DGS 218: Doubling Profit Per Door with a Resident Benefits Package with Andrew Smallwood

How do you decide to differentiate yourself and your business from your competitors? There’s only so much you can offer to owners and tenants before you completely burn yourself out. What if there was a way to benefit you, your client, and the tenants all at the same time while increasing your profit margin?

Join property management growth experts Jason and Sarah Hull as they chat with Andrew Smallwood from Second Nature. Learn how a resident benefits package can create a win-win-win scenario for you and your clients.

You’ll Learn

[04:56] Is it Possible to Double Profit Per Door?

[07:13] What is a Resident Benefits Package?

[21:37] Ways to Protect Your Investors/Owners

[25:19] The Pitfalls of DIYing Resident Benefits Packages

[32:07] Increasing Profitability with Resident Benefits Packages

[39:31] At What Stage Should You Implement a RBP

Tweetables

“Property managers don’t just have one problem. They have a thousand.”

“If we can move the needle just slightly to increase revenue, but also just slightly to decrease operational cost, right, it’s very easy to double profit margin in a business.”

“It doesn’t matter how many doors you have if you’re not taking anything home.”

“It’s important for property managers to keep the main thing, otherwise it’s so easy to get distracted as an entrepreneur.”

Resources

DoorGrow and Scale Mastermind

DoorGrow Academy

DoorGrow on YouTube

DoorGrowClub

DoorGrowLive

TalkRoute Referral Link

Transcript

[00:00:00] [00:00:00] Jason: If we can move the needle just slightly to increase revenue, but also just slightly to decrease operational cost, right, it’s very easy to double profit margin in a business.

[00:00:15] Welcome DoorGrow Hackers to the DoorGrowShow. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, Impact lives, and you’re interested in growing in business and in life, and you’re open to doing things a bit differently, then you are a DoorGrow Hacker. DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings. Many in real estate think you’re crazy for doing it. You think they’re crazy for not because you realize that property management is the ultimate high trust gateway to real estate deals, relationships, and residual income.

[00:00:52] At DoorGrow, we are on a mission to transform property management business owners and their businesses. We want to transform the industry, eliminate the BS, build awareness, change perception, expand the market, and help the best property management entrepreneurs win. I’m your host, property management growth expert Jason Hull, the founder and CEO of DoorGrow along with Sarah Hull, co owner and COO of DoorGrow. Now let’s get into the show.

[00:01:18] All right. So our guest today is Andrew Smallwood of Second Nature. Andrew, welcome to the show.

[00:01:25] Andrew: Hey, thanks for having me excited to be here.

[00:01:28] Jason: So we were talking beforehand and I was expressing how jealous I am of his amazing digital SLR camera. That’s so zoomed in on his face. So you look really good today.

[00:01:37] Andrew: Well, we’ll keep it on the face because I’ve still got some like summer workout to do the summer bods. We’ll keep it the neck up here.

[00:01:44] Jason: Got it. All right. Yeah, I’m working out too. All right. Cool. So our topic today is doubling profit per door with a resident benefits package. You guys, your name has come up— Second Nature— over and over again related to this topic. So I’m excited to get into this before we get in though. Why don’t you share a little bit about yourself? How did you get connected to property management? I doubt you woke up when you were a little kid and said, “property management” Second Nature… this is my dream future. This is what I want to be doing.” So there’s always a story of how people get into this industry, so.

[00:02:19] Andrew: You know, that’s true, Jason, although if I think about every five to 10 year period of my life and where I may have predicted I would be five to 10 years from now, I don’t think I’ve ever gotten that answer right, to date. So, I think I’ll probably just stop trying, but really have enjoyed— you know, since 2017, actually is when I found the company at the time. It was called FilterEasy. A couple of years later, we rebranded to Second Nature as we saw our customers were looking at, you know, they had more than just one problem to solve. I think you guys know probably better than anybody property managers don’t just have one problem.

[00:02:52] They have a thousand.

[00:02:53] You know, customer said, “Hey, we love the way you’re working with us on this. Like, is there more that we could do there?” You know, rebranded to Second Nature, but I’ll be quick with my personal story because I think probably other things would be more relevant to the audience wants to hear, but my background came up and coming up in sales was in sales and sales management for 10 plus years, also got into the nonprofit space involved with the Front Row Foundation, which is a cause I’m still passionate about. They put people battling life threatening illnesses in the front row of their dream live event. And so I’m the board chair for the Front Row Foundation today. I’ve been involved with them in various roles before finding my way to property management. And yeah the CEO and founder of Second Nature, Thad Tarkington, and I actually worked in the same company, although we didn’t know each other super well. We were acquaintances in our previous company. And and I was looking to get into B2B from where I was. And that’s what attracted me into the cool business. I saw it was a really great product. The customers really loved it. And that’s what attracted me to the industry and I’ve loved it ever since.

[00:03:57] Jason: So what do you think the major difference you see between B2C and B2B? What like really was driving that decision?

[00:04:06] Andrew: Yeah, I think, you know, in B2C, it was very transactional, like, have one meeting. And it was, you know, this was like a luxury house where items just to put that in perspective. And so it was like, you know, an order might be a few hundred dollars or a few thousand dollars, and it was like, if you didn’t have an order form in 20 minutes, then you didn’t have an order, right? Yeah, there wasn’t a decision at that point. And, you know, I got a lot of like professional foundational skills that I really appreciate from those experiences. But, you know, what I appreciated was developing relationships and continually, you know, working to drive success right over a longer period of time with customers. But that was more interesting and more fulfilling and also would involve developing new skills and learning new things. And so that, that’s what attracted me to B2B.

[00:04:56] Jason: Awesome. All right. Cool. So let’s get into the topic at hand. So doubling profit per door with the residence benefits package. So is it possible to double their profit per door?

[00:05:10] Andrew: Yeah, it better be, right? If that’s the title of our episode. So, yeah, I mean, fortunately, Second Nature works with a little over 1500, just shy of 2000 management companies across the United States. And if you believe the, you know, studies that have been done out there and benchmarking a lot of property management companies can see their profit per door, you know, somewhere in the 10 to 15, you know, per unit range, obviously some less than that, right. And it’s sort of some more than that, but a lot of companies we encounter, that’s the range, you know, oftentimes when we encounter them, and the cool thing about a resident benefits package is in 30 days or less, they can be adding, you know, oftentimes $17 in profit per door, sometimes more, sometimes less. We can get into the details of why that can vary, but it can be a really dramatic move. And if it’s a fully managed resident benefit package, it can actually be a very easy one to get going. So a powerful step to take.

[00:06:08] Jason: Yeah. I think a lot of property managers maybe don’t see this. They don’t realize this. We get so focused as business owners in the beginning of just trying to get revenue up, trying to get in revenue, and the challenge is: if we can move the needle just slightly to increase revenue, but also just slightly to decrease operational cost, right, it’s very easy to double profit margin in a business. And Sarah had ridiculous profit margin in her business because she’s ridiculously efficient. What was your profit margin?

[00:06:41] Sarah: On a bad month, it’d be like 60%.

[00:06:43] Jason: Yeah, so. Wow. And the big secret was she just wouldn’t talk to people on the phone. Like that’s a big part of it. And still had to talk to people. Yeah. So she’s been able to do some amazing things with our clients in increasing profit and profit really per door is the thing that property managers should be taking a look at because it doesn’t matter how many doors you have if you’re not taking anything home. So let’s talk about how they can increase this using a resident benefits packages. Let’s define a resident’s benefit package for those that have never heard of this idea. Let’s start there.

[00:07:17] Andrew: Yeah. So the way we think about the resident benefits package, and I’d say, this is a generally accepted definition in the industry— is this is a suite of products and services that elevate and professionalize the resident experience, right? And so that’s the 1st thing that it does, and it’s creating an experience that residents will pay for, and that they’ll stay for a recurring monthly charge, right? Alongside rent, there’s the costs, right, of all these ancillary service. We can get it into examples of what those different products and services are in a minute. But that’s what the property manager is doing. They’re saying, “we’re going to bring a different level of service. There’s value in that service.” and if there’s a cost associated with that service as well, that’s how they drive that as a profit center, but 1. That is bringing value to the resident, also protecting the investor from risk, and then the property manager benefiting as well. We call that a triple win. And that’s what we focus on.

[00:08:13] Jason: Nice. Yeah. Value to the resident, protecting the investor and what was the third one?

[00:08:19] Andrew: Yeah. And the property manager should be reducing costs and adding a profit center as well.

[00:08:25] Jason: Love it. Okay, cool. So those are three awesome benefits. Now maybe we’ll get into some specific examples, but let’s go to this first one, the value to the resident. And does this work only in— because I know some property managers right now are listening and “this won’t work in my market. My residents are cheap or my residents don’t want extra value

[00:08:48] Sarah: or they don’t care.”

[00:08:49] Jason: Yeah, you just want the lowest price possible maybe. So let’s tackle the value to the resident.

[00:08:55] Andrew: Yeah. Well, I mean, I think first i’d like to acknowledge some of the truth in that, which is that if I look at different asset classes, right, and you look at like multifamily, which has really done a lot of investment, like you think about class A multifamily major MSAs and like there’s golf simulators and bark parks and like, you know, three water fountains and like all kinds of investment.

[00:09:19] Right. And then generally the way you see them monetized is both as a part of the rent— they’ve figured out how to, you know, classify their property to place where they can actually monetize that in the rent itself. It’s amenitized and then also their services like valet, trash and other things like that, right, that are going to be charged as a separate ledger line item there. And so when we think about single family and smaller boutique, multifamily and scattered site properties and third party managers, you know, and I think about the resident profile of who’s running the class A, you know, golf simulators place we were just talking about is probably that’s probably different value for that person than, like, you know, your typical couple in their 40s with a couple of kids and a dog right in the suburbs, like they’re not looking for the same things, right? And what would be valuable and important to them?

[00:10:09] So, I think it’s okay to acknowledge that different resident profiles may value different things, right? Where we started. Where we started with this was, okay, we see a future where there’s actually a really and truly incredible resident experience. I mean, dozens of dozens and dozens of products and services and bucketing them into what’s already required in the lease. Right and so we started with that before going to “hey, what’s like standard, but could be opt out or what might be really cool for some residents?” like, you imagine lawn care as an example. That’s probably not something that every resident would pay for. And some would choose to do it themselves and. You know, but there’s probably a small percentage of residents that really would appreciate having that kind of service done and coordinated for them. And there could be a great revenue opportunity there. So we’re working towards that, but starting with the mandatory stuff, that’s things like renter’s insurance is generally a requirement of the lease, right? That they have it. When you think about paying rent on time, like that’s an essential responsibility.

[00:11:10] So how can we make things easier by creating a reward system by every time someone pays their rent on time, it actually boosts their credit score, right? Automatically this is happening. It’s almost crazy to think that somebody’s largest monthly expense is the only one that they aren’t getting rewards points for and that they aren’t getting credit, you know, benefits of their credit score for. We obviously started with filter delivery service.

[00:11:32] Like, they got to change the filters on time, but how do we make that so easy to do? It’s going to happen the vast majority of times versus all the friction that gets in the way but otherwise, and on down the list. So, hey, we’ve kind of tackled these things that are core least responsibilities first, and what we’ve seen is: yeah, occasionally a resident might say ‘Hey, I’m not sure about the value of this,” and they need some additional explanation. But when it’s properly priced, when it’s properly positioned and you’ve got the right product mix, right, with those things all done together… extremely effective, right, for property managers that hasn’t gotten in the way of being able to perform, you know, and drive their core leasing KPIs and things that would create a trade off or a compromise for investors or the managers. So that it keeps that triple win intact.

[00:12:19] Jason: Got it. So what are some of the things that might be included in a residence benefits package?

[00:12:28] Andrew: Yeah. So we just alluded to rent reporting. Every time someone pays their rent on time, what we do is we actually help take that information. Get it to the credit bureaus so that it’s building the resident’s score and to give an idea of the impact of that, you know, it’s common to see 20 30 40 point bumps. There’s some incredible you know individual kind of outlier cases where we’ve seen 70, 80 point increases, right, in individual profiles. People who did not have a credit score before actually establishing the credit score, right? Which is a big deal and when you think about You know, especially today where interest rates and everything has gone like— the cost of credit has just. Like, if you look at the interest rates on auto loans, they’ve doubled in just the last few years. Obviously, everyone knows what’s happening, probably, you know, with mortgages, right? And what’s happening the rate on the home loan and credit card, right? Credit cards. Those are really the big three. And you look at the savings. Over somebody’s lifetime of having a 40 point higher credit score, they were at some point to purchase a home, purchase one or two cars, right? And, you know, carrying the average credit card debt that American family has. It’s 6 figures, right? It’s 6 figures in savings of their lifetime. So it’s a really big deal. So that’s exciting. The rewards points that we mentioned every time someone’s paying on time, they’re getting cash value, which they can go then redeem in a marketplace where there’s hundreds of brands, right? That they can go redeem that everything from practical stuff of Starbucks, gift cards do like, I actually redeemed for some like bamboo pajamas. I don’t know if you guys have seen this or any listeners have seen it, but this bamboo— I’m a sucker for like soft material, like tactile stuff. So anyway, I got the bamboo pajamas. That was my thing, but there’s wine, there’s dog food, like all kinds of stuff from really practical every day to kind of fun and luxury spend, right, that people can leverage that for, and they can use it right away or they can save it up and bank it. They don’t lose it over time. You know, the other things we were talking about was on time filter delivery. So as opposed to “Hey,” putting it in the lease and saying, “this is your responsibility.” but then residents don’t know what their size is. They don’t know what quality to buy. They don’t really know how often to do it, or they’re not going back to page 18 at least to remember that. There’s all these things that get in the way. And typically it’s your residents who have been homeowners previously. That would be like probably the best at doing this. They felt the pain, you know, themselves, or they’ve replaced or paid for HVAC, you know, bills or oil cleanings or what might you you know, those are generally your best change, but that’s, it’s a small percentage. Most property managers report 5, 10, 15, maybe 20 percent of residents are changing exactly on time with the exact right filter, exactly the way the property manager would want them to.

[00:15:06] So what we did, it’s not perfect. You know, Jason and Sarah, it’s not like, okay, a hundred percent of the time it works every time. But we actually did a study with the national rental home council across 8, 000 single family rentals, 18 months. And we looked at four operators. And it was A B test, right? So some it’s hey, you’re relying on the resident to do it in some cases, even leaving some in the closet for them to change. Right? Most of the time they’re right at move out right where you left them versus a delivery program where they’re being delivered every 2 to 3 months. Exactly when they need to change, and what we saw was a 38 percent reduction in HVAC work order volume, right? Between those getting delivered and those not. And the reason that happens is because you go from, you know, 10 or 15 percent changing them to all, but 10 or 15%, right, change them. That’s what drives different resident benefits because they’re saving on their energy bill and they’re breathing clean air and it’s as easy as opening their front door now to take care of that lease responsibility.

[00:16:07] So, that’s a great one. I’ll pause here for a second, but we could talk about renters insurance, which is a big one, ID protection, on demand pest controls, actually the newest feature that we’ve rolled out most recently, so that’s a newer one. A fresher one. Yeah. Happy to dive in more if you guys feel that’s appropriate.

[00:16:23] Jason: Yeah. Yeah. I think, you know, people understand the list of all the things their brain starts to go, Oh, I could see how this would be beneficial. This would add value to the resident for sure.

[00:16:33] Sarah: So if you if you had a property management company that does not have a resident benefit package currently, and they’re looking to implement one, but they’re like, “I just don’t know, like what I should put in there. Should I put everything? Should I put like just one thing?” Like what is some advice that you have on like what to include and why?

[00:16:52] Andrew: Excellent question. So we can provide a link, I think to you guys the other show, but rbp.secondnature.com, right, is a place that people can go. And we’ve actually built a contact form there where people put in the state that they’re in, sarah. It’ll actually pull up the calendar of the person on our team who works with property managers in that area. And so what we generally do in a call is talk about what are their company goals, like what are they trying to optimize for, right? That’s the first thing we’ll consider. But then really define what you want your resident benefits package to do for you and your residents, investors. Map out that triple win. Once that’s clear, the next thing we will do is kind of share, like, Hey, in your market, like your resident profile, your property type, right, your area, here’s the product mix, right. And pricing and presentation, right, that we are saying that’s a. Compliant, right. Compliant with your local laws and regulations. And then B. You know, is getting the best business results, you know, for that. And so we provide that kind of consultative approach and it can vary.

[00:17:55] I mean, the fact of the matter is filter delivery in Orlando, Florida, right, is a different problem than in San Diego, California. Right. So we’re not going to recommend the same thing in two different places. We take a kind of like value based approach. Once we help work with the operator to figure out, you know, what that’s going to be and what the right fit for them is.

[00:18:17] Sarah: That’s awesome. Super helpful. And I like that it’s like, very customizable because I think this is something that people just, they hesitate on a little bit because there’s so many options. And especially when we take clients through pricing. Like, what do I include in my high plan? What do I not include? Like, what are the things that I should— and these are always where we see people get stuck is like, what are the benefits that we should include? And if there’s something that really helps them figure out, like, am I compliant? What am I actually looking to do and like what in my area seems to be working well already? I think that would be huge for people. So I’m really glad you brought that up. Thank you.

[00:18:54] Andrew: You know, I’ll jump in with 1 thing, and then I think Jason was going to go maybe towards the investor side. If that’s where we’re going next, but something we saw included in benefits packages early. That we’ve started to see phase out. Like maybe that could be interesting for people if they’ve heard about the past, you know, keeping up with this is originally before we had a lot of what Second Nature and other point solutions have been able to do and really productizing and scaling some of these services is. You know, problem is we’re figuring out, well, what can I do on my own? And I think some of that is still relevant of communicating anything that differentiates you from a for rent by owner, right, versus a professional management company that you have multiple payment options, right? Maybe you have 24/7, you know, maintenance coordination that somebody can file a maintenance request at any time versus I remember one of my first early renting experiences, you know, I rented from a dentist who had four rental properties and it was like two weeks to get ahold of him to let him know that it was freezing cold in DC. Yeah, I was a college kid that like wore flip flops when it was 10 degrees outside. I didn’t complain too much, but you know, thinking about those kind of experiences being a professional, like probably the people listening to this, I would never have that experience, right, working with their company. And so, hey, we do think it’s important to communicate those things. Even if you don’t monetize them or necessarily charge them in your RBP, it’s a good place in the RBP to communicate those differences between a professional property manager and the FERBO. But the one that I’ve seen phased out were these kind of like early on before there were things like filters and insurance and credit and stuff that felt like really tangible to bring in. We often saw things like, hey, here’s a get out of jail free card on late rent, right, or an NSF fee. And the reason we saw that early on is because it was so easy for a property manager to say, hey, this is worth $50, right? Or worth 40. It’s like this tangible value of what you’re giving, right? As a part of that and communicating it. Because they felt like they didn’t have a lot of substance up front. But as more substances come in, we’ve seen that phase out because people started to realize, well, if I’m incentivizing, you know, on time rent, is that really a triple win for like my team that has to deal with that? Is that a win for the investor? That’s not getting their rent on time. And so it’s really about how do we incentivize the right behaviors, right? That’s good outcomes for everybody. And so that’s, that is something that we’ve seen change over the last couple of years, some of that stuff kind of phase.

[00:21:26] Out and focusing on a more proactive and incentivizing what you want to have happen type of approach.

[00:21:32] Jason: Yeah. Incentives matter a lot, especially with tenants. Okay, cool. So let’s get into then protecting the investor. So, I mean, I can see how some of these things, just if the tenants are behaving better, it’s going to protect the property better, like getting filters changed, things like this.

[00:21:51] But maybe you can provide some more detail on that.

[00:21:54] Andrew: Yeah, I mean, I think you know, a huge one is if you think about in single family rental and that investor profile, you know, in particular, I think about how important it is to keep the property occupied. Right? And you know, if you can keep a resident happy and renewing, right, renewing their lease, then yeah, that’s a big win for the investor versus all that. It’s not just the vacancy cost, right? It’s also all the maintenance and repairs and everything that has to happen during that time. And so we, I mean, we have a client. They’ve got a scaled single family rental organization, over 7,000 units that they manage in a few markets, right? And their average their average tenancy is just under seven years. Wow, which is like really incredible, right? And that’s not just because they have a resident benefits package. It’s more than that. But it’s really interesting to see a lot of the property managers really pushing for “how can I drive a great resident experience?” That people will pay for and that they’ll stay for right and extending you know, attracting great residents and then keeping them longer. How that drives investor value. And then while they’re there in the property, they’re taking better care of it. The filters are getting changed on time. There’s less HVAC expense, right? 38 percent less HVAC bills eliminates 38 percent of those bills that it makes an investor question, you know, “I got into this for predictable and like risk adjusted returns and then boom, I have this 7,000 expense.”

[00:23:23] Maybe I’m thinking about selling or do I really want to stick through this or I just ate up the rest of my year’s returns, right? You can eliminate those kind of moments. That’s really what we’re after, right? How do we attack those kinds of moments that you know, create those emotional kind of negative experiences for investors that would make them say “you know, I want to, maybe I want to put my money somewhere else, or maybe I’m not up for continuing this.” so we think about how do we create a resident experience so good. Residents don’t want to leave. How do we create an investor experience so good, they don’t want to sell? They want to buy more. How do we create a team experience so good, the talent wants to be in this industry and wants to grow in this industry forever. And that’s that kind of flywheel of what a triple win experience creates.

[00:24:07] Jason: Yeah, I like it. They’re increasing the lease renewals. They’re lowering their operational costs by not having those happen as often and because they’re taking better care of things, there’s going to be less maintenance challenges, et cetera, better property care, lower HVAC expenses.

[00:24:23] I mean, this sounds like an investor benefits package.

[00:24:26] Andrew: Yeah. I mean, if you look at, if you were to Google resident benefits package, You’ll see Second Nature’s content, but you’ll also see a lot of property managers. And of course, property managers, their website and their content is often generally pointed at property owners, right? And you’ll see a lot of the results are like, “Hey, our resident benefits package, how it benefits investors”. And you’ll just hear it from their mouths, right? It’s the things I mentioned and more, like if all of your residents have renters insurance. Guess what? You can get a lower cost on your property insurance as a property owner and investor, right? If that’s the case because you’re protected from liabilities, especially if there’s a master policy in place that has special coverages that protect the investors. Like our insurance products and others that offer great insurance products in the industry. So, whether you’re working with Second Nature or not, you know, bringing these kinds of programs and designing things to be a triple win is something we’d, we really encourage people to pursue.

[00:25:19] Jason: Now, if somebody were trying to design this on their own, then they’re probably going to have to source several different tools and services, which I’m guessing you guys like have aggregated and some of this stuff is in house, like the filters and some of this you’ve partnered, I’m guessing, but you’ve already brought all of this together. So, one of the challenges or one of the concerns is in those situations is the business owners thinking, “well, I’m going to be cheap. I can do this for less if I go and source all these components myself. Is that accurate?”

[00:25:51] Andrew: Yeah. Yeah. Great question. You know, it’s funny. I think I was telling you, we had our whole team in Nashville this past week. And we actually brought a couple of our customers in, three customers to have just like a customer panel. It was great for people not in sales and account management roles, like people in finance, people in technology, IT, to really hear directly what it’s like to be a property manager and everything else. And Kevin Patterson was with us. He’s a property manager, manages about a thousand units out of California. And Kevin was talking about it. He’s like, yeah, “I saw what you guys were doing. I’m like, ‘I can do this.'” And he is like, “so I bought pallets of filters, right? And had them shipped to my office. And then we realized, oh my God, like now we have to store all these filters and inventory. What a mess. Yeah. I still have some too, you know, two years later.”

[00:26:33] So, I mean, here’s the thing. I would say there’s probably a percentage or two, like my observation is there’s a couple percentage, you know, of companies out there who are wired in such a way and just so passionately logistically detailed that if they wanted to do, you know, a couple of these things really on their own, they probably could do it.

[00:26:53] But I think most property managers recognize. That, “Hey, if I can make $17 in profit per door, I don’t have to add to my head count. I can have this whole thing up and running in 30 days and bring that impact to my business.” Right. You know, fortunately Second Nature hasn’t lost. I can probably count them on a hand or two, customers out of 2000, right? That we’ve signed over the years. And that’s our job, right? It’s to continually provide a competitive rate that’s attractive, that would make people want to pick us, but I will say this: we’ve advised a couple of companies who just say, “I want to try it and go on my own.” And sometimes with Kevin, like we give them some advice, they end up working with us later. A couple of them have been able to make it successful on their own. We’re happy to help, you know, in either case you know, and provide some insight and help avoid some heartburn. I think some things are harder than others, like insurance. Like if you’re going to build your own insurance products, you’ve got to get certain licenses.

[00:27:47] And I want to set up a whole different entity and everything else, you know, for that, but you know, some things are easier than others. Some things are harder than others. So it kind of can just depend what we decided to put together.

[00:27:59] Jason: Yeah. I think it’s important for property managers to keep the main thing, otherwise it’s so easy to get distracted as an entrepreneur. We’re like, “let’s add this and let’s do this,” and then suddenly the main thing starts to slip. So you’re like, “cool. I’m going to beat that $17 that Andrew Smallwood’s going to get me per door. I’m going to get it to $20 or to $30,” or whatever. And then they’re losing out on hundreds of dollars because they’re not getting more clients. They’re not focused on the main things in the business and retaining clients. And they’re like, “Oh, now we have to do this,” because you know, in order to do all of this, it’s building another business. Building another business in the business. And one of the biggest problems I see with entrepreneurs, especially in early stages of their development is this idea that they need to just keep doing more stuff themselves and they start like expanding, doing other businesses. They have 20- 30 things. The most efficient model for an entrepreneur is one business. That’s the most efficient. Generally, all these billionaires scaled one business, right? They cause they have so much focus. And I think focus is the most important of all five currencies of time, energy, focus, cash, and effort in relation to scaling or growing a business it’s focus. That laser focus. And so keeping the main thing I’ve made that mistake, you know, doing my first conference, what I call my $2 million mistake, because we were growing at a healthy pace and then 300 percent a year, and then it was like, let’s do this crazy, big, expensive conference and then sales marketing, like everything had to go towards this conference and it distracted the business because we were on the hook. You’re on the hook with hotel. You’re on the hook with the vendors, like everything that’s going on. And that was really difficult. And that was a big lesson to me that the main thing has to stay the main thing.

[00:29:51] It’s super important.

[00:29:52] Andrew: Yeah. I mean, you said it so well, like when I think of Second Nature’s own outsourcing decisions, right? Like I look at it through three lenses: so one is scale, right? Do I have scale or does the partner of scale? Who’s going to deliver value through scale? Right? Second is skill, right? You know, do I have a certain skill or competency? Do they have a skill or competency, right? Who’s going to drive more value that way? And then the third is time, which we were just talking about of like your opportunity cost and your focus on what you do and you know, I suppose there’s a probably a fourth dimension there of just control of like ultimately the customer experience that you’re trying to create can’t be created reliably by an outsourced partner. And they’re not dedicated and committed to that, or you’re not aligned on that. Yeah. That would be another reason to do it yourself. But but yeah, it’s, man, I take your point, Jason, of just, it’s so easy to be ambitious and want to take a lot on and not stay focused on here’s my core competency that I can continually leverage, to drive a lot of value. And here’s how I can bring in complimentary pieces around it to create something bigger than that.

[00:30:58] Jason: Yeah. I mean, a big part of what we do at DoorGrow is just getting entrepreneurs to focus and then they start to scale really rapidly. So, I mean, in this industry, it could be diluted focus on different types of properties they’re managing because each different type is almost like a different business. They’re like, “I’m going to do commercial, I’m going to do associations,” and then they’re like trying to run multiple businesses with team members that are trying to jump into multiple businesses. And then it’s a mess. And they’re just not going as fast. And so this I view as, this is like adding on another business, and if you can strap on these tools from vendors, other companies, and get these resources, you can go a lot faster and keep the main thing. So, yeah, love it. So the third thing we talked and we’ve touched on this in a few instances of how this can help, but the third thing was increasing profit. So, I mean, there’s the obvious bump that you’re charging a fee for this and you’re get convincing the residents. And for the residents, I think a lot of this would sound like a no brainer. They’re getting more value in their mind than what they’re going to be charged, and then it becomes a no brainer for them to do this.

[00:32:03] And it protects them and it helps them get better credit. But let’s talk specifically about profitability, like increasing profit.

[00:32:11] Andrew: So, yeah. So I think, you know, at Second Nature, like we do care about the experience and providing convenience to people, but it’s also really important to us that there’s a strong economic case for all parties. And so the way we often design and the recommendations we make on pricing. I mean, listen, it’s a property manager’s business. So Sarah, we’re going to let them choose, right? Here’s it’s their pricing that they’re charging their customer. We’re not going to get in the way of that. That’s in their control. But when we make recommendations, which I’ll say nine times out of 10, right? If not more. It’s set up in such a way where a resident is saving over $100 per year compared to what they’re already spending right on the same expenses if they were to go with the status quo, right? Versus being enrolled in the benefits package. And then we make that as easy as signing their lease. There’s a clear economic benefit, right? For the resident for the investors with HVAC savings. Everything else we’re talking about earlier. Well over a hundred dollars per year in annualized savings for the investor. And then for the property manager, as we were talking about, well over a hundred dollars per year. Right. And so that’s when you create new value. The way we think about it is you have a bigger pie that can be shared right across all parties, as opposed to taking the same pie and saying, “how do I shave off a little more for me?” but then you’re cutting into the very relationship that you kind of depend on to support the business. And so how can we find new ways to add on and expand the value and share in that value because that makes it really sustainable and that builds trust while also building your balance sheet and so that’s the focus and approach. You know we recommend that property managers take when they approach pricing and the other thing I’d probably give advice on here is that some property managers will go about this and then recognize very quickly, “oh, this is the thinking. I can’t—” it’s so frustrating, right? When I see an owner do this, you know, like, cost based pricing or a cost based approach as opposed to a market based approach. And what I mean by that is, “hey, here’s all my costs. I want to make $17 per door. So here’s what I’m going to charge, right?”

[00:34:21] It’s kind of like a investor saying, “well, here’s my mortgage and all of my expenses, and I’d love to cashflow $800 a month. So I’m just going to charge this for rent.” At which point Sarah tells them, regardless of what the market dictates, “yeah, your property is going to sit vacant for six months or it’s only going to be vacant for two days and you way underpriced.”

[00:34:39] Right? And so the point is, “Hey, here’s actually a market based approach to pricing that drives fair value and a good value proposition to everybody.” Is the main encouragement we take. And again, if somebody wants to talk to Second Nature, whether they work with us or not, we’re happy to advise on what we observe and see is happening in that market as it relates to pricing.

[00:35:00] Jason: Yeah, ultimately the market’s King. However, there are different segments of the market. So if people are targeting people at the end of the sales cycle that are searching on Google for property management, for example, the market is going to pay less there, because now you’re a commodity. Whereas if you capture people in the blue ocean that are not searching on the internet, which there’s a lot more of those, then you can charge more, have more fees, et cetera. And they’re easier to close, right? And so the other factor lever that we’ve noticed with our clients at DoorGrow, increasing their profitability is increasing their ability to sell. So their ability to sell services and to sell the value and to create the pain gap between where people are and where they want to be, what value they want.

[00:35:46] That ability as well as another lever in which they’re able to charge more than their competition and close deals more easily. And there’s some other levers as well. And so there’s the market’s one of the factors, but there are some levers that can be leveraged as well. And depending on who you’re targeting in your audience, then you also can charge more money.

[00:36:08] So that’s something to keep in mind. So, yeah, this is super interesting. So everybody wants to increase profit if they’re smart, those of you listening, if you’re smart, you want to increase profit, you want to protect your investors, that’s like your business, what you do, and you want to provide value to the residents.

[00:36:24] So why would people just not do this? Why? Like have they just not heard of a resident benefits package or why would they not be doing this?

[00:36:32] Andrew: Yeah, I mean, there are definitely people that fall into that camp, and I’m sure there’s probably going to be at least a couple people listening to this who haven’t heard of a residence package. I also think over the last few years, this has been a really hot topic that’s been talked about a lot, and people are seeing it more and more. As more companies adopt it, they just see it. Like they see our flyers in the Zillow listings, you know, the second photo, you know, beyond the thumbnail, it’s like, here’s a list of all these benefits, right, that people are putting in the marketing language or listing language or on their competitor’s websites. And so I do think awareness is rapidly growing here. I mean, 101% empathy is property managers are often so busy, right? like just to do the kind of like table stakes of property management. It can take a lot of investment into their systems, into their process. I know that’s something that you guys offer to folks and help them with. It can really feel like it’s hard to implement a change in my business, let alone, you know, I think this is where Second Nature saw a real problem to solve. Like, how am I going to go through seven different sales processes, right, which is really like 21 to 30, if I want to look at more than just one vendor for a service, right? Go through all those processes, line up all my agreements, get those executed, and get my onboarding and implementation set up at the same time.

[00:37:53] And align everybody the same, like consistent experience on going throughout it. That feels like going to Mars, you know, it’s like a real big thing to tackle. So that’s where we really just wanted to be like the easy button for that and drive, you know, “Hey, we’ve got a million plus residents on our platform, you know, thousands of property managers that we’re working with. And, you know, can we drive some efficiency and pass that benefit alone to the customer,” you know, is core to our value proposition. And so that’s, I think what has brought, you know, a lot of people to us while we’re growing very fast, have earned the reputation that we have, and at the same time we don’t take it lightly. There’s a lot more work to do. There’s still still more change that needs to happen here, but I think the big thing is just the anticipation of all the effort and just the hard work of making any change in your business, right? Is a lot of times what people come up against.

[00:38:43] Jason: Yeah. I mean, there’s a lot of property managers, people have heard me talk about the Cycle of Suck on the show before. There’s a lot of overwhelm. There’s a lot of stress, a lot of property managers struggling. They’re in a race to the bottom in terms of pricing. They’re focused on internet marketing, SEO, pay per click, content marketing, social media marketing, which is the bottom of the barrel owners that are the ones left over, the crappy scraps that fell off the word of mouth table. Like there’s a lot of challenge there, by the way, we can help you with that. Reach out to us at DoorGrow. So that may be a big reason why they’re just not doing these things that are in their mind, ancillary, auxiliary, and they’re not adding this additional value and they’re leaving money on the table because they’re just too focused on trying to just get their business to eke out a little bit of dollars and, you know, they’re stressed.

[00:39:31] Sarah: So I’ve got a question that Andrew if you have a recommendation on, at what stage would this be easiest for a property manager to implement? Is it easiest right off the bat when they’re starting and they have no doors or a few doors? Is it easiest when they have maybe 100? Is it easiest when they get to the 500 plus mark? Or is there a stage at which it’s like, maybe it’s just in their mind, it feels too hard, and you’re like, “Oh, actually, it’s really easy, and here’s why.”

[00:39:59] Andrew: Yeah, great question, Sarah. I mean, here’s the thing. Second Nature works with customers who have as little as their first one to two doors and are just getting started, right? A lot of our customers have hundreds or a couple thousand doors, and we work with a few clients that have 80,000 plus units in their portfolio. So we’ve worked with people at all sizes who have come and started all sizes. I will say this though. I think if somebody has under 20 to 30 doors, even as simple and easy as Second Nature makes it, you know, probably that person would be better served as they’re getting their first couple of dozen doors on in focusing on their core operations, their core systems, their accounting platform getting set up. I would recommend probably holding on the— I’m sure my S and B reps are going to be listening to this and being like, “what are you saying, man?”—

[00:40:47] And jokes aside, like I have talked to a few people where I’ve like pushed them on it a little bit. Like, “Hey, they’ve got eight doors,” and I’m like, “okay, so here, this handful of hours, right, that you could spend doing this. Let’s add $17 per door times your eight doors. Like, here’s the business impact to this, and then what are you going to do with that amount,” so to speak, right? And “how are you going to reinvest that in your business? Like, how do you see that as the best use of your time versus spending that going and doing, you know, business development or, you know, generating realtor referrals or whatever your strategy is for growing?” Okay. Your business to kind of that you know, initial point of profitability to support yourself. Like, how are you seeing that? And in one case, he said, “this is my differentiator. This is what I get to talk about in my market that I do that others don’t. So it’s actually going to help me attract more owners. I really want to do this now.” Cool. Like I wouldn’t stop that person from working with us, but I’d say generally, probably somebody in their first couple dozen doors is better focused on growing that and getting their core processes in a really stable place.

[00:41:47] Jason: Sure. They can add like one door and make what they would make if I had $17 times eight, right? So if they’re focusing on that, but yeah, I get that. So I would imagine then maybe right around that 50 door stage is a really good place. This is where a lot of people start to stack and add vendors and get sort like. Then it starts to make sense to get some leverage because this is a lot of times I call the first sand trap where they start to get stuck between 50 to a hundred, because they’re doing everything themselves. And this is probably where they can start to get some additional leverage and add some additional services.

[00:42:18] Andrew: So if I can compliment you guys real quick, I saw like the DoorGrow code thing, and I think part of it may have been blurred out, but I think I got like the gist of it, I remember seeing, you know, how you guys had kind of stages. I’m like, wow, that is so cool. And if I was a new property manager, I would love having and seeing a resource like that of just, “man, here’s like what I can focus on at this time that’s right for me. It’s going to get me to the next phase and then what to focus on here to get to the next one.” Like what a helpful and useful tool.

[00:42:47] So I just wanted to say kudos to you guys for putting that out there.

[00:42:50] Jason: Yeah, thanks. If anybody wants that for free, like they can go to DoorGrow.Com. Click the big pink button on the homepage. ‘I want to grow.’ And on that page, there’s three steps. The third one is a YouTube video, 95 minute training called the DoorGrow Code. It’s all about it. So it’ll show you how to scale. And we’re confident we’re doing this with clients that we could take any business from zero doors to a thousand doors in five years or less. If they just listen to us and do what we say at each stage. Yeah. Very cool. So thanks for plugging us. Appreciate it.

[00:43:25] Andrew: So I’m solicited. Yeah. Yeah. But it felt right in that moment.

[00:43:29] Jason: Yeah. There’s very specific things that happen at different stages. And I think if you are at least at that 50 door stage or beyond, like you’ll be crazy not to do this. And I love the idea of getting your resident benefits package as a unique differentiator just to stand out, which will give you more confidence in sales. And when people need confidence, the most is when they have the least doors. This is where confidence is a huge factor for them. Like when we take them through our process of cleaning up their brand, their website, all of this, we’re really just helping them with their confidence level to go out and sell.

[00:44:04] And they can go out and sell without all that stuff. They don’t even need a website. They just need clients. Right. But doing these things helps them. And this is something else I think they can boost their confidence a little bit. And that’s worth it. That’s worth it for sure. So, well, cool, Andrew, anything else we’re missing about this? And if not, then how can people get in touch with you or with Second Nature?

[00:44:25] Andrew: The only other thing I’d say is anybody who’s made it right to this point, 45- 50 minutes in, like, I feel like you deserve a medal or something like that with attention spans, considerations fans. So thanks for sticking with us. I hope you got some value today. Sarah and Jason, I really appreciate the opportunity to be here with you guys. I really enjoyed our conversation. I love you guys’ energy and vibe you know, excited to get to know you guys better. And and I’d say this if people are looking for you know, more resources and things like that, we’ve got at rbp.secondnature.Com, there’s a bunch of things, we’ve got articles, we’ve got the triple win podcasts that we record a bunch of episodes there that people can check out. If that’s of interest to them, we’ve occasionally got events, digital events and things like that, that we’re putting on, if they’re just looking to learn more, we’ve got some of those kinds of resources, or if they’re looking to talk to someone specifically about what we talked about here today they can find a contact form to do that as well.

[00:45:16] And just want to express appreciation to you guys. Again, really appreciate you inviting me on and having a chance to do this.

[00:45:21] Jason: Cool. Thanks for coming on the show.

[00:45:23] Sarah: Yeah. Thanks for being here. I think this is something that if you don’t have it, just look into it. I feel like there’s not a downside in this anywhere. So just look into it. If this was something that I had known about when I owned my business, man, would have done that in a heartbeat, but, I really think it’s something that can like benefit all parties. It can like help set you apart from other people that maybe don’t know about this or just aren’t doing it yet.

[00:45:50] And it sounds like they make it easy for you. I think that you’re probably right, Andrew. Like you hit that right on the nose. Like they’re busy and they’re like, “Oh, this is hard.” It sounds like they understand that and they’ll work with you to make it easy.

[00:46:04] Jason: Yeah. Yeah I love that you guys are helping people through this process and making it easy. So We’ll definitely be pushing our clients to take a look at this episode so that they can start getting the stuff implemented Thanks for coming on the show. Appreciate you. Awesome.

[00:46:17] Andrew: Thanks guys.

[00:46:18] Jason: Thanks. All right So if you are a property management entrepreneur that’s wanting to add more doors grow your business reach out to us at DoorGrow We would love to help you out anything else we should say All right, then until next time to our mutual growth.

[00:46:31] Bye everyone.

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