How I Did It: Lisa Wise Discusses Property Management Growth
Today on The Property Management Show, we’re talking to Lisa Wise, who runs a boutique property management company called Nest DC. She spoke at PM Grow Summit in 2017, and she’ll speak again in 2019, so if you’re curious about the conference or you haven’t bought tickets yet, go to pmgrowsummit.com. It’s the perfect event for property management entrepreneurs who are looking to improve business outcomes.
In our How I Did It series, we’re talking to successful entrepreneurs about the mistakes they made as they were growing their businesses.
Introducing Lisa Wise and Nest DC
Nest DC is six months from turning 10 years old. The company has gone from being the new kid on the block with a novel marketing plan and way of doing business to one of the largest management companies in the city of Washington, D.C. for single-family rentals.
The company is currently looking at ways to build on their reputation and introduce new income streams while helping the community. That energy keeps the staff engaged and excited, and growth mode requires inspiration and excitement. Nest has developed a sister company called Spruced DC, which handles condo and building management for HOAs and owners. The newest brand coming from Nest is Starling DC, which handles turnover and light construction. So, even though Nest is turning 10, they always feel like they’re in start-up phase.
But, they’re not in a start-up phase because they’re earning over $3 million in revenue.
Measuring the Property Management Growth Curve
Nest DC has been on the Inc. 5000 list, which was a big win. However, Lisa points out that you reach a stage where you can’t have hockey stick growth any longer because the portfolio just gets too big. When a property management company moves from 100 to 200 properties, it’s an inspiring math equation. But, you cannot go from 800 properties to 1,600 properties in a year. It’s simply unsustainable.
Leveling out can be good. A business that keeps growing isn’t necessarily thriving. You need healthy growth. Giant profit numbers year after year are hard to come by in a service-based business. And, the core business clients are important and need your attention.
Don’t seek growth just for the sake of growing.
For Nest DC and Lisa, growth right now means allowing the leadership team to take over more of the day to day business operations so that Lisa can be more visionary. She feels lucky that she’s built a good senior team who is willing to continue taking on new challenges.
Growth Can Mean Complementary Business Units (CBUs)
To really have a healthy and growing business, you need a profitable company. One way to increase profits and growth is to introduce CBUs. Maybe that’s a maintenance division or a sales division within a property management company. The goal, according to Lisa, is to use those additional businesses not as independent companies that are predatory and focused solely on profit, but to use those business units to improve and develop relationships.
While you’re building CBUs, it’s important not to sacrifice what you do best just to do something new.
Property management companies often make this mistake. There’s a shiny ribbon of a renovation business or a sales business, but suddenly you cannot get your lease done or your basic customer service needs met. Don’t threaten or risk your core business.
You can monetize your current relationships with customers without being predatory. People trust the relationships you have.
Here’s an example of how Nest DC made this work with their new company, Starling DC:
When a property owner comes back to occupy the home after being away, the Starling DC business can make sure the space is ready when they get back. Nest is losing a door because that property no longer needs to be professionally managed. But, they’ve made a grab for some cash flow on the way out the door.
That’s pretty smart.
In addition to starting two new brands, Nest also provides some consulting services that build additional income. They do expert witness work in court, and they consult with small condo associations who cannot afford full-time management but need help with some of the shared responsibilities like roofs and taxes.
Building long term relationships is the best way to cash flow your company, especially when you’re adding extra services and businesses.
There’s a window of opportunity for CBUs, and a growth-minded property management company will identify that window and act.
Learning from Mistakes: Liability and Insurance
Lisa’s main mistake while growing her business was legal exposure and not being able to identify and address risk before getting into trouble. Like many entrepreneurs, she and her team pieced a lot of those systems-based regulatory risk management activities together without investing in good legal and accounting advice right away. There were several points when Lisa realized she should have had more insurance. There was a situation in 2013 when her company was hammered with a lawsuit based on lead paint exposure. Lisa acknowledged that she made a mistake and didn’t do her due diligence with a vendor.
No one was truly at risk, and it wasn’t the end of the world, but the company was at risk. Lisa had to detour from growing her business to deal with this conflict. Property management can be a risky business. The more visibility and the more resources you appear to have, the deeper people think your pockets are. So, spending money on legal advice earlier is something Lisa wishes she had done to better protect her company.
Lesson: Don’t have a friend write your contracts. Paying legal bills doesn’t feel good, but you need that expertise and that protection.
Growing from 0 to 100 Units: Marketing and Systems
Confidence and belief in your services is the best thing to propel you from zero to 100 units. Lisa was telling everyone Nest DC was the best in the business. They built a reputation and became visible in their market. Creating an attractive brand and using every resource that was free and available started the marketing and branding that led them to growth and success.
They used social media and took advantage of every networking opportunity that was available. They went to open houses every weekend with a gift bag and introduced themselves to real estate agents. That provided free one-on-one face time with prospective clients. That’s the marketing they used to get to 100 doors. It was all about gathering clients one unit at a time.
What really got them on the map was a “Best Of…” contest in the DC City Paper.
They only had between 18 and 30 properties, but they were voted Best Property Management Company in DC. This got them a lot of visibility and an instant reputation for excellence. Since then, they’ve been in the top three every year.
Operationally, Lisa didn’t have a lot of structure in place. Whoever answered the phone was the team member who took care of the inquiry or the problem. There were five people on staff, and Lisa wasn’t earning a salary.
Next Stage Property Management Growth: From 100 to 300 Properties
Systems became incredibly important in the journey from 100 to 200 properties. At this point, you cannot simply keep keys in a box. You need to organize and track the portfolio of properties you’re managing. Nest DC began working with Appfolio, and having a property management software that was aligned with their business model was exactly what they needed.
The volume became a driving force in getting everything systemized and operationalized. Like every other property management business owner, Lisa learned that what works at 50 units doesn’t work at 200 units.
Software is only as good as the user is at using it, and the team had to make sure everyone was clear on roles and how to use their software. They had to come up with some best practices and standard operating procedures. They embraced consistency and they reduced risk.
Employees were free to do their best work on the confines of an endless beach. Appfolio gave Lisa’s company the sandbox to build their practices around. Sometimes, they still felt like they were on that endless beach. But, they had better strategies and solutions were easier to come up with.
The marketing strategy didn’t change much, they just did more of it. They continued getting the brand out there and they kept participating in the industry. They did lot of blogging and made an effort to comment on the social media posts of other businesses. They kept doing the open house visits and they began participating in roundtables. Professional affiliations were important, and Nest DC sponsored different community events. They did everything they could to become visible in the community.
Beyond Property Management Growth: From 300 to 500 Properties
Departmentalizing became the most significant part of the transition as the company grew to over 300 units. The company had about 12 employees, and there needed to be more structure around a finance department and a leasing team. Then, they developed a maintenance team. There was more clarity around how those departments worked, and investments were made in training people.
Internal culture became important, and there was an increase in salaries because longevity was the result they wanted. Lisa wanted to invest in people who aligned with the company’s values. That element helped the growth continue.
Every year, the company takes a giant step back to fine tune what they’re doing. Internally, if there’s something an employee doesn’t like doing, the advice is to find a better way to do it. Sometimes, the things you do aren’t necessary, but they simply become the fabric of your company. Edit out whatever you can. Take advantage of innovation. Scalable growth means delivering the best services and products without killing yourself.
Over 1,000 Properties: How do Things Change?
Leadership makes the difference when your company jumps to over 1,000 doors. There’s not necessarily a big leap in how things are done, but there needs to be a shift in who is doing what. More leadership, stronger managers, and people for staff to look up to are critical. You need to invest in a larger pool of people. A sustainable staffing model is essential. You can refine your systems and get better at what you do, but what you really need are decision makers.
Encourage your staff members to build on their strengths and develop their leadership. Lisa doesn’t know how to lease properties or screen tenants anymore. That’s a good thing. She’s focused on property management growth and developing the next brand.
Reputation is the next thing for Nest DC to conquer. Their rating on Yelp is lower than it should be, mostly because filtered reviews are a problem. A handful of the negative reviews are minimal compared to the majority of four or five star reviews, but those are the ones that get the most attention. Building a better reputation online will be the company’s focus in 2019. They will keep working with their survey system and they’ll be more proactive about getting happy customer to share their positive experiences.