Podcast: Play in new window | Download
The Property Management Show has been on the air for about two years, and each episode inspires a lot of feedback from listeners. There have been some questions along the way as well, so on this episode, host Alex Osenenko is answering some of the specific questions that listeners have submitted. Alex will use his experience and expertise to answer these questions, and you’ll notice they apply to nearly all property managers and small business owners.
Background: Alex Osenenko
What makes Alex uniquely positioned to answer these questions?
He has spent the last 10 years in the property management industry, and the last six of those years as an entrepreneur and business owner. He has scaled Fourandhalf from being a garage business with 0 employees to a thriving company that currently employs 27 people and continues to grow. In addition to this experience, Alex has talked to thousands of property managers at different stages of their careers. He has spoken to successful business owners, business owners that have failed, and a whole section of professionals in the middle of the spectrum of success.
Alex sees the purpose of his professional life clearly: it’s to help small businesses grow. This is his passion, and the podcast serves that purpose. Here are the Questions and Answers he’s chosen for this episode.
Question 1: Struggling with Business Structure
Sam from Longmont, Colorado started his company about four and a half years ago with a few properties he took over from another management company. He got into the business because he was looking for something more stable than just selling real estate. Now, he’s managing 85 properties – most of which are high quality single family homes. As Sam has grown at about 30 percent for the last two years (way to go, Sam!), he’s wondering how to structure his company. When he first began, he was doing everything himself. That included maintenance, accounting, inspections, and showings. Most of you can probably relate to that.
Once he got to 40 properties, Sam knew he had to make a change. He hired two people; one to help with maintenance and one to help with showing available rentals. As he continues to grow, Sam wants to know how to adjust to increased business. His question is whether to bring in some extra showing agents or switch to a portfolio structure and bring in an administrative person.
Alex has another idea.
Answer 1: The Squad Structure
According to Alex, Sam is in the perfect position to continue scaling with a squad structure. For Sam, that means having a Property Manager Executive on top, who is responsible for speaking to clients. All client interactions should go through the Property Manager Executive. Below that, there is someone handling maintenance support, rentals and leasing support, and maybe accounting. So as a squad, that structure operates efficiently because there’s a single point of contact for your clients. According to expert Adam Hooley, you should be able to handle between 150 and 300 properties with a properly organized squad.
So, Sam’s path is pretty clear. Take the time to spend a day or even half a day reviewing and listening to the Framework of the High Performance Property Management Team with Adam Hooley. Check out that interview, listen to the podcast, and pay attention to the book that he mentions and allows you to download for free. Put the structure together and fill it in with properties. Then, when you’re ready to build that second squad – you already have the framework.
Question 2: Turning Leads Into Business
Monty from Florida has owned stock and commodity investment firms for the last 25 years, so he’s comfortable using the phone and cold calling. It’s his favorite tool to generate leads at a low cost per acquisition. Property management is a good fit because he’s been helping investors get better returns for 25 years, and this is not much different. Recently, Monty hired one of his former commodity brokers to do cold calling for his property management business. There’s been some initial success, but so far most of the leads they have closed have been only for tenant placement accounts. Monty hopes to convert the placement-only accounts into management accounts in future.
He knows he is one of the best salesmen and closers; and he’s good at hiring and training his procedures with similar results. Monty and his team close as much as 30 percent of their inbound leads and average a minimum of 15 to 20 percent closing rate. His struggle is in getting more leads. Monty says he sees companies like Empire in Houston, that claims to have built 0 to 700 doors in four to five years, or Larsen Property Management (now RentWorks), claiming to add a door a day. He knows those are impressive numbers, and he wonders why he has a hard time generating 40 to 50 leads a month, let alone 30 doors.
Monty recently spent $15,000 on radio and internet marketing to only generate 60 leads in a month. He wants to know what the marketing budget is for companies like Empire and RentWorks, and what they spend to get those results.
Answer 2: Internal and External Ways of Increasing Growth
The companies Monty mentioned are important. Steve Rozenburg and his partner Pete are at the helm of Empire, and Brad Larsen runs Larsen Properties, which is now RentWorks. The numbers mentioned by Monty are real and true; their growth is staggering. And his question is – how can a company get the same growth rate as Empire and RentWorks?
There’s an internal and external path.
Internal Pillars for Growth: Purpose, Numbers, and Experimentation
First, you have to establish your purpose. The purpose of an organization is not to enrich its founder. That’s the outcome, not the purpose. The purpose of a company has to be higher than that, and something people can connect to and belong to. Brad and Steve have a loud and clear purpose. Everyone knows who they are and what they’re doing. They want to lead the industry, and their teams are aligned behind that purpose. They have values, and they talk about those values all the time.
Next comes numbers. You have to understand everything about your business and its numbers. For example, Steve and Pete with Empire obsess about Key Performance Indicators (KPIs). This is what drives the decisions about which direction the company should take. Know your numbers on pre-sale and post-sale terms. Pre-sale is what happens before you bring a customer in, and post-sale is after you sign the customer. Be obsessed with KPIs.
The last piece is experimentation. Both of these companies are exceptional at experimenting. Steve and Alex have spent hours interrogating each other about marketing, growth, what can be done to grow smarter, and why things aren’t coming together as fast as they would like. Those intense conversations required deep thinking about every single aspect of growth, marketing, and scaling your company. Brad is the same way. He runs his own podcast where he interviews property managers who have ideas about better ways to do things. He thinks.
Experimentation culture starts with the owner and trickles down into the organization.
You need resources to fund experiments. Renter’s Warehouse spent 25 percent of revenue on marketing to scale up the business. They don’t spend that much anymore. But initially, they spent that to bring the business up to the level they wanted. You don’t necessarily have to spend 25 percent of your revenue. But, you have to invest into business growth. Put the money you earn back into your growth. If you are looking to grow, have a consistent and strategic budget allocated to marketing and growth. That should be around 10 percent of revenue, depending on your operations structure and how much you want to grow.
Ongoing Investments vs. One-Time Investments
So, Monty invested $15,000 on marketing and radio in November. That’s great. But what if he put $15,000 into marketing and radio every month? Generating 60 leads in one month is not so bad, especially when your close ratio is 20 percent. That means Monty earned 12 contracts in that month. Imagine that your Annual Customer Value is $2,300 or $2,400 on management fees alone. Multiply that by four years, which is the average number of years a customer will stay with you, and you’ve got a lifetime value of $115,000. If you can produce $115,000 over the lifetime of those leads after spending just $15,000 – you’re doing pretty well.
So, it makes sense to keep investing that $15,000 every month – not just one month. That’s how successful businesses operate. Look at unit economics and acquisition costs. If you can pay back your acquisition costs in six or seven months, your investment makes financial sense.
Know the math, and keep experimenting.
Yes, it’s going to be expensive and it may reduce your cash flow for a while. But, that revenue will catch up.
Continue to experiment.
Don’t expect immediate gratification.
You have to look at success from the perspective of annual and lifetime customer value. If you want a great, profitable business, you need to understand that spending $1,000 or $2,000 to acquire an account is cheap.
External Pillars of Growth: Content, Reputation, and Conversion
When you need more leads, you need more content to attract those leads. Both companies that Monty mentioned have well over 150 or 200 or 300 blogs that are basically explainer videos. Those blogs are talking to prospects about managing a property. They are a platform for sharing expertise. That content brings thousands of visitors to their websites.
Next, reputation is critical. Steve and Brad are obsessed with reputation. They check their reviews and they figured out a way to get positive reviews. Find a way for your happy clients to speak on your behalf. You need to commit to a culture of positive reputation. That includes rewarding employees and asking your customers for reviews.
Finally, your external source for more leads is conversion, which happens through your website. Brad and Steve don’t have cookie cutter websites. You need a site that converts visitors into clients. Design a site that can effectively communicate your value propositions and then resonate with visitors.
The companies Monty mentioned are on top of their respective searches because of their internal and external foundation.
Question 3: True or False – SEO Won’t Save You
Matthew from Raleigh asks – when someone says SEO won’t save you, to what extent is that true, and in what way is it missing an opportunity?
Answer 3: No, SEO Won’t Save You. But it Will Help You (If You Do Some Other Things Too)
The last answer focused on internal and external frameworks. Those things are necessary to answer this question too, and it’s worth repeating.
You have to have the framework internally. And externally, you need content and conversion. SEO is plugging keywords and restructuring your website so it responds to the right keyword searches. It’s a back-end website structure that engineers a way for Google to understand what your website is all about. Then, your site is found for particular search terms.
For that purpose, SEO is an enabler. But – if you don’t have a company that’s aligned, and you don’t know your numbers or track your KPIs, SEO won’t matter. If you don’t understand what it costs to acquire a customer and you don’t know where your leads are coming from or what it’s costing you, and you refuse to experiment – then it is true: SEO won’t save you. Your customers will come in and out through a revolving door that never stops swinging.
You need your purpose and a team that cares. Then, you need content, reputation, and conversion. If you are authentically answering questions, and you have a great reputation with a website that converts, then SEO will enable your strategy.
But, on its own without those core principles employed in any business, you have a leaky bucket that SEO cannot fix. SEO makes an impact when everything else is working for you.
Question 4: Relationship Between Marketing and Business Growth
John from Minnesota asks – why should I spend money on marketing if I’m not growing?
Answer 4: Investing in Growth is NOT Optional
If you’re not growing, it’s probably because you’re not marketing. Or, it’s because your team is not aligned or because you don’t have a purpose that’s clear and communicated. If you’re not growing, you’re probably not looking at your numbers every six months.
Growth happens to companies that are programmatically going after their purpose. It happens to companies that are structured correctly internally and externally, and are well-positioned. So if you’re not growing, find a way to put budget towards acquisitions rather than whatever activities you are currently investing in. Your money’s going somewhere. Are you spending it all on payroll or software? You pay yourself a salary, and then where does the rest go? Which part of your revenue is dedicated to growth? If you say none – then there will be no growth.
Running a business is difficult, painful, and lonely. You have no one to complain to, and you have to make decisions and solve problems. You have to be unpopular sometimes to save the organization and the company and the critical customers. It’s a lot easier to do things the way they’ve always been done. That’s the definition of an easy life as an entrepreneur. If things worked one way 20 years ago, you think they should still work that way now. But, that’s not true in most cases.
Everyone wants to grow, and the urgency to grow requires an investment. Whoever you hire to help you, you need to put in the resources and the work.
Find a partner and invest time in this. It’s important to understand that anything growth-related requires an effort. It requires experimentation and investment. Successful property management companies figured that out, and they’re not stopping. They aren’t just setting it and forgetting it or leaving their system to run on autopilot. They experiment continuously.
Listen to Brad Larsen’s podcast if you get the chance – it’s called The Property Management Mastermind. You’ll gain some exceptional knowledge out of that.
Today’s Takeaways:
- Understand your purpose and align the team behind it.
- Know your numbers.
- Be a culture of experimentation.
- Make tons of content.
- Be obsessed about reputation.
- Create a website that converts. Make it unique and explosive.
That’s the winning formula.
Contact us at Fourandhalf if you have any questions about property management growth, and we’ll start planning another Q&A show in the near future. So, send us your questions, and thanks for listening.
