Property Management Masters Develop These Seven Portfolio Multipliers
The key difference between small property management companies and those that dominate their market is the level of focus they have on developing their business in seven key areas. We refer to these areas as the Seven Portfolio Multipliers. The Seven Portfolio Multipliers are exactly what they sound like, seven areas of your property management business that, if mastered, will grow your property management company. Mastering the Seven Portfolio Multipliers requires determination and discipline as a business owner, but you will propel your business to an entirely new level of success.
Remember, if it’s your goal to maximize the revenue and profits of your business, each multiplier needs to be optimized. These factors work together to propel your business forward and neglecting some won’t have the same effect.
One: Lead Generation
It’s important to understand how to invest revenue to cost effectively generate leads for your business. A key to this is differentiating between leads generated by investing cash and leads generated by investing time. There are also two key components to an effective lead generation system: the channel used to reach your audience and the message. If your message doesn’t clearly communicate the your services and how they solve the most pressing problems, you are going to generate fewer leads. Likewise, if you are not driving that messaging through the proper channels to reach property owners who want to hand off their property for management, you are going to miss opportunities and waste marketing dollars.
Two: Sales Conversion
What is your closing rate on the qualified leads you receive? The next step is to master the process of walking a lead from first contact to a signed management contract. Some of the property managers we’ve worked with are so effective at sales conversion that they can close contracts on the initial call! Establishing trust very early in the sales process and communicating the value of your services is very important. This is becuase the property owner becomes less focused on the price of services. Instead, they are focused on the fact that the property manager understands how to solve their most pressing concerns.
Three: Revenue Per Door
This multiplier has a tremendous impact on long-term profitability. You should be an expert at offering services to tenants and owners that drive value for both parties. They should benefit clients while also generating more revenue for the management company. For example, one service that can be effective for increasing revenue is a credit reporting service for tenants. The tenant pays a nominal monthly fee to have their on-time rent payments reported to a credit bureau. As the tenant pays rent on time, their credit improves due to the positive trade account being added to their credit history. The tenant wins! Now that the tenant is working to improve their credit, they are more likely going to pay their rent on time, giving the property owner more consistent rent revenue. The property owner wins! The management company wins because they charge the tenant a fee for the service, increasing their revenue per door!
Four: Operating Efficiency
The number one cost to a property management company is labor. Property management is a service business. As the portfolio grows, the requirement to hire more personnel to maintain quality service grows too. Implement systems that assist with automating key business processes. This will help your team manage more doors without increasing payroll. Always look for ways to improve the ratio without sacrificing quality of service.
Five: Profit Margin & Financial Health
Top line revenue is great, but it’s the money you keep that counts.
It’s important to ensure that the total fixed costs to operate your business are maintained with a specific percentage of revenue. Ultimately, instead of a financial model that is focused on making a living, focus should be on creating long-term wealth by investing 10% of the cash flow in assets outside the business.
Six: Referral & Networking Activity
There is a low dollar cost, high time strategy for generating leads: referrals and networking. Building relationships with clients and allocating time to participate in referral and networking activities puts you in front of opportunities to grow your business. There are many opportunities to network in each local market. Identify three to four events that you can focus on consistently. Then you can become known as the expert for property management within your market. (Don’t neglect online channels either!) Paying real estate agents a referral fee to refer business is another strategic option. The challenge many property managers face is that they are so focused on managing the properties in their portfolio that they don’t save time to network.
Seven: Management Contract Retention
A management contract is highly valuable and you can extend the lifetime profit value of the contract by providing astonishing service to tenants and property owners. Put systems in place to solicit feedback from property owners, so you know how to strengthen your service offering each year. You can also track the number of years on average you retain a management contract and work to extend the owner relationship every year.
We’ve seen firsthand how property managers accelerate the growth of their business by optimizing the Seven Portfolio Multipliers. We’ve also seen property managers get stuck at the same level of operation year after year by neglecting them. There is more than one way to build a property management business, but if you want to dominate your market, roll up your sleeves and master these multipliers. Don’t forget, PMI has the tried and tested processes, vetted systems, and expert support to drive success in property management. Call to find out more: 385-352-8903