Should you Discount Your Fees to Win a New Management?

This is often a highly debated and disputed question. I mean how many of you have had this conversation in your office, or should I ask how many times have you had this conversation? You’ve all heard the saying you get what you pay for right? And that is certainly true, budget fees often correlate with budget service. But I’m going to advocate there are times when you should discount, or rather I prefer, negotiate your fee and there are times you shouldn’t.

Important considerations when thinking about discounting fees:

What is the cost revenue wise to the business – are you going to be making any money, we don’t work for free now do we?

Is the client worth it – were they difficult to get hold of, rude, or unwilling to negotiate? What is your gut telling you, are there any red flags with this client? Will they be high maintenance and cost you too much time and heartache?

What will be the advantage to your future business – does this client have multiple properties, do they have good connections and referral leads that will generate more managements down the track? Developing relationships with key partners like developers, builders and financial advisers and offering a ‘special fee’ can reap huge rewards for your business long term.

Let’s talk Negotiation?

Let’s remember there is a difference between discounting and negotiating. In a fee discount situation, the client wins, in a negotiation, the aim is to end up with a win/win result. 

Ask yourself these questions and have answers to them:

  • How much do you believe in what you do?

  • What are the services you offer that are more valuable or different?

  • What are your points of difference?

  • What will you be willing to negotiate on?

How to stand your ground in a fee negotiation

So, how do you hold your ground when faced with the ‘will you discount your management fee?’ conversation. Especially if your competitors are offering less?

1. Let the owner know about all the strategies your agency deploys to maximise their rental return. Like minimising vacancy periods, maximising annual yield and optimise long-term capital growth potential.


2. Tell them about the world-class systems you use, such as the cloud-based software, electronic signature platforms, 24/7 tenant booking systems. Share any other points of difference, like payment of their rates and water bills, etc.


3. Let them know about your state of the art marketing that is designed to attract the best tenants and your stringent tenant selection and inspection processes. Tell them about all the things you do that goes above and beyond expectation and the minimum requirements.


4. Let them know how experienced your team is and what services they provide that goes above and beyond expectations. Share your business and portfolio management structure, outline exactly how their investment will be managed.

If you can’t avoid some kind of monetary incentive to win business because of strong competition in your area, consider some alternatives to a fee reduction for the life of the management. For example:

  • Waiving the letting fee for the first tenant

  • The agency paying for a smoke alarm compliance package for the first year.

  • The agency paying for the first photos

  • Offering a discount when multiple properties are being managed.

  • Offering an incentive, such as the first 3 months’ management for free, for owners who refer your services to others (provided those referees sign up with you).

Also, have a response or scripts for certain conversations like; ‘but your competitors charge less’. For example, you could reply: ‘Can you tell me about a situation, Ms. Client, where were you charged less than the fee I am suggesting today, did you get the level of service and the calibre of service you were looking for?


BOTH parties need to win

Negotiation isn’t about one party getting a good deal at the expense of the other. It’s about creating a situation where both parties feel they’ve won…So keep this in mind when negotiating with clients. Some clients are going to want to negotiate. Don’t see it as a turn-off. Instead, look at it as an opportunity to create a situation where both sides can feel as if they got the best deal possible.

For every concession you make, ask for something in return

Humans have an inherent that we need to feel like we worked for something. When something comes too easily, it loses value. When you make it too easy for prospects to get what they want in a negotiation, you do everyone a disservice. You’ll feel like you gave up too much and your resentment will build.

As for the client, they’ll feel like he could have gotten more out of you because what they did get out of you was too easy. They’ll wonder how much better he could have done in the negotiation. And that’s not good either. Because you’ve now trained them to keep asking for discounts every time.

Keep in mind that your fee is NOT the only thing you can negotiate. So be open to other possibilities. And the more you know about what matters to your prospect, the more creative you can get.

Three Ways to Respond to Requests for Lower Fees

You’ll find that when prospects ask for a lower fee, you have at least three ways to respond:

Option A: Agree to cut your fee, but… ask for something in return. And here’s the key: it doesn’t have to be anything important to you. It just needs to be perceived as something she had to give up in order to get what she wanted.

Option B: Keep your fee intact but throw in something of value – like professional photos, an extra inspection, payment of water, and council rates.

Option C: Offer to do less for less. Offer to reduce the number of inspections, only do the scope of work in order to meet the prospect’s budget. This could include, for example: less inspections, less open homes or only once a month payments, etc. Think of this as a counter offer.

Negotiating isn’t necessarily about meeting in the middle of two competing numbers. It’s about crafting an arrangement that meets the needs of BOTH parties.

Trust me, when you make this a give-and-take, everyone wins. And the client will respect you more for sticking to your guns and not giving in too easily.


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