8 minute read
Time to charge what you’re worth
By Trevor Rawnsley, CEO, ARAMA
Charging what you’re really worth is the foundation of any successful business, and it’s vital in the Management and Letting Rights (MLR) industry.
Maximising your profit comes down to your ability to demonstrate value rather than price. So, what is your value proposition?
MLR offers unparalleled value by combining professional property management with a deep understanding of local markets to deliver consistent financial returns and peace of mind for your clients (lot owner-occupiers or lot ownerinvestors). Your business acts as a long-term partner, ensuring the scheme and investors’ lots are well-maintained, compliant with regulations, and achieve high occupancy rates. By handling day-to-day operations, tenant and guest relations, and maintenance, your business enables your clients to enjoy hassle-free living and investing in strata.
Your MLR business delivers benefits that extend far beyond financial returns. Successful operators enhance the lived experience for people who rent, live, or invest in community title schemes.
Sadly, we have found that many residential managers are seriously underselling themselves and not realising the value they deliver to their clients and customers.
ARAMA’s most recent biannual cost and charges survey, analysed by leading MLR accountants Tony Rossiter and Robert Cuda, revealed that while ARAMA members across the country are charging a fair rate — an average of $54 an hour plus GST for their services — managers in the north, for example, are charging just $37 an hour plus GST. That $17-an-hour difference adds up to thousands of dollars a year, meaning managers are effectively robbing themselves and their businesses of deserved income.
Why are some residential managers underselling themselves so badly?
The subject of fees and charges in strata is controversial now, with one of Australia’s most high-profile strata management firms accused of overcharging and receiving kickbacks from contractors and suppliers.
ARAMA members, who operate as caretaking service providers to a body corporate or owners corporation, work under a contractor service agreement and a code of conduct that includes full disclosure of their fees and charges agreed to in advance by their clients and/or the body corporate or owners corporation.
There is full transparency. Residential managers must demonstrate good value for money. They should also demonstrate good sense by not depriving themselves of a fair return for a fair day’s work on behalf of their clients and/or the body corporate or owners corporation.
Yet, Tony Rossiter from Holmans Accounting says the trend for some residential managers to undercharge for their work is something “we have observed over many years.”
Tony said: “One theory is that some residential managers do not appreciate the value they deliver to a scheme and generally are less likely to rock the boat, so to speak, by increasing their charges. Perhaps they fear upsetting their clients and losing them from their letting pool if they increase their fees.
“Another reason could be that some regional markets are somewhat isolated from the main MLR market, which is South East Queensland. By being isolated, those residential managers may have missed the train to regularly increase their own charges, yet are watching the price of other services such as linen, cleaning, and labour increase over the last couple of years.
“In ARAMA’s most recent cost and charges survey, cleaning, linen, and labour charges had increased substantially since the last survey two years ago.”
Cairns-based accountant Robert Cuda, from Caatz Management Rights Accountants, said, “Some residential managers haven’t appreciated the value of their own time in getting repairs and maintenance done for owners. We have been encouraging clients to review their fees and charges immediately and to increase their fees and charges in line with what is fair and what is being charged in the rest of the country.”
The reluctance of many residential managers to charge for their true value comes despite significant increases in charges for other aspects of the business.
Cleaners on weekends are charging more than $50 an hour at many properties, and during COVID some were getting $70 an hour cash in hand. Those cleaners recognised the value they delivered to the business.
It’s the same in many other areas.
It’s time that all residential managers realise their true value and the positive impact their work has on others.
ARAMA members who are residential managers have a vested interest in ensuring schemes are managed effectively and efficiently.
But how much should you charge for services outside your agreements? ARAMA fields many enquiries from members on this subject.
The cost and charges survey is freely available to members on the ARAMA website and is just one of a range of tools ARAMA provides to answer the questions and problems residential managers face regularly. The survey provides valuable comparative data for residential managers and other ARAMA members and covers the major costs and charges that generate business profitability.
There is an accompanying webinar on our website that goes into the specifics of these charges as well as the correct process to implement any increases. If members need additional help beyond this, ARAMA can recommend a specialist accounting firm to assist.
But there is a lot of extra work a residential manager performs for unit owners not covered by the letting agreement, such as organising tradesmen and renovations for clients who live interstate or overseas.
A common practice within our industry is that for any work we arrange for a lot owner, a 10 percent fee is charged for our time on top of what the tradesperson charges.
This is not work for the body corporate because that is usually covered by the caretaking remuneration contract. It is separate work for a lot owner client who may not live nearby and needs the residential manager to do work on their behalf.
A residential manager might have to organise a plumber, electrician, or builder to undertake work inside a unit. That manager then must meet the tradesperson, ensure the unit is vacant, deal with the guest or tenant who might have been there, complete paperwork, receive the invoice, and pay the invoice.
There has to be some compensation for that extra work.
As long as the residential manager discloses that fee and can produce the original invoice if an owner wants to see it, then that’s quite fair and appropriate. There can often be a lot of work involved in organising and paying tradies, and it saves an owner from having to travel to arrange it themselves. It’s usually a very small fee compared with the costs an owner would incur for having to arrange the work themselves.
By doing that work on behalf of the lot owner client, the residential manager is saving that owner a considerable amount of time and money. It’s only fair that the manager charges an appropriate fee for that value-added service.
Business coach Mel Kettle, who publishes the Connected Leadership newsletter, recently gave some great advice on how to charge what you’re worth.
She says she puts a price on value rather than time, considering things such as expertise and experience.
Mel says charging a low price can signal low quality or inexperience and that by clearly communicating your value, you give clients “a way to understand what makes you unique beyond costs. This positions you as a credible choice, rather than just an option that fits within their budget”.
She says when you can explain your skills, expertise, and the outcomes you can help clients achieve, you build trust and confidence. Clients want to work with people they believe can deliver results, solve their problems, and provide peace of mind. Being able to clearly communicate these factors gives them a reason to trust in your abilities, and the best residential managers are those with a great reputation for professionalism among their clients.
The ARAMA Community Connect Toolkit is another great resource available exclusively to ARAMA members to help them communicate value.
Mel rightly points out that value-driven communication is about cultivating longterm partnerships and repeat business. When clients see you as an integral part of their team or community, they’re more likely to stay with you, refer you to others, and consult you on future needs, regardless of price. That’s certainly the case in the MLR space when it comes to keeping units in the letting pool and asking for top-ups on agreements.
The cost and charges survey is a great place to decide what is a fair price for your work.
Maximising your profit really comes down to your ability to demonstrate value rather than price.
So, what is your value proposition?
