What are we paying for?

More and more companies taking leashold space are examining what it is that they are paying for each quarter on their service charge.

In these times of stringent cost management, the hand that signs the cheque is pausing and asking the questions 'What is this for?', 'Why has it gone up?', 'Who controls this?'. Questions that are overdue and need answering.

So let's look at the model. Currently a Landlord normally assigns the management of a site to an agent. The agent oversees the delivery of the services that te landlord has contracted on the site and liases with tennants to ensure that the services are delivered. For this sevice the agent charges a fee, that fee is calculated as a percentage of the total Service Charge budget (Normally between 7 and 14%). Can anyone see a problem with that? The agent is activly disincentivised to reduce costs!! One of the may reasons that service charge has risen 7% compound year on year for the past 5 years!

We at Simplicity have changed the model. We charge a fixed fee and agree a bonus from the Landloed set against criterea such as cost reduction and Service Delivery. In a recent example we took a bonus of 10% of the cost savings implemented across the year with a rider that Service Levels must remain the same or improve. Simple!

This is not rocket science, this is a simple and easy remodelling of an out moded and inappropriate system which is long overdue and puts the customer back at the centre of the conversation.