Small businesses like your property management company are grossly underspending on marketing, and it’s hindering your growth.
This isn’t your fault. The person who gets the blame is a HOMI – a High Octane Marketing Individual.
All of these HOMIs are screaming at you from billboards and YouTube advertisements; Facebook videos and late night infomercials. They’re making some pretty huge promises. They’re telling you they can blow your business up for a small fee of $30,000, or maybe just for a few hundred dollars a month. You might have been burned by a HOMI in the past.
Of course you’re going to hesitate before you invest in marketing.
These HOMIs don’t know you, and they don’t know your business.
Sales and Marketing vs. Running Your Business
Like most small business owners, you didn’t become a property manager to do sales and marketing. You want to spend your time operating your business.
Sure, you want to grow your business, but you don’t want to think about growing your business. And, if you make a mistake while dabbling in marketing, you’re more likely to pull back and avoid it altogether.
HOMIs are quick to take advantage of your situation.
Property Management Marketing = Unparalleled ROI
Don’t give up on marketing.
It provides you with unparalleled returns on your investment. The amount of business you can earn with the right marketing investment is staggering. I just finished a presentation where I calculated the return on capital that one property management business got by investing $20,000 in marketing. The annualized return was 36 percent.
Is there any other legal way to get that kind of return?
No, there isn’t. But, your property management business has the potential.
Eliminate Risk from Your Marketing
Investing money into marketing must seem like a risk if it hasn’t worked for you before.
But, by tracking these three Key Performance Indicators, or KPIs, you can eliminate that risk. Take a look at these three numbers you need to effectively create a marketing budget. It’s simpler than it sounds.
Customer Acquisition Cost (CAC)
What does it cost you to acquire a customer? It’s simple to calculate. Take a period of 12 months and add up all your marketing and sales costs. Divide that by the total number of owners you brought on board. Or, divide that by the number of doors you acquired. That will provide your CAC.
Sales and Marketing Costs for 1 year: $25,000
Number of New Properties in 1 year: 50
You spent $500 to acquire each of those new properties.
Annual Contract Value (ACV)
What is that customer worth to you for a period of 12 months? This is the amount of money you made on management fees, leasing fees, and other ancillary costs from that one property or that one owner in a year. Divide the revenue that you gained by the number of doors that you have under management. That will provide your ACV.
Revenue over 1 year: $1,200,000
Units under management: 360
Each client is worth $3,333 over a year.
Customer Lifetime Value (CLV)
What is the customer worth to you over their lifetime? Maybe you have a customer for an average of five years, or 10 years. You can multiply your ACV by the length of time you have a contract from a customer and determine your CLV. This number will show you why spending $500 per contract is not so expensive. If you don’t know how long your average customer stays with you, use a number like 4 years, which is around the national average for property management companies.
Annual Contract Value: $3,333
Avg. Time Owners is a Client (in Years): 4
Each client is worth $13,332 to your business
Build Your Marketing Budget
Even if you hate math, these are not difficult numbers to calculate. Once you have them, you can apply this principle to building your property management marketing budget.
- Let’s say you want to grow by 100 units this year.
- Well, you know that your CAC is $500.
- 100 x $500 = Your Marketing Budget.
Use this approach to validate which marketing channels are actually working for you. Get even deeper by applying the CAC to each channel. Maybe Facebook marketing is costing you $2,000 to acquire one client, but Google AdWords is costing you $750 to get one client. It makes sense to direct your marketing money towards AdWords because you’ll gain more clients for less. You can compare Google AdWords to investor seminars and all the channels you’re using. They each have their own CAC.
This is what HOMIs can’t or won’t tell you. Understanding your KPIs and the cost of each platform will help you decide where to double down with your marketing dollars to get more property management leads.
You won’t waste money on marketing when you have this information.
Talk to us. If this helped you or left you more confused – we want to know why. Contact us at Fourandhalf, and we can help you calculate your CAC and determine where your marketing dollars are best spent.