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Our topic today is business process outsourcing for modern property management companies. My guest is Todd Breen, who has a wealth of experience in a couple of areas. He has been running his company – Home Property Management – for 30 years, so he has the broker and business building experience from the perspective of a broker and property manager. His other venture is called VirtuallyinCredible, where he does video tours, training, and international speaking. He also does business process outsourcing.
Q: So Todd has the applicable knowledge on how outsourcing helps grow property management companies. My first question is the hard one – in the realm of property management, how will people know they are good prospects for potentially outsourcing work and saving money?
A: I get that question a lot. People always ask if they should outsource and what type of work should they outsource. The first thing I like to do is put up a scale. On one end are the control freaks who like to micromanage every process of their business. At the other end are the people who tend to fly by the seat of their pants and are trying to get the job done. They have no systems and no processes. So we help a company decide where they are on the spectrum.
As soon that’s determined, I can provide some insight on what it will be like to outsource and how their needs can best be met. So if someone has a tightly run operation with lots of systems and process already in place, they will be able to pass everything that’s in place onto us. Those people can be good outsource candidates provided they devote a lot of time and attention to learning the cultural differences in the Philippines or India or any other place that we outsource. They have to adapt a little to that culture.
Half the battle is done because you already have your system and your training in place. You’re just bringing someone in from across the world. It’s not a big deal and they work virtually. The people who have no systems or procedures should outsource after learning how much easier it is to let someone else do the work for you. They need an intermediary, and that’s where we come in. We establish those systems because the more systemized you are when hiring your virtual assistants, the less systemized you need to be when you outsource.
Q: So this works for a tightly run business with systems and management practices, who can hire talent from overseas for a lot less money to complete the tasks. Then, their more expensive talent can spend more time on value-added tasks than the menial data entry things. And it works for the folks who have no system, because you work with them to systemize and execute. Is that right?
A: Yes. It also depends on the size of the business. We know the larger the business, the more likely they are to have proven systems in place. When I see a company with 150 doors or fewer, I know that those are the entrepreneurial owners who are newer to the process and struggling to put together all their systems. Our best client at VirtuallyinCredible is the company with 250 units or less who is thankful for the affordable help in systemizing processes in their business that they didn’t know how to do.
Q: So Business Process Outsourcing (BPO) companies are everywhere. You can buy their services for any business. The advantage of working with a property management centric business like VirtuallyinCredible is that you get help with the actual data entry and PCR reports or whatever, but you also get help systemizing and doing things efficiently, securely, and with deliverables. You help them systemize and execute.
A: That’s what happens. It’s such an “A-ha” moment when we do a presentation to a smaller business owner. They thought they were just getting labor help, but that comes with a built-in system, and it’s better than anything they’ve done. It works. As we go to 250-500 size companies, they have already struggled to create their own systems, and now it comes down to deciding which system is better – theirs or ours. Smaller businesses are grateful we’re here. Medium sized businesses require some communication. You have to fit well with the existing staff and handle turf battles with staff who may resist any changes. It’s a dynamic about bringing outsourcing to a medium sized business that is a bit artful. Not everyone is comfortable outsourcing.
Q: There are definitely negative connotations to outsourcing work to other countries. I think people have pre-conceived notions without necessarily understanding what the true concept is. Let’s explore the ROI. You said that a higher end property management company has to learn about different cultures to build in the processes. What amount of outsourcing do they need to do to get a good return on their investment if they’re putting in the time to get to know new cultures and time zones?
A: When I talk to someone with 700 or 1,000 doors, I’ll ask openly if we are a stepping stone or a permanent solution because at that level, companies can learn to outsource themselves if they want to. There are rules and laws to know. In the Philippines, you’re allowed to hire someone to work as an independent contractor for one year. After one year, if you don’t make them an employee, you are out of compliance with Philippine labor laws. So steps have to be taken to make a permanent outsourcing solution work. It’s important that you learn the labor laws and the taxation laws. When we were starting this, we had to learn what to do when paying a foreign worker in U.S. dollars. When you do that, you are required to do some withholding and make the foreign worker apply for a social security number. But if you pay in their local currency, that doesn’t apply. So you need to learn the tricks so you can do it yourself. If you’re a small or medium size business, it’s better to get other people to do it for you so you can focus on building your business. Then, you can take it over and increase your ROI.
Q: Tell me more about Virtually Incredible. If I own a 700-unit company and I tell you I have processes and systems in place, what can I give you in terms of processes and what can I expect in terms of ROI by using your company?
A: The ROI is dependent on property management business structure. The ROI can come in saving on overhead. You don’t need as much office space. There’s also ROI in your peace of mind. Staff will go on vacation and take sick days. If you have staff, you have problems. That’s just the nature of a business. The more staff you have, the more potential problems you have. ROI comes in clearing your mind and your calendar. You shouldn’t have to worry about those functions because another business is going to take care of those problems and staffing for you. Then there’s the obvious ROI which you know is important, being in California. What do you think is the average hourly price you’d have to pay someone to work in a management company?
Q: In the bay area, like $22 per hour if you want to hire and retain someone. $45,000 a year minimum.
A: Right. So when you look at what you pay US-based staff, the price adds up, especially when you include vacation and benefits. You can hire quality people in the Philippines for $3 an hour if you do it directly. They work from their homes. It’s a great starting point. We have close to 100 people working for us from their homes, which allows us to pass on a lower cost to our customers. We don’t have traditional overhead in the Philippines either.
With our leasing line services, we answer leasing lines. One customer in Phoenix, Arizona had a commission leasing agent quit. That employee was earning $5,000 a month. When they came to us, they had 30-35 listings any given month and it was costing them $5,000 to staff that position for 40 hours a week. With us, calls were answered 80 hours a week, and our bill to them is $1,500 to $2,000 a month. So, they get double the efficiency at half of the price. And one person can only handle one call at a time. When we took over, we could expand to answer the leasing line even if three calls were coming in at once. So their listings went from 35 a month to about 15 per month. We also began answering their email inquiries. That added $1,000 to their bill, but their vacancy list went down. That’s an ROI too. In addition to saving money they picked up an extra month’s rent through reduced vacancies.
Q: So there are three main ROI areas: the delta between the cost of talent here and the cost of talent there. As you say, that can be 70 percent off. The second is the actual volume. Instead of replacing one person, you have a team of people. Third, the peace of mind ROI. Basically, you don’t have to worry about vacation, employees leaving, or taking sick days or making claims against the company. So the advantages are huge. Where do people fall down with this?
A: There’s a do-it-yourself attitude that prevails among entrepreneurs. People think they can do it all themselves, but they get so busy, they don’t do it as well as they could. I call that the Penny Wise Dollar Foolish approach. If someone tries to hire a person from another country, they might get it wrong. I had to learn the hard way what to say and what not to say. The Asian culture is all about saving face. Here, we can tell employees when they screw up. If you criticize someone there, they might not show up the next day and you’d wonder what happened. You didn’t know that you embarrassed them. I have people who say they tried outsourcing, and it didn’t work out. If you try to do it yourself, you may stumble.
Q: People tell me all the time that they’ve tried property management marketing or they’ve used Google Ads and it just doesn’t work. I always find that interesting because Google is a trillion-dollar company and 80 percent of their revenue comes from AdWords. If something isn’t working for you, there’s a reason.
A: It’s no longer possible to be a jack of all trades and a master of none. That doesn’t work anymore.
Q: I found myself growing up with the business. I wanted to touch everything and do everything. I’ve learned you have to trust vendors and establish good relationships. For the control freak that does it all, the opportunity cost is tremendous. You can be doing so much more with your time. The people who expect everything to happen for them are also making a mistake because they aren’t developing relationships. Those are the two biggest pitfalls for any business. What do you think?
A: When we get the business owner that hires us and hands us a mess and wants us to do it all, I always wonder how well or how long we are going to work together. Because if they don’t have enough care and concern with how they turn things over to us, what else is happening at the business that I don’t know about? So I always make a point of reaching out to those companies and making sure we are working with them to bring down their outsourcing bill. We don’t want them to spend any more than they have to, so we work with them. Sometimes, the set-it-and-forget-it people lose an opportunity to shave 10 or 20 percent off their bill.
Q: We use lots of vendors and we pay thousands of dollars to places like Reputation.com. It’s so tempting to just shift my focus elsewhere because that’s done and they’re taking care of it. If staff are responsible for those vendor relationships, great. But if you don’t pay attention, you can have price increases and changes that affect your customers that you’re not even aware of. That’s a problem. Maintaining relationships is part of building your business and I think vendor relationships are key building blocks of our company.
A: I grew our company from zero doors when I was 21 years old. I’ve been doing this for a long time and when I look at people trying to grow a business now, I look at all the resources they have that we didn’t have, and I can’t believe the opportunities. A lot of people really leverage those opportunities, and that’s smart. You can get software as a service, you can get a website from an expert and you don’t have to figure that out yourself. There are lots of property management vendors available in the NARPM community. The one thing I’m surprised with is when I look at the amount of resources a company spends answering leasing calls. Usually, when I go into a business and tell them to look at the number of calls they get a month, 70 percent of calls to their business are leasing calls. So how do you grow a business when you’re doing this 70 percent of your time?
Q: One of the biggest reasons our customers don’t succeed as much as they should is because they’re unable to get to the owner call. Guess what those are being mixed up with? The leasing calls. So I can relate to that.
A: Outsourcing the leasing calls should be a number one priority. Out of the 700 calls that might come in a month, only five or seven new leases come from those. So, 1 out of 100 calls makes money. And 99 out of 100 didn’t come with any money, but those are still being answered. Most business owners will take an inbound call for new management prospect and answer questions but then never follow up with that prospect, even while they’re answering 700 calls a month about leasing. That imbalance keeps them where they are – disorganized. So outsourcing those leasing calls is one of the best thing you can do to focus on growing a business.
Q: We include LeadSimple for all of our packages because leads are usually a perceived problem. There are enough leads, but they aren’t being followed up on or treated like the lifetime revenue value they are. Put these owners and leads on your pipeline and follow up. So, you’re right. You have to pick your battles as a small business but dealing with new business is the biggest problem I see. If they pick up the phone they will probably close the deal. If they don’t, the lead dies.
A: But someone who follows up will close them. The same thing happens on the leasing line. We will mystery shop any company’s leasing line and the results are really eye-opening. We get people answering the phone and they’re busy and distracted and they don’t even want to answer questions or, we get voicemail 50 percent of the time. Voicemail does not rent houses. It’s very intriguing to see how businesses are running themselves. If I could tell any business anything, it would be to get rid of the things that are not making you money and focus on what does. Right now, a management company can be bought for $4,000 to $5,000 a unit. So the resale value of those units is amazing. That shouldn’t be the phone call you put on hold.
Q: We are solving the same problem from a different angle. We have each identified and have a solution to increase the owner calls and pay more attention to them, while reducing the distraction and getting better quality leasing. You provide a better customer experience, and houses are rented faster.
A: Yes, and sometimes people ask if we can answer their new management calls. No, we should never do that. That’s your job as a property management business owner. New prospects don’t want to talk to someone in the Philippines and no one outside of your business should answer those questions. So get rid of the other calls that aren’t going to make you any money and focus on doing a great job and working those leads like it’s your job. Grow your company ad you’ll have a valuable asset. With a resale value of $5,000 per unit, if you add 100 properties, your net worth went up half a million dollars. That’s a lot of money.
Q: Yes, and for a 500-unit company, with proper marketing, it’s reasonable to grow by 100 doors a year. Being better at the sales process, you get even 20 or 30 more. That’s quite a paycheck.
A: I made some choices with my business to take the biggest issues I didn’t like, and I outsourced them. A lot of processes I keep within my business. There are some companies that outsource individual processes like if you want your leases entered or your renewal notices sent out. You have other companies that answer repair lines. All those are great things. I focused on those 70 percent of phone calls. That’s been the fun part of helping people. We also do tenant screening. And that’s because you want peace of mind. You want to know there is compliance with federal regulations, conformity, and trust that every tenant who applies gets handled the same way.
Q: Fair housing laws are pretty clear. Owners hire a property manager so they don’t have to deal with the headaches. But if you get sued, you’ll lose your business.
A: No one can afford to even be checked twice for fair housing problems. We have all those systems in place. Systems keep you in compliance. If you have no systems, you have no routine compliance. Shortcuts will leave you open for risk with compliance. So those are the two major departments that I outsource at my company; leasing calls and screening. Then, anything we did successfully I scaled for other property managers.
We would love to talk with you again. Thank you for your time. It was a pleasure, and I will see you at a conference soon, I hope.
If you need help with sales or marketing for property management companies, or you’re interested in learning more about the PM Grow Summit, please contact us at Fourandhalf. Thank you for listening, and we’ll see you next time.