In every stage of growth, there is a sweet spot with maximum profit. A business is either in profit mode or growth mode. Growth mode is expensive; it's investing well ahead of the curve into infrastructure (people and systems) to increase capacity and serve more customers.
Welcome to the game of subscriber retention.
We change the game when we think about landlords as subscribers. No one's locked in; everyone can vote with their feet and choose an alternate service provider. The secret is to look at the critical areas of risk and do something about them.
Critical areas of risk in PM include:
- Maximising rental return - through tenant selection, alignment of lease end dates to peak tenant demand.
- Customer interactions with tenants - Entries, exits and routine inspections.
- Maintenance - both pro-active and reactive maintenance.
- Safety and Compliance - insurance, smoke detectors, minimum living standards.
- Maximising return - tax depreciation schedules, rent reviews and capital expenditure projects.
- Problem-solving - tribunal representation and legislation risk mitigation.
- Client interaction with landlords - client briefing forms, workflow across leasing, management and portfolio growth teams.
Each critical risk area is a reason for a subscriber to leave you. PM training focuses so much on compliance, on the 'issues of the day, that rarely do we understand the job we get done for our clients. If the customer can't see the difference, they won't pay the difference. It's time to re-imagine what's possible and to put service front and centre of what we do, to solve customer problems in new and better ways.
What metrics can we use to reshape PM as a subscription service?
Start by really understanding your customer and what you do to interact. In 1988 I remember each month spending two days in the car with dad, driving our entire rent roll, looking for car's in carports with oil leaks/engine rebuilds, gutters that were falling off, or lawn that wasn't mowed. It was an era where you had to know your portfolio, one where if the client called you, you needed to have real-world knowledge of their property and its current state. If you are the landlord's 'eyes and ears' on their property, you need to be just that. Set and forget property management is a service standard, and it demands a premium fee.
When we work with any property management subscription business, we dive deep into customer relationships' knowledge and quality. I ask a series of questions, and it doesn't take long to rapidly expose areas of risk, lack of care, or diligence.
Here are a few questions to get us started:
- How many landlords do you manage?
- How many of those landlords live locally?
- How many of those landlords that live locally have you met face to face with at least once since you became their property manager?
- How many of those landlords have we been to their principal place of residence to give them an idea of its value so they know their equity position?
- How many of your landlords would like to grow their portfolio?
- How many of your landlords have tax issues and would like to accelerate their spending on capital expenditure projects to improve their asset's saleable value?
- How many of your landlords are subscribed to your landlord's first program?
- How many of your landlords do you have client profiles for, including all contact details and preferences, from communication to expenditure?
- How many multi-property landlords do you have?
- How many of your multi-property landlords have had an annual review to assist in their portfolio growth?
- What's the average management fee %?
- What's the average management fee $?
- What's the average case value per client? (includes all fees, management and leasing etc.).
Why is all of this so important? It's the way forward to go deeper with our existing customers and define a service worthy of the fee.
We get it so wrong when we hire a business development manager and provide little to no direction.
The client doesn't understand the term BDM. Who's business are they developing, the landlords or the real estate offices, or both? We need to rapidly redefine the functions that the 'BDM' performs. Let's call the BDM role a Property Management Growth Specialist (PMGS). The role of the PMGS is to achieve growth, and you do that through two specific channels - the existing subscriber base and new subscribers.
Let's dive deep into what we do to work with the existing subscribers:
- What does the data tell us about our existing subscribers (landlords)?
- Which subscribers have an appetite for growth? Capital expenditure? Would like a market appraisals on their principal place of residence to know their equity position? Have additional properties in their portfolio they'd like us to manage?
You get the picture. Then the firm needs to get clear on how it attracts new subscribers. Review every new subscriber you've won in the last 12 months and ask one simple question, how did you meet them?
There are only a few channels that deliver consistent growth:
Your existing sales team. They meet 1,000's of buyers each month. How many of them are investors? Or intend to be? And what do you do to identify them, then assist them both in the real and digital worlds?
Strata meetings. Medium to high-density dwellings have strata managers, and all landlords either attend or have someone attend in their place at each strata meeting. The strata managers know all the owners and appoint the building manager.
Builders, developers and architects. Every local council website lists in order all development applications. Is the property being built to sell or built to rent?
Self-managed landlords. They advertise their properties on various portals, advertise with signage and on tenant forums.
Suppliers. Maintenance is one of the largest lead sources for letting businesses in the UK. Their maintenance divisions also provide services for competitors and thus meet plenty of landlords. The same goes for anyone who provides property related services - think plumbers, electricians, lawn maintenance. Jim's Mowing completes over 1 million property-related transactions per month; think of all the owners they already know?
Past Enquiry. 100's of potential Landlords call your agency every year. Most of these calls are price shoppers, where without serious sales skills, you fail to convert. When you lose an opportunity to a competitor, it's not forever; it's just for now. Pull out the past enquiry register and start calling.
Acquisition. The bankers are keen to change the model. Most property management business are bought and sold based on a multiple of the top-line revenue. Bankers are eager to shift that to a multiple of the EBITDA. Why? Because when you build scale, you can sell that on the stock exchange. Becoming a public listed company provides more capital opportunities than mum and dad business owners. Valuations pay no view to the sales revenue generated from where the landlords live, then the internal sales, where landlords buy investment properties from your existing rent roll through your landlord's first program.