With letting agents ranking 97th in profitability across all sectors, one industry pundit is urging agents to optimise their businesses now in order to make the financial gains they desire.
Sally Lawson of Agent Rainmaker says that in an era of escalating business costs, letting agencies must re-evaluate their strategies and maximise revenue streams through meticulous planning, cost analysis, and expenditure reviews.
It comes following statistics from the Plimsoll Report showing that the top 1000 letting agents were operating on an average of just 11.9% profit margin which, explains Sally, underlines the urgency for change.
“One of the first questions I ask when working with letting agents is about when they last conducted a comprehensive cost analysis,” explained Sally. “It’s no surprise that many haven’t done one in a while, with some having never done one.
“But understanding the true expense of running a business is the first step towards improving profitability. To do this effectively we have to understand what our commodity is, what we actually sell, and that is our TIME.”
“To work out what everything we do costs, you can do this by the following calculation:- First work out your total annual running costs for the business, dividing this by 253 working days in the year, and again by 8 hours a day. Finally, dividing that by the number of full-time staff employed will unveil the real cost of their services.”
Once the true running cost is established, it’s crucial to determine the desired profit margin – whether it’s 10%, 20%, or beyond – so that rates can be adjusted accordingly. And, she adds, this pricing model should be applied across all of a letting agent’s services.
“However, it’s essential to recognise that profitability hinges on more than just pricing. We need to be offering more services, additional offerings, where landlords would normally look at other suppliers, we could be serving them instead. Our evolving landscape and fast-moving industry necessitates a re-evaluation of business models in order to remain sustainable. And with ever-increasing legislation and workload demands, the traditional flat-rate fee model simply may no longer be enough to make a substantial profit.”
Sally points to the work done by Paul Buck and Phil Boyden of Boydens Estate and Letting Agency in the South East, who embarked on a transformative journey to optimise their two-generation business. In just over nine months, they generated £350k in additional revenue, demonstrating the true power of strategic optimisation for those working in the sector.
“It’s time to revamp the traditional business model and fully embrace change. By meticulously analysing the numbers and adapting to evolving market demands, letting agencies of all shapes and sizes can unlock untapped potential and secure a truly prosperous future,” Sally concluded.
