Should you consider charging your customers up-front fees? My Business speaks with one business owner who says charging an engagement fee creates benefit for his clients as well as himself.
As Paul Glossop, founder of buyer’s agency Pure Property Investment, points out, simply getting any customer through the door is not an efficient use of your time and energy. By investing time to qualify your leads up front, you can deliver a much higher return on investment.
“For me, I guess what goes into that and what level of salesmanship goes into that is pretty simple: it’s process first and foremost,” explains Paul.
“Really what it comes down to is, if you know what you’re talking about and you know your facts and you know your details and ultimately you’re confident in the product that you’re pushing, then everything comes quite natural.
“I go through a system of questions when someone inquires; I may say, ‘What do you actually want from me? What are your objectives?’. From that, there’s a laundry list of things that we go through. If they're happy to proceed and use our services form that point onwards, we go through a standard buyer’s agency agreement. They pay an engagement fee and therefore they're our customer and we start working on a property strategy.”
Charging an engagement fee for his service, according to Paul, is a means of eliminating time-wasters from the equation, leaving only serious customers, as well as a means of sustaining cash flow.
“It’s getting in the game for them,” he says.
“We’ve toyed with different ways of engaging in it and saying ‘No up-front fee, just sign this document’ or we’ll just give you a good information session up front. [But with engagement fees] commitment comes: we know that they’re actually going to be genuine.
“And then secondly for us, it gives us a bit [of capital]. Because we don’t charge the remainder of our fee until we have settled on a property, so we need to create some revenue up front. It's better to say, if we're going to fly to a location for example, we’re going to go pay for research databases. We need to create revenue ongoing as well, so a portion of it's making sure there's skin in the game for our clients, and the second part is making sure we’ve got some reoccurring revenue upfront rather than waiting for this property to actually settle before we get paid.”
However, there has to be substance behind your business for people to be happy to pay such a fee.
“If I’m going to run a business, charge people for a service, what are other companies doing? What can I do that’s going to be better? What can I do that’s going to be unique to me and my skill set and what I can build a company around?” says Paul.
“We keep it a very bespoke property buyer’s agency. We keep it capped in amount of clients.”