Knowing RMC revenue models enables informed decision-making, budget management, service quality, and strategic planning. It helps you understand the cost of your program transparently. It also ensures alignment with your global mobility program goals and objectives, and aids in building a more strategic, trusting and beneficial long-term relationship.
 
So, to be sure you’re receiving the best service and value for your program needs, start with knowing that RMCs generally categorize revenue into two segments: U.S. Domestic and International. This article gives a behind the scenes peak into both categories and sources of revenue that are generally standard for all RMCs.

A Look at U.S. Domestic Sources of Revenue

Real Estate Referral Fees

By far the greatest source of revenue for RMCs is domestic real estate referral fees. A program with many homeowners, high real estate values and policies with home sale benefits enable an RMC to be the most flexible in pricing other services.

A well-established industry practice is for RMCs to collect a referral fee from the real estate agents who assist relocating employees on the sale and purchase of their departure and destination homes respectively. RMCs typically collect anywhere from 38-45 percent of the “action side” (sale or purchase side) of the transaction associated with the relocating employee.

With changing real estate practices, there may be a shift in the way these referrals contribute to RMC revenue resulting in a change to pricing structure. This is an area that will be assessed by all RMCs as changes in the real estate industry continue to unfold.

Non-compliance Fees

Since real estate referral fees are critical to an RMC’s cost structure, it is important for an RMC to offset an uncaptured real estate referral fee. In the event a referral fee is not captured; an RMC may charge a non-compliance fee for not being paid on either the departure or destination home sale. These fees can be avoided most of the time by the client requiring usage of the RMCs broker network.

Household Goods Transportation Commissions

RMCs typically have contracts with major van lines that include a discount against a tariff (the tariff can be set by the van lines, or they may use the 400-N equivalent). These tariffs  govern the charges on actual weight and actual services performed. When the RMC is preparing pricing, they pass through a portion of the discount to the client while the rest is revenue to the RMC.

Temporary Living Fees

RMCs typically collect a referral from temporary living / corporate housing providers. The standard amount received for temporary living is approximately $7.00-$10.00 per day for domestic and international depending on the agreement with the RMC.

Mortgage Marketing Fees

By law, mortgage companies are limited to what they can pay to RMCs for access to relocating employees. Typically, they pay a nominal dollar amount per customer referral to have the RMC promote their mortgage company to relocating employees.

Other Service Provider Referral Fees/Commissions

There may be a small referral fee or commission for other services such as spousal assistance or title insurance. These amounts are nominal in comparison to the other sources of revenue mentioned above.

Network Fees

RMCs may charge a fee to suppliers to be included in their network. The fee provides suppliers the opportunity to participate in training and access technology across the RMCs network and to be considered for referred business. However, not all RMCs engage in this practice to ensure the focus remains on performance when selecting service partners.

Service Fees

Most RMCs will charge a service fee for customers receiving renter. lump sum, capped move or domestic assignment policy benefits. In addition, they will charge for ancillary services such as property management. RMCs can keep service fees low, or even at zero, if the company’s policies are supportive, annual relocation volume is high, and the average property value generates a reasonable amount of referral fees. Clients may be offered a bundled fee by move type (e.g. renter, homeowner, short-term assignment) or based on an expected scope of service.

A Look at International Sources of Revenue

International Service Fees

Unlike U.S. domestic moves, the primary source of revenue for international mobility comes from service fees rather than real estate referral fees as the opportunity for referral fees is lower. While those moving one-way may decide to sell and/or purchase a home, it is not common or encouraged for international assignees to sell or purchase a home. As such, most RMCs will provide a “bundled fee” option as well as an “a la carte fee” for certain services. Clients may be offered a bundled fee by move type (e.g. long-term assignment, short-term assignment, one-way international transfer, etc.) or based on an expected scope of service.
Clients might also see separate fees for on-going assignment management, global cost estimates and/or travel coordination. Many RMCs bundle their services differently, making it difficult to compare apples to apples. When reviewing fees, make sure you determine exactly what is included.

Other Service Provider Referral Fees/Commissions

Just as with U.S. domestic, RMCs manage and coordinate international mobility services for which they may receive a referral fee or commission. The collection of referral fees and commissions allow RMCs to keep fees down for clients but is not enough for a zero-service fee. The types of services where a referral fee or commission may be received include Destination Service Providers, International Household Goods Transportation, Temporary Living, Cross Cultural Training and Language Training.

A Look at Other Charges for Both U.S. Domestic and International Programs

Interest

RMCs may charge interest on funds that they disburse on a client’s behalf.

Technology

Some RMCs charge for the use of their technology or for reporting, particularly if there is a request for customization by the client.

Implementation

You may see a charge for implementation either as a new client or for implementation of requested improvements such as technology integrations or custom administration requirements.

Authorization or Initiation

Agreed fees are typically charged when the employee is authorized to begin their relocation services with the RMC. Should the relocation be canceled, some RMCs may charge a cancellation fee depending on actions taken with that employee.

Pricing U.S. Domestic and International Programs

To determine the revenue opportunity of an account, the RMC needs to know the number of annual employee moves for each move type, both historical and projected. For U.S. Domestic programs, they may also ask for the average home value for the departure moves and the average home value for home purchase moves. This will help them determine the projected revenue from referral fees of the opportunity. This clear line of sight will benefit the client as the RMC may be able to offer lower fees.

Once the RMC knows the potential revenue opportunity, they consider what it will cost to service the business. They will look at the annual move volume and the scope of work to decide how many employees and which positions will be needed to service the account. They will look at the compensation packages of the team members, as well as overhead costs such as rent, phones, technology, etc. A portion of those costs will be assigned to each move and deducted from the revenue to come up with a reasonable profit.

Balancing Service Quality and Price

At the end of the day, there are many factors that come into play when determining a proposed fee structure, the least of which is service levels. For service levels to remain high, an RMC focuses on keeping individual consultant’s caseloads low, for example. To do this, an RMC must utilize technology where it is able to streamline processes without replacing invaluable human interaction throughout a move.

When reviewing the pricing in an RFP response, keep in mind that the lowest fee does not necessarily translate into the lowest cost of a program. Quality service delivered by experienced people will result in satisfied relocating employees who will be productive in their new role quicker, which will add additional value to your company’s bottom line. Similarly, a higher quality provider will result in fewer escalations and reduced administration from the client.

Questions?

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