The topic today is understanding the process of joining a property management franchise when you’re starting your property management business. We have two guests who are the perfect people to speak on the subject. Randall Henderson, the Director of Training for Property Management, Inc., and, the person who needs no introduction if you’ve heard of NARPM: Brian Birdy. He’s joining us today as Vice President of Residential Management for PMI. They’re going to give us an introduction to their company and talk about what sets them up as experts in the franchise field.
Randall: Property Management, Inc. has been around for about seven years. We’ve had explosive growth recently, and in the last couple of years we’ve added 60-plus franchisees. What differentiates PMI in the industry is that we offer a wide variety of property management types. Not only do we do residential management, but also commercial and association management. The residential piece is still our primary focus, but we have added more pieces for our property management franchises.
The franchise world is growing in the property management industry because starting a business from scratch is a challenging and scary thing. So these new business owners who come in are nervous and they want some systems in place. They want to work with people who have been there and understand the industry. They want someone who can provide value on technology. I came to PMI after running different real estate companies. I’m a broker and that’s what led me to a place where I can help train and teach new entrepreneurs.
Brian: One of the things about franchising is you do have someone physically there ready to train you. That’s one of the things Randall has successfully established. He has put together an extensive training program which gives our franchisees so much more than what I had when I started there. NARPM is a valuable organization and we recommend that everyone join it and participate, but it isn’t there to take you on a moment by moment tour of the industry. PMI gives our franchisees a significant training that never ends. It’s formulated and includes weekly activities forever. You always have an opportunity to learn something new to grow your business. I have 20 years of experience with a property management company, and I’m a national instructor with NARPM. This year, the interest level in franchising and specifically in PMI is at its highest that anyone has ever seen. We have a team that can support that, so the momentum is exciting.
Q: Property management has truly grown in prominence as a recurring revenue business. It also has the potential for complementary business units like real estate sales and maintenance, which increases the lifetime value of a customer. With that, here’s my first question. What does a franchise really solve for a potential entrepreneur who wants to start a property management company? Who should consider a franchise? What’s the profile of a person who should consider your franchise?
Brian: It’s right for the person who is willing to recognize that you are building and growing a business. This person needs to have the time, energy, desire, and finances to invest in the future of the business. Property management is a fantastic business to be growing, but you need to realize that buying a franchise doesn’t mean buying a business. It’s buying what you need to grow the business. You must actively give the time and energy to grow it or your franchise will struggle. Buying a franchise gives you a boost and a kick-start to getting the business going. You get training and guidance, visibility and a lot of support. You’re given the tools without the expense that others would have to pay to acquire.
Q: Do you have to be in the industry or can you come from anywhere?
Brian: You can come from anywhere. It’s better, easier, and faster if you come from the industry or you’re a Realtor because you already know some things and have some background. You can be a property manager ready for the next step. There are advantages for those people. The training aspect is easier and there’s the fact that someone in the industry may already have some doors. But if you’re struggling and you’re making all the mistakes and you’re not growing, you might realize you need some help. That’s when it’s important to consider a franchise. I come from a family business that was very small. If I had known I could go to a franchise model, with the tools a franchise gives me, I’d probably be retired right now. The growth would have been faster and there would be less mistakes and less money lost. I would have given credit all along to the franchise brand. That’s why I can tell people today that unless you are a significant manager in the market you’re working right now, think about a franchise. It’s available for anyone and everyone.
Randall: I always ask what will make a new franchisee successful and it’s really not the licensing or experience in real estate. In my view, we have three areas where we try to help new franchisees: real estate, property management, and also being entrepreneurial. That third one is the most important determiner of success. The people who understand business ownership mentality have a different drive. Everything else can be learned. It’s hard to motivate and inspire someone to have the drive it takes to be successful as a business owner. The program we put together is excellent at teaching operations, marketing programs, and other systems, but at the end of the day, the people with the drive are the ones who will be successful.
Q: Can you give an example without going into too much detail of how that drive would affect the growth of a franchise? What are the elements if I’m considering joining the franchise?
Randall: Someone I’m working with right now just emailed and said he had been working on the implementation of our training, and he’s doing all the things he’s supposed to do, but it’s just not clicking yet. He said he and his wife are working hard, but they’re not sure what else they should do to drive this business to success. In my view, this will be a successful franchise owner. He’s using Thumbtack, which is a tool that works great in some markets but not all. A successful franchisee is thinking about what else can be done to grow, and finding the right avenue that will work. I give them all the different possible avenues to try. I provide the methods and advice on what to do next. Someone who is willing to keep moving forward will definitely be successful.
Brian: I think sometimes success just comes to this: when the phone rings, you’re on it. When you answer the call, your mind is set that this conversation can lead to many different things and you keep an open mind. Figure out what that’s going to be. If it’s someone looking for a property manager, great. If they want to do something outside of my business model, I know I’m not doing that now, but I have something new to think about. Or, I can provide a referral. I’m building a long term relationship with anyone I speak with. Every conversation is geared towards the next most important thing you can do to grow your business. Not all property managers have this entrepreneurial spirit, and they don’t realize that every phone call has potential. We spend our time dealing with disappointed customers and complicated tenant issues throughout the day, and there are challenging owner issues taking up a lot of our time. But, we know that’s part of the business. You still have to have a positive outlook on how you run your business. Everyone is important. Other businesses cannot survive treating their unhappy customers the way some property managers treat their unhappy customers. Look at every contact as someone with potential, so you’re always growing your business. Even if it doesn’t produce a penny for you today or tomorrow, you’re still going to need business next month, next year and five years from now. Ask questions and let them know what you do. Talk to waiters, waitresses, taxi drivers, people in line at the airport. That’s how you reach people and grow.
Q: On our last podcast, Chris with Mainlander said to keep your antennae up. That’s basically what you’re saying now. And, you touched on something near and dear to me. I feel that everything in property management is growing fast, including services like ours at Fourandhalf. But there is a total lack of attention to the art and science of the sales process. I don’t understand how a $10,000 phone call goes unanswered. How is that feasible for the business not to hire someone who is responsible for closing this new business? When the owner takes a calls, that owner can usually close the sale. But that’s only if they get to the call. If they don’t get on the phone right away, the lead goes elsewhere. Some of the larger companies push these calls to portfolio managers, but they aren’t motivated or compensated to take new business calls. They have tenant and owner issues to deal with, and they’re taking care of their customers. So my question is, how do we fix this? Why isn’t the sales process a priority?
Brian: We teach this model, and that’s why I think a franchisee can benefit so much from working with us. We have looked at the national average. The national average response time on an inquiry for property management services is 37 hours. Someone who wants to hire a property manager has to wait 37 hours to hear from someone. This is an awful statistic but I tell our franchisees they should be excited about it because they can make a difference just by answering the phone. Randall and I listened to some of the most awful phone calls. One was 26 minutes long and at the end of that conversation, where the business owner basically tried to not get hired, he still got hired simply because he answered the phone. He did nothing right after that, but he did the most important thing – he was available.
I was a one-man office for many years and I saw my ability to respond to new business calls failing. I knew I needed a structure that made talking to a new owner about new business a priority. I did that for a while, and then my son, who was a broker, came in and told me to fire myself. I had to focus on running my business and hire someone who could talk to new owners and bring in new business. So we made that change. Having an organized, systemized process to physically handle those phone calls is very important. You can’t do that if you’re on your own. You’re busy meeting tenants, showing the house, and by the time you call a prospect back – it’s too late.
Q: There are some solo entrepreneurs who can do it all. Bob Thomas is one that I think of. But many others feel that there are other things that are so much more important than picking up the phone. Then, they forget to grow. Randall, what’s your specific advice on the sales process?
Randall: You mentioned passing the call to a portfolio manager. That’s a mistake. They are not incentivized in the proper way. So you want to set up someone who is incentivized only to bring in new business. You want to bring in a sales person who operates on a commission-only system, and is driven to set up appointments and close those doors. Many of our entrepreneurs are not phone guys. One said he is phone reluctant. The faster they can recognize that and properly incentivize that person to be an independent agent, the faster they will find success. Real estate agents are good at that. Not all of them are successfully selling right now, but they know how to answer the phone and connect with people, and they’re interested in making the extra money. Hire that out and stay close to it. The entrepreneurs who recognize this early and put that in place are much more successful.
Brian: Another part of the problem is that many of us are very much Type A personalities. We know we are good sales people, and we think no one can sell our business like we can. But you are unable to grow when you get overwhelmed with things to do. You need a better structure. Another thing that makes it tough is unless you have good hiring experience in the past, it’s knowing how to hire that right person. Just because you’re a real estate agent doesn’t mean you are the best person to get new business. You have to know the business and attend the networking events and be comfortable with cold calling. When I was working my business al alone, I’d work 14 hours a day and every evening when a new lead came in, I’d call within a minute. I knew they hadn’t left their computer yet so I would call right away and show them that their needs were important. The success and close rate was tremendous. The first person who has human contact has the strongest chance of winning, whether you’re bigger or smaller or highly rated or not. You need to be the first one to have a meaningful conversation to solve the problem.
Q: I agree. Every call is its own world and opportunity. You listen and ask questions, you connect with the person and understand their problems. You have to care, and focus on the speed of response and competence factor.
Brian: We understand how important the sales factor is, and not everyone has gone through sales training. So we do that. We have a specific hour one day a week designated to sales training for all our franchisees. We are working on it and teaching through it so anyone can improve their sales skill sets. We dedicate forever 52 hours a year to training in sales. So you cannot necessarily give someone the heart and desire to succeed, but we can give them the tools. Very successful franchise owners out there are tremendously successful despite their own history and personality. That’s because they’re being taught and they apply it to the best of their ability. They grow because of our education and support. This shows us that anyone with the right desire can do this.
Randall: It’s about moving forward. How many times you can get up and keep moving forward? The entrepreneur who loses is the one who stops playing. Keep moving forward and you’ll get to success. It’s hard to give them the confidence to do that, but that’s the difference between success and failure. It’s continuing to move and push to learn those things. The best way to learn cold calls is to make a thousand of them. The learning curve changes but if you’re moving forward, you’ll get there. I tell everyone to remember that people dumber than you are successful at it every day.
Q: We know the drive is important. Answering the phone is important. How do you qualify for a franchise? If I’m sold on this idea, how do I qualify to buy a franchise?
Brian: Randall and I have nothing to do with sales and franchises. We are focused on the training and support and growth. We know that there is a financial expectation. There is a cost up front and you need the realistic ability to invest in growth when you first start. This business produces no money at first and unless you are an existing manager, you’re not going to make money on day one.
Q: What’s the startup cost?
Brian: The PMI franchise fee is $30,000. That’s one of the lowest investments into a franchise out there. You know you’ll pay some royalties, but what you get out of that is training and support. You have to be able to get a real estate license if your state requires it, and there are only a few states that have no such requirement.
Randall: The $30,000 is the franchise fee, but if you come in with only the $30,000, you’ll have a tough time. We hear Fourandhalf talk all the time about how much you must be willing to spend on marketing every month, and we’re very much in alignment with that. You really need to show us that you have money set aside to go out there and do things right out of the gate. That means spending $1,000 or $1,500 a month to do all the digital marketing and cover all the avenues. That’s another qualification.
Brian: And you need to be prepared to get a real estate license in most states. You have to get your real estate license but even when you have that, you cannot do business unless you’re affiliated with a broker. So that’s immediately something you need to do. Affiliate with a broker, which in the real estate world, can be a problem because for many brokers, property management is fearful. We at PMI are structuring a nationwide brokerage system for our franchisees. We have preferred brokers that are much cheaper than what most brokers will do. The property managers need a license and a broker, and they have to create an entity. All these things that are required is the big benefit to having a franchise. If you are on your own, you can do it, but no one will guide you.
I’m in Minnesota right now with a good company – 33rd Company. I’m in their office today and they shared with me how they started things. They just started without knowing all the rules. I continually hear about guys who started on their own and they didn’t get in trouble, but later they realized things were done wrong because there was no one to tell them what to do. We can help with relations, connecting people with the right brokers, and how to leave the brokerage and keep what they’ve built. In the real estate world, when you work with a broker, all the houses and the work you’ve done belong to the broker. Many people have done well as agents, but brokers take all their houses. It’s legal, and recently I’ve seen it with people who lost doors because they weren’t brokers.
Q: So, we have covered having drive, answering the phone, and taking care of licensing and legal implications. I’m going to put my spin on this. As an entrepreneur, if you’re thinking about growth and you know you have $30,000 in the bank and $2,000 to use a month in marketing, you might think you don’t need a franchise. But that would be incorrect. You can be in business 20 years and manage 400 properties. Even starting Fourandhalf, we had to attract outside money and capital to spur the growth. I think that for entrepreneurs entering the business, this is cheaper than selling part of your company to investors. You guys make sense.
Brian: In the real estate world, this system is proven. We are designing it around the property management world. Some of the most successful national real estate companies, like Berkshire Hathaway and RE/MAX are all franchises. They pay royalties and buy into the franchise. It’s designed for them to grow a business. Many of them are saying now that you cannot do property management as part of their real estate franchise. We are specializing in management, and at PMI we talk about residential, commercial and association collectively. The skill sets and requirements are the same and you’re not doing it on your own. You’re a franchise, and your visibility and effectiveness on the Internet matter. We can refer customers from one city to another, and that allows us to continue growing.
Q: It’s time for parting thoughts. As a trainer, Randall, do you have parting words of wisdom?
Randall: At the NARPM Broker Owner retreat, we heard from Steve Murray, of Real Trends. He was our opening speaker and he talked about where the industry is moving. We have to be out in front. We expect to have people who recognize the value of property management coming in. We solve key problems; finding business, how to market, where to get licensing and broker set up, and training on a variety of subjects like how to close, and what to do on the operation side. We expect and we have already seen an influx in people interested not just in property management, but in franchise. So our goal is to be on the cutting edge and be learning. We are ahead of the game because it’s changing very fast.
Brian: When I want to start my business, I need to be business owner, a sales person, an accountant, a bookkeeper, a government affairs specialist, an HR specialist, a counselor, and a maintenance guy. I have to be all these things. Most of us are not all these things and we don’t know how to partner with experts. People like Fourandhalf who have expertise in specific areas can help us. To grow your property management business, you have to know that or be affiliated with the right places. That’s one of the things Randall teaches individuals. At first, you try to do these things on your own, but when you partner with people, you’re able to do it better. Never try this on your own because you’ll just end up wasting time and money. The cost of failure is high, so that’s another reason people are driving towards franchises.
Thank you very much for your time, we’ll have to do another episode because I had 14 questions and we covered three. Thanks for your time, Randall and Brian. And for our listeners, thank you for joining us. And if you need help with marketing for property management companies, please contact us at Fourandhalf. We’ll see you next time.