running costs of your business. Next month, I will look at some of the ways that you can prepare to win market share during the early stages of the upturn whenever that comes.
Surviving the virus
Supporting Part 1 of our crisis survival series by Adam Walker, these are companies who can directly help to reshape your business, help you survive – and thrive.
With forced office closures and new remote working policies, many agents will be realising the effectiveness of technology and outsourcing as a business strategy.
While many agents have seen a stark drop in let-only income and been forced to furlough staff who service landlords and tenants, we’ve been supporting our clients to maintain a reliable property management service.
Currently, having a white labelled outsourced property management team removes any staff management, furlough and service continuity stress. We provide our clients with a team, but that team is our responsibility.
Outsourcing can cut costs, save time and improve the services a business can offer.
Remote working to stay safe has become the new norm for the foreseeable future. The current situation has shown us that technology doesn’t make us less personal. It allows us to maintain communication and right now that’s crucial for harnessing positive relationships with landlords and tenants alike. We have long since held the belief that remote paperless workflows are the fairest and most efficient way of agreeing compliance, condition and cleanliness. From check-in inventories to check-outs and virtual visits in-between, we have these workflows covered. Try Inventory Hive free for 30 days then sit-back, relax and let us show you the ropes with a free personal screenshare demo.
mio is a sales progression software which empowers Estate Agents to speed up the residential property transaction, making effective sales progression simple. mio provides a single view of the entire chain for agents and consumers enabling better communication between all parties. With its award-winning consumer app and simple to use milestones, mio will reduce manual data entry and calls from buyers and sellers allowing agents to focus on the important tasks.
To support agents, mio will be available for FREE for the whole of 2020.
Contact us today and we can have you set up within 24 hours.
JMCL is a UK based, cost reduction, consulting practice specialising in third party costs with a successful track record in the property sector with estate agencies for sales and lettings. Using its proprietary, Enlightened Procurement approach, JMCL identifies opportunities through rigorous analysis and then delivers the agreed savings in a transparent manner, while simultaneously improving supply chain resilience. Uniquely JMCL utilises only highly experienced subject matter experts to work with clients. JMCL works on a gainshare basis, funding its activity with clients and being paid only from actual savings delivered as they flow to the bottom line each month.