3 Steps to Profitability with Kathleen Richards
On The Property Management Show this week, Kathleen Richards is joining us to talk about profitability. She’s been on the podcast several times, and we’re asking her a pretty simple question: how can property management companies set themselves up to make good money?
Kathleen Richards: An Intro
Kathleen has been a member of NARPM since 2005 and she’s the former broker/owner of a Santa Cruz property management company. She earned her CRMC designation from NARPM and owns PM Made Easy, a company providing operational documents and forms to professional property managers.
In 2015, she became a certified business coach and founded The Property Management Coach. Since beginning the company, she’s coached over 450 property managers and business owners on how to be more efficient and how to be profitable.
Out of that business, Kathleen developed a niche that has drawn people to her who want to start a property management company. Some of them are real estate professionals who want to expand into property management. Other clients recently bought a franchise but don’t have the necessary industry experience.
Earning Consistent Property Management Profits
The focus of Kathleen’s work is to make sure your property management company runs smoothly. That’s the value that leads to consistent profits year-round.
There’s a lot that demands your attention when you start a business. According to Kathleen, two things are needed:
- Time management
- Having efficient systems in place
The quickest way to set up a business is to create a plug and play model.
So much of what property managers do on a daily basis is repetitive. People usually don’t make progress with their business because they’re just reacting to things all the time and putting out fires. There’s no room to be proactive in how the put their systems in place.
Automation helps. You can create templates and not type the same letter 20 times.
This impacts your profitability. Maybe you’ve been thinking about raising your property management fees or updating your property management agreement but you haven’t actually done it yet. If you don’t have the time to focus on that, it means your systems and your time management aren’t working for you. That leads to less money.
Being too busy actually hurts your profitability. For example, if you’re spending a lot of money on marketing but you don’t have the time to return phone calls from new potential clients, you’re throwing away that marketing investment. It doesn’t work.
Systems Start BEFORE Day One
Maybe you’re just starting a business and you don’t have any clients yet. You still need those systems in place. In fact, this is the perfect time to create them. Get together a plan for onboarding new tenants. Create an application. Set up a rent collection process.
This isn’t necessarily the sexy stuff, but it’s foundational and necessary. You have to be prepared to operate your business before you open your doors.
There’s nothing worse than working hard and not earning money. The right systems and careful time management prevent you from spinning your wheels.
Set Yourself Up for Profitability
Think about your pricing – always.
Trying to do property management cheaply in order to attract more doors is a mistake. You don’t have to charge the least and you don’t have to manage every property that comes to you.
Set yourself up to be profitable. Price your services in a way that reflects your value, and monetize what you do.
Here’s an example of how bad pricing can prevent profitability.
Kathleen worked with a client who had a flat rate for everything. When they actually did the math, they discovered that she was only earning four percent of the rent per door.
A lot of owners worry about losing clients if they raise their rates. Set your prices correctly from the start so the expectations are out there. Communicate what you do by charging the right prices for each thing you do. Don’t offer to do “everything” for a certain percentage. Monetize each service you provide.
You have to be clear about explaining your value. For some people, only the price tag will tell them how important the work is that you do.
This is how you run a profitable property management business.
Carve Out Your Local Niche
With her coaching clients, especially those just starting a business, Kathleen recommends avoiding a broad approach. Be specific about the neighborhoods you’re serving, and then expand into other areas when the time is right.
Pick the neighborhoods or the parts of town you’re willing to work in. This will be easier to manage, especially if you’re starting out in a dense area.
Be intentional about the properties you choose to manage as well. If you have an in-house maintenance team, you might want to focus on managing homes that will need a lot of rehab because that’s going to increase your revenue stream. If you don’t have an in-house maintenance team, swap out those older homes that need a lot of work for properties that require less maintenance.
Think through who you want to serve. You can’t go wrong when you know your ideal client and your target market.
Avoid the door grab.
Even if you’re just starting out, there’s no need to gather up as much of the market as you can. Big companies can afford to do that but it doesn’t make sense in a service business like property management. Costs creep in and tenants get less easy.
There’s a lot of automation in property management and small businesses can take advantage of it, but it’s going to cost money. You’ll have to pay for the software and the automated showings and the virtual assistants. Typically, new business owners are doing everything themselves. If that’s you – don’t do the door grab. Decide who you want to work for and where you want to work.
A prospective coaching client told Kathleen they were based in Marin County in California. Marin County has a lot of high dollar properties. Homes rent for more than $10,000 a month in many cases.
The client wanted to go into that market and grab a large market share. When they said what they planned to charge, Kathleen knew right away it wouldn’t work. The price point was so low, it didn’t make sense.
If you saw a brand new Ferrari for sale at the price point of $10,000, what would you think of it?
You’d think there was something wrong with it.
You’re coming into the property management market as an expert. You don’t want to arrive with a price so low that people think there’s something wrong with you.
Don’t be the cheapest in the market just to try and attract the largest market share. This will backfire on your profitability.
Webinar Announcement: 3 Keys to Generate Revenue All Year Round
A successful and profitable property management company needs:
- The right pricing
- Boundaries around which properties and which locations will be served
- Time management
In January, Kathleen is launching a webinar around her 3 Keys to Generate Revenue All Year Round.
She’ll go deeper into these things, and the webinar is free.
The three areas the webinar will focus on are:
This part of the webinar will be all about operational logistics. Most property management companies wing it in the beginning. You’ll earn more if you have a plan for marketing and operations and how you onboard owners. It shouldn’t be complicated, and Kathleen keeps it as simple as possible.
The focus here is the WHY. Why do you want a property management business? You need a reason that will drive your performance and your profits. You also need to know how to handle things when they get tough. Every business owner faces challenges. A lot of real estate agents who come over from sales are often shocked at how hard property management is. This is a different set of skills for them.
If you’re not an analytical person, your gut will tell you when you’re not as profitable as you should be. You’ll start feeling unappreciated. You’ll feel you’re not making any money. You’ll feel resentful towards your owners and you’ll get tired of all the complaints. Property management is about solving problems. When you’re profitable, it validates that you’re doing something right.
If you’re not committed to running a profitable business, perhaps being an entrepreneur isn’t for you.
If you don’t have a strong WHY, property management isn’t for you.
Those areas will be covered in Kathleen’s webinar.
In addition the webinar, Kathleen is launching a course on how to put all these things into practice. It starts at the end of January and goes for seven weeks, until March 18. But even if you don’t do the course, the webinar will provide value to anyone thinking about property management and building a business.
To sign up for training, visit pmdoneright.com and register for the webinar. Three different dates towards the end of January are available, with different times.
The course and the webinar are great opportunities for new property management business professionals who might not have the budget for one-on-one coaching. By spring and summer, you’ll be ready to add revenue to your existing business or build your new business.
Maybe starting a property management business is for you and maybe it’s not. Find out.