Dave Gorham is back as our guest on The Property Management Show. He is a co-founder of Realty Solutions in New Jersey, and we’re diving into his philosophy around customers for life, and how it’s important to align a business with the idea that you’re going to serve your customers in some capacity for as long as you can.
Dialing into Customer Lifetime as a Business Model
Customer lifetime is an important part of Dave’s business. And, it was never intentional.
This focus grew out of the discussion he began having with clients about their financial assets and their exit strategies. It became part of the same conversation. As the company began to grow, Dave was acting as the Business Development Manager (BDM), and he would talk to potential clients about exit strategies. He’d be curious about why they were buying a particular property and what they planned to do with it. Dave found himself wanting to know what the client would do with a property if it became unprofitable and a financial advisor recommended letting it go.
This naturally helped him to create customers for life. He found it was necessary to figure out how to serve a client as a property manager for the lifetime of the relationship.
Curiosity really drove these conversations.
It was Dave, building relationships and being really curious about why his clients wanted a particular property and what they planned to do. If the property didn’t make money, was that his concern as a property manager? Or, did it depend on the owner’s strategy? They might have an equity position where they don’t need the cash flow now, but they know the zip code they’re buying in will lead them to a profitable sale in five years.
For other investors, there has to be cash flow. They invest in properties that will never provide the equity that others are looking for.
Scope of Services and Customer Lifetime
A lot of those conversations resulted in owners not necessarily having the answers to those questions.
For Dave, this became an opportunity to build relationships and plan for a lifetime customer. He and his partner built Realty Solutions on just one property. Many of the owners who struggled to answer Dave’s questions about why they were investing or what their exit strategies were could relate to that. They were starting with one property, too.
Initially, these questions were curiosities. Now, Dave sees these questions as part of the conversation. If a potential customer cannot answer the questions, Realty Solutions can provide advice and guidance. If they can answer the questions, they’re getting a glimpse of how Dave’s company can help them succeed. They’re saying:
“This is what the journey can look like.”
This is part of helping new customers and even existing customers understand the scope of services that Realty Solutions can provide.
You don’t want a client looking for services elsewhere when you can provide those services yourself.
When you have the conversations up front, you’re better positioned to provide all the required services, and for life.
Knowing how to talk about what makes you unique is a huge selling point. What is the heart of what you do?
Customer Lifetime from a Sales Standpoint
This can be part of your sales process. You’re trying to educate someone on how to think about what would make a good investment. Why one asset instead of another? You cannot just buy a property and wait to make money.
Dave acknowledges that this lengthens the closing cycle. There might be a client eager to sign up for property management services, and Dave sees the value in slowing down and gathering all the information. What if this goes the wrong way and the client decides not to hire them for property management?
Dave says there needs to be a distinction in the company that establishes at what point services start. Before they start, he is willing to give away everything. All the advice. All the information. All the education.
Because it makes them a better customer for life.
They’re an investor. We’re investors. This makes those clients colleagues.
Realty Solutions wants to put together programs and solutions. They want to build a network. If they give away all the information they have and then a client’s exit strategy changes or they decide to manage the property on their own because they’re more educated, Dave thinks it’s great. They haven’t hurt themselves.
Self-managers are not competition. They’re future clients.
As an investor, you know how overwhelming it is to lease and manage properties. They’ll be looking for help eventually.
Maximizing Customer Lifetime
Once a customer hires you to manage their properties, how can you maximize their lifetime customer value?
The goal is to get your investors to continue growing their portfolios.
The pandemic was a huge detriment to economies. But, Dave says it allowed them to get clear on who they are. They decided that improvements could be made to how they interface and communicate with clients. They also decided they wanted to elevate the subject matter that they were discussing.
At Realty Solutions, there was a rule five years ago that property managers had to talk to five clients a month. They were stressed and busy and had stuff to do every day. They were never thrilled with jumping on a call with an owner and not knowing what the owner wanted to talk about.
Some new efficiencies have been developed. There’s a lead property manager who has one job: to talk to clients. There’s time for critical thinking and a real conversation. The operational efficiencies and structures are in place to allow that property manager to talk to owners like they’re true clients. They talk about what they want to do with particular properties or new properties.
These systems are used for constant conversation.
There’s also been a new development where they’re selling one client’s property to another client. Realty Solutions promotes itself as a brokerage. In the last few years, they have not needed to go on the MLS because they have owners who want to buy the properties being sold by other owners.
That’s a win/win. It’s a double win-win for Realty Solutions, because they’re still managing a property that they already know and serve.
One of the major pitfalls in client retention is the lack of focus on keeping those clients. Property managers put a lot of time and effort into how to get a client. They work hard in getting that contract signed. Then, it’s easy to forget about them. But you have to change the context of the conversation. That’s where you’ll maximize customer lifetime value.
Repurposing Content to Demonstrate Value
On the business development level, a lot of content is shared to bring in new clients. If someone is searching the web for rent collection information, the BDM at Realty Solutions will share a video or a blog on that subject.
Now, property managers are re-using that content to remind clients that they’ve had for years that they’re doing more than fixing toilets in the middle of the night on a Saturday. They don’t just knock on the door and ask for rent. They’re a valuable partner in the investment process. Any property manager who is not constantly talking to customers about the value they provide is doing themselves a huge disservice.
Another example of describing value is the owner benefit package that Realty Solutions recently introduced. A lot of owners opted out but then didn’t realize that they were getting something really valuable. There was a need to reconnect and re-offer the services. This helped the BDMs at Realty Solution to tweak their message on how to sell it. Talking to existing owners helped.
You cannot assume the message you’re intending is the message that’s landing. Have the conversations that will tell you what owners are hearing.
These conversations also help with conflict resolution.
Most conflicts come from miscommunicating or misinformation.
Investing in excellent software and professional video conferencing can help you leverage the ability to communicate. If there’s a conflict with a client, Realty Solutions will get in the room and have a video conference with the client. It’s like everyone is in the room together. You can look at people eyeball to eyeball. This, Dave says, levels up the relationship. It’s harder to be mad or misunderstood.
There’s also some new email etiquette that triggers in-person conversations. If an email goes out for the third time, the property manager knows that it’s time to stop and make a phone call. Something is being miscommunicated if three emails are required to sort it out.
Tracking Improvements and Customer Lifetime
According to Dave, the customer lifetime value at Realty Solutions pre-COVID was eight years. A lot of things happened post-COVID and the market is now insane. There was a fear that a lot of clients would sell. Which was true. Except that in order to sell, a buyer is required.
It’s easy to panic about losing a client to a sold investment property. Now, it’s a celebration for Realty Solutions. They’re already talking about exit strategies. Their team can help. They can even keep it in their portfolio by selling the home to another investor.
Dave believes this will improve their customer lifetime value. In a few years, he believes it will be much longer than an average of eight years.
Sometimes, it’s not necessarily customer lifetime value you’re looking at, but property lifetime value. Dave remembers an owner who was in trouble. The owner sold Realty Solutions his entire portfolio, including one property in particular that the team didn’t want. So, they sold the property to an outside buyer.
That buyer then needed property management. After that year of owning the home, he hated the property too, and wanted it sold.
Realty Solutions put it on the market, and one of their clients bought it.
They were left managing a property they never wanted to own.
But, it’s an example of getting a lot of years off a single property.
Customer Lifetime and Business Decisions
Focusing on customer lifetime value will influence the business decisions you make.
For example, it will change how much you spend on marketing versus another acquisition.
Understanding customer lifetime value also impacts the way Realty Solutions approaches shedding clients that are not really working for them. Their clients need to fit their business model and participate in the whole picture. Dave is willing to take risks, but he’ll also make a quick judgment and pull back if he sees money being lost.
Spending on advertising, for example, increased over the last two years. Many companies pulled back on their advertising budgets. Realty Solutions did not. They saw where their revenue was declining, and they took measures to stop it. That included more robust advertising.
Now that they’re in a stronger place, it makes sense to pull back on advertising and sink more money into digital marketing.
Remember that marketing is not just advertising. When you’re thinking about property management marketing, your strategy is not to market in just one way. There’s a whole mix of things you can do. Some of them are foundational and some are advertising. You can shift the dollars in your marketing budget from one thing to another.
This is an important nuance.
A poorly run business does not help your clients. If you’d like to talk more about what you heard Dave discuss with us, please contact us at Fourandhalf. We’d be happy to talk about your lifetime customer value.