Do you know your numbers enough to beat the tenant fee ban?
Is everything adding up in your business?
So far, I’ve gone through many ideas for increasing income and replacing potential lost income for when the tenant fee ban hits. You need to give yourself your best chance – providing new levels of service, improving systemisation, and searching for new growth opportunities – but you also need to consider if all of this will convert into actual income.
It’s time to look into your numbers, to see if you’re operating to the correct KPIs for your business and are doing the right thing to achieve the turnover you’re capable of. It’s crucial that every number adds up to ensure you’re not only earning enough to run your business, but even MORE than before for when the tenant fee ban does come into effect.
The best way to figure this out is to work backwards…
1) What is your magic number?
Let’s start with your current turnover – how much profit are you left with after you make the necessary deductions for funding your letting agency? You really need to drill down into what you spend money on – from wage bills and renting offices to marketing materials and taxes. Every penny must be accounted for, as it could reveal whether you need to do more to run your business more comfortably.
Once you have figured this out, then calculate how much you need to increase turnover once the tenant fee ban is in effect, in order to replace the income that you will lose. You need to set your business a solid annual target – a magic number – and then find ways to reach this number.
2) How much is your business worth?
By this, I mean how much value is placed on your services – how much are people paying per deal and is this enough? You will need to look at each service you offer, how you package them and how much they need to be worth in order to reach your magic number. Look closely into how much services are worth now and see if your current business model is performing well enough to achieve this. How much value does each conversion have?
For example, one negotiator may be closing 20 deals per week but offering discounts and reduced value to do so – this means their labour may costing you more than what you are getting back. On the other hand, another negotiator may be closing 20 deals per month, but half of those included an up-sell to a higher value service – this means you are getting more in return for the hours they have put in.
3) How much is done on average to reach a target?
When you have a clear idea of the prices and values of your services, you need to measure and quantify the work put in to earn this. Work through the system of your business, from generating the lead to gaining the instruction:
- How much marketing do you have to do to get a lead? Look at the spend on advertising, the number of adverts and their placement, their reach, etc.
- How many of those leads are converting into consultations, valuations or any other kind of capture? What is the value of these services?
- Of the captured leads, how many of those turn into an instruction? Be mindful of the types of properties and their rental rates – are you putting in too much or too little effort for what your managed properties achieve?
- Of those instructions, how many are high-level customers, i.e. paying for your full run of services?
It’s more important than ever to make sure you’re squeezing every penny possible out of the work you’re doing, in order to stay on track for your KPIs and set goals to achieve the magic number you need to reach to run your business. Drilling down deep into your numbers and really making sure that they add up can help you set future targets that are probably a lot HIGHER than the ones you are operating to now.
The task of looking into your numbers is understandably daunting – where do you start? As part of our one-day workshop, Property Agency Intensive, we teach you our methods for doing this – including checklists and systems for managing your KPIs and keeping track of your figures. If you’re interested in learning how we keep on top of our numbers, as well as other methods for combating the tenant fee ban, book HERE for the workshop on the next available date.