Agents need to learn to charge for their services
Back in the early 1990s when venue agents came to the fore, their universal sales message to clients was ‘Our services are free of charge and will save you time and money’.
While the larger agents’ fee models have become more sophisticated over the years, many smaller agents still live by this philosophy. This is dangerous (regardless as to what may or may not happen with commission in the future,) as agents that promote themselves as a free service are often guilty of performing much more than purely venue sourcing for clients but feel unable to charge for these additional services.
Agents need to start by looking at client profitability on an individual basis and understand whether the time spent servicing each client leaves them in profit.
While costs will vary, a general rule of thumb would be to expect a consultant to earn £100,000 annually in commission. Once holidays, bank holidays, sick days, etc. are deducted, the consultant probably works 45 weeks per year and six hours a day. The consultants hourly rate would therefore be £100k divided by 45 weeks x 5 days x 6 hours = 1,350 hours, so the consultant’s fee would be £74 an hour. This may sound high, but think what an electrician or mechanic charges for their time.
I guarantee many agents will be working with clients who generate far less than the hourly figure that their consultants need to produce. This in itself is poor business practice but what I find really concerning is when the agent then provides this loss-
making client with additional services without charge. Some of the worst offending examples are listed below:
- Agents booking transient accommodation for clients. It is impossible to make money from one room, one night type bookings.
- Agents can only make money when dealing with groups, which is why accommodation has moved online.
- Agents holding multiple venues for clients. While this is bad practice regardless of client profitability, it’s particularly senseless for low value bookings. Not only is it a costly exercise for the agent, it also damages their conversation rate and reputation with venues.
- Agents settling invoices on behalf of clients without charging them. Since when did agents become banks and what bank lends money without charging?
- Clients should pay the agent for this but instead they demand ever lengthening credit terms.
- Agents providing event support for the client’s events. This service should be charged at the consultant’s hourly rate, as this is event management and does not fall under venue sourcing.
The problem is, if agents constantly say their services are free of charge they devalue their offering and make it very hard to then demand fees from clients.
Nevertheless if a client isn’t generating the required income, the agent needs to be professional and apply the requisite fees.
The worst case scenario is that the client will refuse to pay the fees and the agent will lose an unprofitable client. Hardly a disaster.