Should letting agents be outsourcing non core activities?

pound coinsWe recently gave a presentation at a regional ARLA meeting to 120 letting agents at the Lansdowne Club in London. As part of the talk we questioned the agents as to whether they were outsourcing inventories or conducting them in-house. Our experience of letting agents suggested we  could expect about 60% of the agents to still conduct inventories themselves. However, not one of the 120 agents raised their hand as they all outsourced this function.

During the discussion afterwards a number of attendee’s expressed their surprise that any letting agent would still conduct inventories in house. They firmly believed that it made better financial sense to outsource the work to a professional inventory provider.

What’s the real cost of conducting inventories in house?

So, if 100% of those ARLA letting agents in London are outsourcing their inventory requirement, we asked ourselves why are the majority of agents in other parts of the UK still using their own staff. Clearly, the answer is that even though there are significant advantages in outsourcing, they must believe it is cheaper and therefore more profitable to perform them in-house.

We decided to calculate what the real cost of using in house staff to do inventories actually was. We assumed that the letting agency would normally rent around 15 properties a month and took into account, salary, overhead, petrol, parking, professional indemnity insurance, the extra time for an inexperienced person to carry out the inventory and the opportunity cost of having an agent conducting inventories rather than their core function of finding tenants.

Our results showed that for a typical agency it was likely to be costing them about 50% more to conduct each inventory than it would to use our service – and without any of the advantages.

Clearly, if an agency’s staff are being underutilised then it can seem sensible to use them to perform non-core activities. However, consider this: are you really giving your landlord clients the service they deserve by letting untrained staff perform what for the landlord is a very important task? It could conceivably lead to him losing hundreds or thousands of pounds if he doesn’t have an inventory that satisfies the adjudicators. In a market where every letting agent is looking for more landlords is an in-house service likely to give you a competitive edge and enhance your reputation?

In essence, outsourcing inventories can reduce costs, minimise your risk and exposure, free up time so you can focus on your core activities plus ensure you are using the best qualified people for any given task. Add the benefits of having supporting video evidence and you have the ultimate package.

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