The Silent Killer of Property Management Profits: Why You're Afraid to Raise Fees (And How to Fix It)

It's Terri Handy here, and today I want to talk about something that's critical to your business success: increasing your property management fees. I know this topic might make you uneasy, but as a fellow business owner, I can't stress enough how crucial this is for the health and growth of your agency.

Let's face facts: the cost of running a property management business is skyrocketing. From staff salaries to technology upgrades, your expenses are constantly on the rise. Yet, I've noticed a troubling trend - many agency owners are hesitant to adjust their fees accordingly. Why is that?

In my conversations with agency owners like yourself, I've heard various reasons:

1. You're worried about losing long-term clients
2. You're concerned your staff might demand pay raises
3. You feel you lack the resources to handle potential fallout
4. You believe your local market won't support higher fees
5. You're apprehensive about becoming the most expensive option in your area

These concerns are valid, but let's dig a little deeper. Often, these reasons mask two fundamental issues: fear and a lack of confidence in your agency's value proposition.

The Fear Factor

As an agency owner, you're no stranger to taking risks. But when it comes to raising fees, many of us freeze. We fear those uncomfortable conversations with clients, the potential loss of business, the unknown consequences. And sometimes, there's a nagging doubt: "Are we really delivering enough value to justify higher fees?"

But here's the truth: if raising fees was easy, every agency would do it regularly. The fact that it's challenging is precisely why it's so important. Your business deserves to be profitable, and the excellent service you provide merits fair compensation.

The Case for Increasing Fees

Consider these compelling reasons to raise your fees:

1. Improved profitability: This allows you to invest in better resources, training, and staff development.
2. Increased business value: Higher fees directly impact the value of your rent roll and overall business.
3. Market alignment: Most professional services regularly adjust their pricing - why should property management be different?
4. Enhanced service delivery: With improved profitability, you can offer even better service to your clients.
5. Staff retention: Fair fees allow you to pay competitive salaries and keep your top performers.

Preparing for a Fee Increase

If you're ready to take action, here are some initial steps:

1. Audit your costs: Ensure you're recovering all expenses, especially marketing costs.
2. Review your processes: Verify that you're charging for all services outlined in your management agreements.
3. Establish a minimum monthly income per property: Determine the "bright line" that covers both costs and desired profit.
4. Analyze your value proposition: Can you clearly articulate the value you provide to clients?
5. Understand your market position: Know where you sit compared to competitors and why.

Implementing Fee Increases

When you're ready to raise fees, consider these strategies:

1. Introduce new fees for additional services
2. Increase current fees across the board
3. Focus on raising the average commission to improve rent roll value
4. Implement a tiered fee structure based on service levels

Remember, it's natural to feel apprehensive about this process. But as a business owner, you need to overcome this for the sake of your agency's future.

Overcoming Obstacles

To move past the fear and hesitation:

1. Prepare your team thoroughly for client conversations
2. Start with small, manageable increases
3. Communicate changes clearly and professionally
4. Focus on the value your agency provides
5. Be ready to explain how the increase will benefit clients through improved services

In conclusion, raising your fees isn't just about boosting your bottom line—it's about valuing your agency's expertise, investing in your business's future, and setting a standard for the industry. It's about providing better service to your clients and creating better opportunities for your team.

If you're ready to dive deeper into this topic, I ran a workshop on how to raise your fees covering everything from identifying which properties are due for an increase to communicating with your clients and handling any pushback. It was an invaluable session for agency owners like yourself that attended. You can access this workshop from our PM Connect Membership >

Remember, you're not just running a property management department—you're building a valuable business asset. It's time to start charging what your agency is truly worth.

Let's make it happen!

Terri Handy