Property management is hard enough. As your business becomes successful, don’t always say “yes” or “no” to everything. Owners are coming to you to solve a problem. Step into potential opportunities without being pulled in multiple directions.
Today, I am talking to Marc Cunningham, President of Grace Property Management, who identifies five characteristics that define successful property management companies.
You’ll Learn…
[02:42] Entrepreneurial Footsteps: Marc grew up in real estate property management world working for his dad, who founded Grace Property Management in 1978.
[04:02] Doors in Denver: Grow slow and steady; from 110 to 1,000 doors.
[04:32] Mantra: Follow the opportunity.
[07:15] However you define success, companies follow some of these five standards.
[07:56] #1. Filter and Qualify Owners: Don’t take every owner that comes along.
[20:04] #2. Know your numbers to know how well your business is doing.
[31:43] #3. Focus on profit, not door count. People are willing to pay for additional value.
[37:20] #4. Have systems and processes in place, and follow them.
[43:50] #5. Recruit, develop, and retain talent.
[52:28] Marc’s Extra: #6. Hold weekly one-on-one meetings with each team member.
[53:15] DoorGrow Extra: #7. Invest consistently in your own development.
[56:27] DoorGrow Extra: #8. Get coaching to help grow your business.
Tweetables
Resources
DGS 25: Why Every Property Manager Should Implement Profit First
DGS 80: Automating Your Business with Process Street with Vinay Patankar
DoorGrown Cold Leads Calculator
Transcript
Jason: Welcome DoorGrow hackers to the DoorGrow Show. If you are a property management entrepreneur that wants to add doors, make a difference, increase revenue, help others, impact lives, and you are interested in growing your business and life, and you are 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. At DoorGrow, we are on a mission to transform property management businesses and their owners. 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. Now, let’s get into the show.
This guest that we have today is a fantastic gentleman named Marc Cunningham. Marc, you’re not a stranger to most people probably listening to the show. Welcome to the show.
Marc: Thank you for having me, Jason.
Jason: I’m really excited to have you here. It’s strange that you haven’t been on here yet. At the beginning of the show, I was like, “Have you been on here? You’re like, “No.” I said, “It’s long overdue.”
Marc: I’ve just been waiting for the invitation.
Jason: Okay, well I’m glad we finally got you invited. I’m glad you’re here and today’s topic is going to be the five characteristics of successful PM companies. Before we get into that, I want you to share a little bit of your background to qualify yourself to the audience, help them understand how you got into property management and what your connection is to these five characteristics of a successful company.
Marc: Absolutely. Let me start by asking you a question. What were you doing in 1978 Jason?
Jason: 1978?
Marc: Yeah.
Jason: I was probably pooping in a diaper and drinking breast milk.
Marc: Okay. That image there.
Jason: I was born in 1977.
Marc: Okay, so you’re one. I wasn’t much older than that, but in 1978 my dad decided that he was going to quit teaching—he was a middle school teacher—and he was going to follow his entrepreneurial real estate dream. We opened up a real estate property management company Grace Property Management 1978 in Denver. I was employee number one because I was pre child labor, so my dad would have me doing all the things that kids probably shouldn’t do. He would have me showing properties, mowing lawns, collecting rents, and filling out lease, just anything that needed to be done. I grew up in that world, so it really gave me a unique view into real estate, into property management, and just in the business because that’s all I knew. That’s all we did.
As I got older, I’d take my summers, I’d worked for him in the summers, and again just doing whatever needed done. If I get really lucky, if it gets too hot out, I’d work in the office. When it got over 110 degrees, the deal is I get to come into the office, otherwise I’m mowing lawns. I did that for many, many years. I went to Colorado State University, I studied finance and real estate there, and I was working in Cheyenne, Wyoming doing accounting work there. My dad called me one day and he said, “Hey, I need to hire a property manager, are you interested?” Well Cheyenne Wyoming, with all due respect, isn’t the most fun place to live, so I jumped to that opportunity and that was about 20 years ago, 20 some odd years ago.
I joined the firm permanently at that point in time. At that time, we were relatively small, I think we had 110–120 doors and we have grown slowly and steadily over the years. Today, we do both residential and commercial. We’ve got just under a thousand doors that we manage. We do real estate sales, we do property management, we’re investors ourselves—I own some stuff—we flip. Our mantra is follow the opportunity. If there’s an opportunity to real estate, we want to look at that, whatever that is. So, that’s how we’ve gotten to where we are today.
Jason: I was just down in Vegas speaking to a group of property managers and they were bringing up like, “How do I avoid all this distraction and move the business forward?” What I said to them is opportunity is I’ve noticed is what kills entrepreneurs. How do you keep following the opportunity at all times but also keeping your focus narrow enough that you’re actually moving forward.
Marc: That’s a great question. That’s a really good question and that’s hard. It is really hard because we found that the bigger we get, the more successful we get, the more opportunities that are out there. At this point, we’re of the belief that you’ve got to say no to almost everything. I think it was Steve Jobs that said, “The difference between successful people and really successful people are the really successful people say no to just about everything.”
Jason: Following the opportunity as a mantra doesn’t mean saying yes to every opportunity.
Marc: It does not mean saying yes to everything. You need to consider everything. What I don’t like is people say, “No, we don’t do that.” For many, many years, for example, we didn’t do real estate sales. “Hey, will you help me sell my house?” “No, we don’t do that. We only do property management.” We didn’t consider. Well then, one day we thought, “Maybe we should consider it,” and as we considered it, we realized, this is a really good opportunity that we should capitalize on.
Where when an owner says, “Gosh, I want to sell my house. Would you guys be interested in buying it?” “No, we don’t do that.” Well, stop saying, “No, we don’t do that.” At least think about it, consider it, and I think that’s the way to step into some potential opportunities. But yes, you have to be cautious or else it will get you pulled to many directions.
Jason: Relevant to that, how many of these units are now in your own portfolio, are yours or your company’s?
Marc: I don’t have a real big portfolio. I’m a pretty conservative guy, so I’m a buy-it-pay-it-off kind of guy. I’ve got 10–12 rental properties in my portfolio.
Jason: Let’s get into these five characteristics that you feel define a successful company, and you’re obviously a successful company. You’ve helped keep it successful, right? Second generation, so let’s get in number one.
Marc: Yeah. I don’t pretend to be a guru. I can’t stand the guys that stand there, beat their chest, and say, “Do it like me, I know what I’m doing.” This is just from our perspective. We worked with a lot of companies and I didn’t get this, but I do a lot of PM coaching in business stuff on the side with PM companies helping them get better, basically. We know a lot of PM companies, we’ve worked a lot of PM companies and there seem to be some standards, some things companies that are successful, however you define success, are going to follow some of these aspects. This is not meant to be an exhaustive list by any means, but it’s the way that we gauge ourselves.
Jason: This will be cool because I probably come from a very different perspective. You’re in the industry, you do this in Denver and I don’t have any rental properties. I don’t manage. I’m not a property manager. I have largely been this nerdy fly on the wall that’s been able to see inside of hundreds of companies. My perspective might be a little bit different, but I’m sure there’s some alignment. Let’s get into number one.
Marc: Number one is successful companies don’t take every owner. They don’t take every owner that comes along. So you agree with that one?
Jason: Totally. If anyone’s heard my show, they’ve heard me talk about the cycle of suck, which is it starts with filtering owners. Like if take in bad owners, you have bad properties. It doesn’t matter how amazing they are. If you have bad properties, you have bad tenants. It doesn’t matter how much tenant screening you do. If you have bad tenants, you have a bad reputation because you have bad owners and bad tenants. Nobody’s happy and this is where I think the entire industry as a whole in aggregate sits right now. It has a bad reputation because they’re taking on any owner.
Marc: Yeah, I would agree. The concept is this. Any PM company knows that if a tenant, a prospective tenant walks in the door, an applicant comes in and says, “Hey, I want to rent your property,” every property manager is a little bit skeptical. They raise their eyebrow. They say, “Okay, well maybe. I’m going to qualify you.” We know industry-wide that whatever the number is, call it 25%-30%, depending on the market you’re in, the 25%-30% of the applicants are not going to make good tenants. Everybody would agree upon that. Well, we really believe that probably that same percentage 25%, 30%, 35% of prospective owner-clients are not going to make good owner-clients. The challenge comes, how do we filter them? Because if it’s an applicant to rent a property, we have them fill out a rental application. We go in deep.
That’s the hardest part of the business is qualifying those folks. So, how do you qualify an owner? That’s where the challenge lies. If you called our office today as a prospective owner-client and you are talking to our new account specialist or one of our PM’s, they would have a dock in front of them, a piece of paper, and a lot of this is just basic questionnaires—what’s your email address, what’s the property address, tell me about the property—but at the end of that questionnaire, they have four questions. Yes or no questions that they have to check the box on yes or no. They have to discern this information during the conversation with you because it helps us qualify these owners.
For example, the first one says, “Is the owner financially stable?” If during this conversation you as my prospective owner say to me, “Hey Marc, if you can’t get this property rented next week, I can’t make my mortgage payment. I’ve got to get this thing ready quickly.” Well, you’re not financially stable, right? That’s going to be a no on that box, that’s the first question.
Jason: “So, are you current on all your house payments?” One of my clients said that was a favorite question they would ask. If they say no, it’s instant disqualification.
Marc: Absolutely. Then the second question we have to ask ourselves is, is the client emotionally stable? That can be a hard one to discern. I always tell people, “Don’t ask them the question verbatim, okay?” It will get you in trouble.
Jason: “Are you sane?” Yeah.
Marc: Exactly, but we need to be able to discern that information from the conversation. Is this somebody who’s going to be stable when things go bad because at some point in time it will.
Jason: Right. Sometimes, people will reveal their emotional instability pretty quickly, right?
Marc: Yes. I tell my PMs, “Look. Two quick keys. If they cry on the first conversation or if they own more than two cats, they are not emotionally stable. Run away from them.”
Jason: Might be a little biased against cat owners. What’s cat owners like?
Marc: I know. You just lost half of your audience because of my personal bias.
Jason: No, they’re cool.
Marc: I am as well. Then the third question we ask is, “Can I control the situation and the client? Are they willing to give me control?” Not in a puppet master, I’m going to be the mean guy, but they have to give me control. They have to be willing to do so. Then question number four is, are they realistic in expectations? Do they think that we should be able to get $2000 a month for property that’s only going for $1000? Or do they think that we should call them before we ever spend a dime on maintenance? That’s just not realistic. That’s not going to happen. If we can’t check the yes box on all four of those, then my PM does not have permission to work with that client.
Jason: I love the idea of figuring out if they’re willing to relinquish control. That’s such a big thing because they’re coming to you to solve a problem. I’ve noticed with clients that they’re not willing to be strong enough of a fence for people to push against to elicit trust enough for people to relinquish that control. I think a lot of people will push. They might look like bad owners, they’re trying to test the fence, and it’s like in dating how girls will crap test the guy. They just want to see if they can handle them or if they’re willing to be strong enough. I think a lot of times property managers will try to be nice and maybe don’t have enough bite or drive and they’re really looking for somebody they can feel safe with, so they test us.
I think clients will test us and then they’re willing to relinquish control at times. It’s just something I’ve noticed during the sales process because I deal with entrepreneurs. They’re driven people and I need the same thing. They need to be willing to relinquish a certain amount of control because I’m asking to do crazy stuff, like fire doors or change your business name.
I love that idea, and then are they realistic in their expectations. If somebody says, “Hey, I want to add 500 doors in the next quarter,” then that’s probably not going to be realistic. I want to make sure they’re in touch with a reality that I feel I can give them or lead them towards and it’s the same with our property management clients.
Marc: Yup, and if we set those filters on the front-end, that’s just going to make things so much easier on bringing good clients on because our business is hard enough without having difficult owner-clients. I think there’s the second aspect of that is, “Well, gosh. That’s great. I wish I would have heard that before I took on Mr. Crazy,” so, what do you do then? I think the other part of that—you alluded to this—is sometimes you do need to let those clients go, and sometimes that’s the best thing, because we’re talking about what successful companies do. Successful companies realize that, “Hey, if we made a mistake, we brought on a bad client, we need to let that client go, whatever that looks like.”
Jason: There’s always going to be those mistakes. We cannot always know and perceive every person coming in and know that they are emotionally stable, or that you can control them, or that they will be realistic, but when they start to reveal those colors, we have to be willing to let them go.
I’ve made bad decisions in bringing people in as clients and I have had to let them go. Some of them were just really like verbally abusive to my team. You’d be really amazed at some of the types of people that that can somehow leak through even if you have pretty good qualifications at the beginning. I love what you’re getting at here because really anybody that studies sales in any capacity knows that qualifying a prospect is at the outset. It’s really mind boggling that people would not qualify their prospects in any regard.
Marc: I’m curious. You said you had to let clients go. How have you overcome the internal thought of, “Ooh, but that’s money. That’s a big chunk.” When do you decide? How do you decide? Is that an internal struggle for you?
Jason: Sometimes. There’s always a negotiation and it’s a balance. It’s a balance between the money aspect and the cost with the team. Ultimately, my team I want to keep forever. I want to keep them long-term. If I keep that client on, I’m saying to my team, your feelings don’t matter. I don’t care about you. That sends a really painful message and I’ve noticed this in property management companies.
People wonder why there’s so much turnover with their staff and I think one key reason is because you’re allowing your staff, you’re forcing your staff to tolerate too much. There are some of these owners that should be let go, and I’ve said many times to clients, “The hallmark of a seasoned property manager is that they fired some clients.” Some businesses have hundreds of doors and they’ve never fired a client. I know if they’ve never fired a client, they have some bad things in their portfolio. There’s some pain in there and that’s a difficult place to work. They’re not willing to let go of painful situations and there’s always going to be painful situations.
Marc: Yeah, and I’ve never talk to a PM who did let a client go who regretted it.
Jason: Never.
Marc: It’s hard, it’s scary. We face that. I remember very vividly when we were small and we had 125 doors, maybe. We had a client and had like 12 properties. I remember the guy, could see the guys face. He wasn’t a bad guy, but he was just difficult and it had to be his way. He would contact us all the time. He just drove us crazy. We finally decided we needed to let the guy go. Well that was like 10% of our portfolio. That was hard. We thought about it, we don’t know what to do, and even after we did it we thought, “Oh, is that the right decision or not?” But we quickly realized it’s like a load that’s been lifted. When you get rid of those people that sucked that time and energy and life out of you, it is a positive thing.
Jason: The operational costs, the emotional cost when all of that falls by the wayside. I’ve never had a client fire something. I had one person fire half their portfolios like one big property. I had one person do that and they were terrified, but they did it. Two things happen almost every time. One, they replace the income really quickly. It always, it creates some vacuum in the universe, I don’t know what you want to call it, but they always seem to replace the income really quickly with better doors. That always seems to happen. They just need to trust that’s going to happen. The other thing is, is they always say to me, “I can’t believe I didn’t do it sooner,” like they wished they had done it sooner. They were so afraid of doing it and then once they do it, they realize it wasn’t so bad and they wish they were like, “Why didn’t I do this sooner?”
Marc: If one of your clients is talking to you and you’re saying, “Hey, you need to fire this owner,” how do you recommend they do that like? What should they say? Should they say, “You’re fired”?
Jason: You’re interviewing me now.
Marc: Yeah.
Jason: There’s a few ways you can let them go. There are some creative ways. One of the best is just raise the fees. If […] make it worth, just make it more expensive. Say, “Hey this property is difficult. You’re a bit more challenging person to deal with, to be honest. We are willing to keep doing it, but it’s going to cost X.” So, you just raise the rate, and if they keep being annoying and you feel like it’s still not worth it, you keep raising the rate until they self-select themselves out. That’s one easy way.
Another way is to just refer them to somebody else, and if you’re going to refer you might as well get a nice referral fee out of it. Go to one of your buddies and one man’s junk is another man’s treasure. I mean they might know how to deal with this type of person. They might be a better personality fit for this type of person than you. Don’t just instantly assume that because you can’t tolerate them or their difficult for you, that everybody else will. Give them to somebody else and let somebody else have a shot.
Marc: I like it. We will rarely fire an owner, but we will as you just suggested bump fees up and up until they decide to fire us. I’d much rather have them fire us and leave on their terms.
Jason: Right, they’ll self-select out. Are we complete on number one?
Marc: I think so. Number two is successful companies know their numbers. I see this so often with PM companies. We get really good at the logistical side of we know how to lease, we know how to talk to owners, know how to collect rents, but when it comes to the numbers, the financials, we just don’t know what we’re doing often times. I really am a big believer in that concept that if you don’t know your numbers, you don’t know your business. You don’t know how well your business is doing.
One question I’ll often ask of coaching clients that I work with on that side of things is also, “Okay. Now, if you, Jason own a PM company, at what point in time do you close the books for your company? Let’s say the month of June ends, right? We’re here almost until the end of June. When June closes for you, how quickly will you have your June books closed so that you know how much money your company made in the month of June?” The answers always surprise me. They’re all over the board. “Well, I’m currently 90 days behind. I’m trying to catch up,” or, “I’m not much further behind in that,” or, “I might get it towards the end of the following month.”
Jason: Yeah, how can they make business decisions if they’re 90 days in the rear-view mirror? Imagine trying to drive a car like that.
Marc: Like I said, I’ve been doing this for many, many years. While we were small. like anybody else, I was everything. I was the janitor, I was the accountant, and I was everything. My favorite day of the month was always the first. Not because we collect rents, but because on the first day of the month, I go online and print out our company bank statements for the last month. I get our paper checkbook out and I’d reconcile. I’d get our ending balance and I enter it all into QuickBooks. I can look at that piece of paper and say, “Hey, how much money did we make last month?” I love that. I would wake up early to do that.
I’m weird, I know, but that’s how you know how well you’re doing, I wouldn’t wait until the second, the third, the fourth, the twentieth, that’s crazy. You can do it on the first. So, I’m a big believer in as soon as possible, which in this day and age it can be pretty much immediate. You get your books balanced, you run some numbers, you see how your company is doing it, and you’ve tracked some metrics, some internal metrics for your company to know how you’re doing.
Jason: I think the challenge is when property managers are holding on to something that’s not in their particular wheelhouse or area of genius, but if this isn’t your thing, if you’re not like Marc and you don’t love doing this and this isn’t like what makes you thrilled and excited is to get in your bank statements and numbers, have somebody else get everything ready for you. I’ve got a profit-first coach and accountant. She meets with me and goes over everything with me. I get not only my perspective, but she says, “This is what it looks like to me, Jason,” so yeah, I think it’s usually helpful to do a review every month and look at your numbers.
Marc: Yup, and like you just said, most folks aren’t as weird as I am as it comes to that stuff, and that’s fine. But you need to find someone weird like me. You need to find someone who can go get excited about running your numbers, make sure they do it, and then you review those and you track a couple key metrics.
For example, some of the metrics that we always track, are door counts proportional to owner count? Because that’s a sign of a healthy business. So for example, if your company has 100 doors, if you’ve got 100 owners for those 100 doors, that is the sign of a very healthy business because it means that you don’t have any one owner with too much control versus the guy the guy called me a couple of weeks ago and he wanted to know if I was interested in buying his business. I go, “Tell me a little bit about it.” I think he had like 75 doors, “I’ve got 75 doors, I’m here in Denver and interested in selling.” One of the first questions I always ask is how many owner-clients do you have? He had 75 doors and 4. I was like, “You know what? I don’t need to know anything else. I’m not interested.” Why? Because if we took those doors on, that’s four owners. That’s a lot of control.
Jason: If it’s two of them, then what are you getting?
Marc: It’s something that you can’t control, but you need to track it, that’s one of the things you want to track on a regular basis. Another metric we really like to track is the percentage of our overall income that we spend on employees. Because in our industry, that again can just be all over the map on companies. Do you have a number on that that you recommend to your folks on what that number should be?
Jason: It varies so wildly especially by market, but I know an owner that has 65% profit margin in his business.
Marc: Wow.
Jason: I know it’s ridiculous.
Marc: It’s a good thing I’m sitting down.
Jason: I know. He has a couple of hundred doors. It varies so wildly and it depends largely on the type of owners they’re taking on, the type of property, because—I’m talking about this in the cycle of suck idea very often—if you take one bad owner or one bad door property, can have 10 times, maybe even 100 times the operational cost as a good door. So, that can vary so wildly.
I’ve had a company come to me that had 500–600 units under management and wasn’t making a dime. I said, “How is this possible?” They’re like, “Well, we’re doing $3 million a month in real estate,” so there was a brokerage with a cancerous tumor on the side called property management. He had twice as much staff as he needed, no technology in place. Fast forward, he fired half his team, he fired about 200 doors, maybe 300 doors, and it’s now a very profitable company.
So, it’s not all about doors and staffing is always going to be the highest cost. If you can replace even a fraction of that or create some leverage for your team using technology, outsourcing, whatever, those are some big wins financially. A lot of times everyone’s looking at, I got to get more revenue in and they’re not looking at their expenses. That’s why I’m a big fan of the profit-first system which says, “You take out a portion for profit and then what’s left over is your expenses.” Most people are like expenses. You’re just revenue minus expenses and then whatever’s left over, there’s nothing left over typically in that situation.
Marc: Absolutely. We have that profit is almost like an expense item that we know we’re going to take out every month and put into a savings account. We’ve been doing that for a long, long time from that aspect. But yes, I agree 100% with that aspect of what you’re saying there. The number that we coach folks around is you don’t want to go over 50% of your total revenue to staffing costs regardless of your size. The bigger you get, the more that number’s going to probably creep towards that, just because you get more overhead, you get more managers, and you have more red tape, so that’s a natural part of that. But if you go over 50%, that’s a red alert. Something’s wrong from that standpoint, so that an important to track for every company.
Jason: Yeah, as a company scale, they’re able to create a bit more leverage, but yeah, I could see how when you’re really small and you’re doing everything, your employee costs are a bit less per door because assuming your free labor or maybe if you work for your dad. Or sometimes it’s a spouse. They’ll have their spouse as their business partner, and you’ll see them get to maybe 70-80 units, they’re tapped out, and they can’t afford to hire their first person. Nobody’s getting paid. That makes sense. All right, I like it. Anything else on number two, knowing the numbers?
Marc: The other things I would just add that’s worth tracking that I often find companies don’t track this well enough is how many doors they’re adding and how many doors they’re losing. It’s always a surprise to me is when you ask them that, they’ll say, “Well, I can dig it up, but I don’t know.” A lot of the software don’t track that. If we’re old school, we’ve got the spreadsheet. Every time we lose a door, we go to our spreadsheet for the year, we put it in, and it’s going to keep that auto tracking. Every time we sign a new one up, put those on the spreadsheet so we can pull that up and instantly see, “Okay. As of right now, we’ve lost X number of doors per year and we’ve added X number of doors.” So, track that. Don’t make that something that you’ve got to go dig in your software and try to pull a report. That needs to be one of those metrics that you’re tracking at least on a monthly basis.
Jason: Yeah. It’s a pretty difficult situation and it’s a common one where you’ll see somebody adding a door and losing a door just as often. They wonder why they’re not getting growth. Sometimes, the problem aren’t getting enough […], it’s obtaining doors. They could be the type of target audience that they’re going after, it could be that they are lacking some awareness around how to retain these clients or whatever it might be, but yeah, that’s an important thing I think to pay attention to.
Marc: Yeah, and to track the percentage of doors lost. That’s all over the map as well. If you can keep your losses on an annual basis in the single digits from a percentage standpoint, that’s pretty good. If you can keep it 10% or below on doors that are leaving you every year, you’re in the pretty rare group of PMs.
Jason: I created something for property managers called our cold leads calculator. One of the things I noticed with a lot of companies—this is more relevant to what I do—a lot of property managers are not paying attention to the amount of money that they’re spending on cold lead marketing—pay per click, SCO, APM leads—all these different places at social media marketing, content marketing, that they’re paying to generate business. A bulk of where most people get their deals and leads from I find in the industry is often word-of-mouth, so they just group everything together. All their warm leads from word-of-mouth, referrals, other cold lead marketing, and they’re not paying attention.
When you look at the numbers alone of the cold lead marketing, which everyone can check it out by going to doorgrow.com/coldleads, they can take this little questionnaire and go through it, but it’ll help you calculate your cost for cold lead marketing. It also calculates and factors in the time. Time is worth money and it calculates and ask what that time is worth, like what’s your hourly wage or whoever is following up on these, how much time does it take to follow up on these, to create a real aggregate or at least close aggregate cost of what one cold lead is costing you.
I’ve seen numbers. I just had one come through the other day. One cold lead was costing them $5000. I’ve seen $11,000, I’ve seen a $1700 per lead or per acquisition per deal and what I love to ask them when I get them on the phone, I say, “Hey, I saw you fill out this cold lead thing. How long does it take you to recoup $5000 on a contract?” and they’re like, “Well, that’s probably three years of free management or two years whatever.” Then their perspective starts to shift and we have to uncouple that. The transparency in numbers helps you make decisions as a business owner.
Marc: Yup, and then review them regularly. Don’t just leave it your accounts. If you’re a successful PM company, you’re looking at those numbers because those numbers make a difference.
Jason: All right. We’re on to number three.
Marc: Number three is a good lead-in as you were just talking about there. Number three will be successful companies focus on profit, not door count. You’ve already talked about this. This comes up so often in our industry, what’s the first question any PM ask another PM? How many doors do you have? What’s your door count? How many doors are you managing? That’s the measuring stick and it’s the wrong measuring stick because I know companies that are smaller, they’re very profitable, and I know companies that are very large that are not profitable at all.
Door count is irrelevant. The profit is what matters. What that means is practically speaking, if you’ve got 50 doors, I would say, “Before you say I another 50—that’s fine—but you know what? Let’s maximize the profit of the existing group you have.” That doesn’t mean just go out and nickel-and-dime everybody, but it means what other services can you provide? What other things can you put in place to make sure that you’re maximizing that income and that’ll have a dual impact in that you’re going to increase your income on that 50? Then when you pick up your next 50, now you’ve already got some structures in place to ensure that they are profitable as well. You’ve got to focus on the profits, on the revenue streams to be successful.
Jason: Absolutely, I don’t think there’s ever been a property management company that I’ve seen that is not leaving some money on the table. There’s always additional services that you can offer, even if it’s something little like filter easier petscreening.com. There’s always some additional value that you can offer and there’s always a way that you can monetize that. People are willing to pay for additional value.
Marc: On the flip side of that as well, I think we need to pay attention to those expenses because what the industry right now is more difficult than it has been a long time and folks that have not been in the industry for too long, they’ll recognize this because this is normal to them, but it’s a tough industry. This is a tough market to be running a property management company. When things get tough, you’ve got to be tight on expenses, and it’s too easy not to get tough on expenses.
That’s one thing we encourage folks, is to go through that profit of loss, line by line, and if there are expense items on there that are not directly relational to income coming in, you have to figure out how to cut them. You have to get rid of those wasteful expenses. That is such a good exercise to sit down and start going through that stuff and say, “Well, gosh, I’ve just been paying for the subscription service every month and I don’t even know what it does. I signed up for it two years ago. All right, let’s get that cancelled.”
Jason: Yeah, and you’re like, “Why am I still on this?”
Marc: Exactly. This is beneficial as getting on a new door, is cutting those expenses.
Jason: This is why I love having a profit-first coach, because this really is built into the system. Every month is like, “Hey, what about these services you said you’re going to cancel and you said you don’t need this anymore?” Yes, so I think it’s helpful. If you’re not like accounting-minded, I highly recommend you go back and watch my episode with Mike Michalowicz, who is the author of Profit First and check out that episode. I think it was a fantastic episode. Really cool guy, came and spoke at our conference. It covers that system like cutting down expenses, putting profit first, making sure that expenses are fitting within your existing budget and you’re still getting a profit. Yeah, makes sense.
Marc: What I had to do, I realized that the biggest expense item, the biggest overhead we had was my ego. The thing is that, that I wanted for me, the big desk, the big office, the nice car, and that’s something everyone needs to start there because if you drive, especially in the real estate sale side, you go to any real estate sales event and what is the parking lot filled with? A lot of very expensed leased vehicles. I’m not against nice vehicles, but that’s just a suck on the income side of things.
Jason: I think there’s always this ratio between the amount of money that you’re going to take out of the business, and the amount of money that you’re going to leave in to fund towards the growth. If we take out too much too quickly, the business growth is stagnated. I’ve seen some really aggressive companies put almost all of their money. I’ve seen owners try not to even take a paycheck. They’re really minimizing their take out of the business so that they could fund the growth, because they’re delaying gratification for the future. They’re funding and creating a business that is growing and they’re putting their funds and their money towards that.
Sometimes, you have to double down as a business owner and to be willing to take a short-term hit because you want a long-term growth goal. And we can put too much towards growth to where it feels shaky, it feels unsafe. We’re not holding anything back. There’s no padding there. It really is this balance of how much I’m going to put towards growth be aggressive, how safe am I going to play it, and how stable and slow am I going to be at doing this. There’s a balance there.
Marc: It is a balance, it’s an absolute balance because you need to leave some in, and you need to be pulling some out every month and putting it into that savings account so that you have opportunities. We’ve purchased several companies over the years and every one of those deals worked because we were able to in essence say, “We can write a check. We’ll write a check today. We’ll get this deal done.” Why? Because we have money put away. That savings account isn’t just comforting, it’s an opportunity fund for things when they come up in the future.
Jason: I like it. All right, is that three?
Marc: That’s three.
Jason: All right, number four.
Marc: Number four is successful companies have systems and follow them. They have systems in place and they follow. In a word, system means different things to different people. Some people think, “Well, that’s just so I need a good software. What’s the system?” I really believe that probably 75%-80% of what we do on a day-to-day basis in our industry can be systematized, meaning, simply documenting your process, documenting your routine, because it plays out in so many ways.
We learned this early on when we were growing and first there were two of us. My dad and I, we both did it all and we hired a third person, and then we all three did it all. Then we hired a fourth person, and by the time we hired that fourth person, we realized that, we can’t all do it all. This isn’t scalable, we can’t all do everything. It works great at two people, it works great at three people, but when we had that number person and Mr. Tenant calls and says, “Hey, I called in with a maintenance request last week and I haven’t heard from anybody.” And I say, “Well do you know who you talked to?” “No, I don’t remember.” “Well hold on, let me see if I can figure it out.” “Hey dad, did they talk to you?” “Hey, Bill did they talk to you?” “Sue did they talk to you?” “No.” “Well they talked to one of us, right?” That’s very ineffective.
You’ve got to start specializing in your processes. We realized at that point in time that if we’re going to hire someone to be our leasing person, for example, we better have a documented process for them to follow. I mean specific detailed documented. Here’s what time you get to the property before showing. You open the door, you turn on the lights. Here’s where you stand when they come in. Here’s how you greet them, here’s what you say, here’s what you don’t say, here’s how you process an application.
If we do that into our entire business and we break the business down into the smallest components, it simplifies things like nothing else because we’re in a complex business. If you think of a continuum in your mind, a long line going on both directions. On one side of the continuum, you have the words consistency and simplicity. On the other side, the far extreme opposite, you’ve got the words variation and complexity.
You have to ask yourself, where am I on that continuum? We’re all different places, but we hopefully will always be moving forward towards consistency and simplicity. I don’t think there’s a better way of doing that than through documenting your process, your system and then following it, training on it, improving it, upgrading it. It’s got to be written, it’s got to be documented, and it is a process.
Jason: That needs to be used. People document it, they’ll give it to the team member, the team member will look at it at the first few times they do it, and then they’re done. I have Process Street on as a guest once. We used Process Street internally, but it forces them to actually use the process on going. It’s a checklist that has to be verified and completed.
Marc: Yes, checklists are huge. We couldn’t exist without the checklist. Its old school, but it works. We still have paper checklists on some things in our office here that people say, “That wouldn’t work.” I guess just too old school. I say, “Well , we’re pretty successful. It worked for a thousand doors; I can tell you that. Will it work beyond that? I don’t know, but it works to get you to a thousand.”
Jason: There you go. I’ve noticed in businesses, I think there’s, at a minimum, probably seven systems that every business eventually has to have in a business. One, they have to have an internal communication system. For me and my team, it’s virtual, so we’re using things like Basecamp, Voxer, stuff like that. But there needs to be an internal communication system that isn’t just, “Hey Steve, did you do this?” So, internal communication.
There needs to be process documentation system. That could just be Google Sheets, Docs, and whatever, or it could be something more complicated or cooler like Process Street or whatever, but there needs to be a process documentation system.
There needs to be a billing system, of course. Property managers use maybe AppFolio or Rentec Direct, Buildium, but there needs to be some billing, accounting system.
Then there needs to be a support system. A lot of property managers are starting to gravitate towards setting up Help Scout, Intercom, Drift, or one of these, but internally we use Intercom. There needs to be a support system in the business so that you can track tickets and track things. Sometimes, you’ll do that through your property management software a bit.
I find one system most property management businesses are lacking or missing is a planning system. You’re hearing people move towards traction in some of this which I think has some fundamental flaws to be blunt, but it’s a great system. It’s better than no system and there’s a lot of systems out there for planning, but there needs to be a planning system in the business.
Another system that’s necessary is a sales CRM. This is different than your existing customer database. This is for prospects. There needs to be a sales CRM in place. A lot of property managers use LeadSimple, for example.
If there were one other system you can throw in there probably be a phone system. We need some way to manage this big influx of calls or outbound calls with team members being able to be reached. These are some of the systems that I’ve paid attention to, that businesses need. Most businesses will have maybe two or three.
Marc: Yup, and we preach what we practice as well as preach to make on the systems for individual team members to make them position-specific. We have 20-some odd people our office and every role has a position-specific system manual, so our director of accounting has a director of accounting system manual. I’m the president of the organization. I have a president system manual. Why? Because I need to be replaceable. That’s one of the benefits of it. That idea that now we become less dependent upon individuals and no individual can hold us hostage to be like, “They’ve got everything in their head. What are we going to do they leave? We can’t lose them.” It’s a terrible place to be. We don’t have to worry about that. You’re going to lose everybody at some point in time. You’ll either lose them for a good reason or a bad reason, but they need to be replaceable. Now if you have a document, if you have documented their process, then they become replaceable.
I’m replaceable. If I get hit by the truck today, it’s alright. Hopefully, the company will take a little hit, hopefully they’ll need me a little bit, but we got a system manual, somebody can step in that role, and already says, “Hey, this is what Marc does.” Just do it and you’ll be successful.
Jason: I like it. All right, so are we on to five?
Marc: Number five, the last one, successful companies recruit and develop talent. We just talked about systems and the concept that systems can make your people replaceable to some extent and they should. However, at the end of the day, the team with the best players usually wins. If you can go out there and if you can figure out how to recruit the best talent and then retain them, that is going to do more for your company than almost anything else out there. If I’m going to brag about something about our company, I’ll brag about that.
We get the best people around. We’ve gotten good at that. It makes it so much easier to do business. I don’t work harder than my competitors, I’m not smarter than my competitors, I’m not technologically savvy more than my competitors, but what we do better than a lot of our competitors is we get really good people
Now that’s hard, and it’s hard to get really good people and that’s why you got to recruit. It doesn’t mean you put an ad on Craig’s list and read a bunch of resumes of people that can’t get jobs. I mean you go out and you find people that are really good at what they do and you got to get them, you have to recruit them. That’s hard because successful people aren’t looking for jobs. They are already successful. If you want to be successful, you got to go out there.
I’ll tell a story and I’ll give that the short version. We had to hire a leasing person not too long ago. Wwe were hiring, meaning we were just reviewing resumes and I thought this is ridiculous. We can’t find anybody good. I better do what I tell myself what I should be doing. I got my car one day and I drove around to a lot of the multi-family class A properties in Denver, and I walked in as a prospect. “Hey, I’m Marc, I’m here. I just want to see what you have available. I’m looking for a buddy of mine to rent a property.” And I was usually met with the, “Okay, well here’s a piece of paper. Tell your buddy to give us a call.” I say, “Okay” and left.
About the fourth place I came to, I came in and met a gal there behind the front and I said, “Hi, I’m Marc. I’m just looking for a place for a buddy of mine.” She said, “Well, me about your buddy. He’s looking for one bedroom. He’s tall dark and handsome, got a cat, probably crazy,” and she’s like, “You know what? I know the perfect unit for your buddy. Do you have a couple minutes? I’d love to just have you tour this property.” “Yeah, sure. Okay.”
She tours me through and she’s pointing out the feature benefits to offer. She was sharp. Her name is Lindsay. I said, “Lindsay, you are really good at your job. She goes, “I love leasing. I just love it. I love helping people. I love real estate. I love what I do.”
I said, “That’s great. Coincidently, I happen to run a property management company and we’re actually looking to hire a director of leasing for residential real estate. Have you thought about doing residential?” because she’s a multifamily. She was like, “Oh no. I could never leave. I’m not a job hopper. I’m really stable. Stability is a big deal for me once I get somewhere I like to stay.”
Now I’m drooling. I got to have her. I said, “Well is there anything you don’t like about your job Lindsay? Well we work weekends.” I said, “Oh. That’s too bad. We don’t work weekends.” I said, “Tell you what. Why don’t you come into my office sometime? Here’s my card. I’d love to just sit down and have a conversation with you. Who knows? Maybe something comes out of it, maybe something don’t, but I’d love to just connect and see if there’s something there for the future.”
Well long story short, we got her. We got Lindsay. And we had to go after her, we had to get her because she didn’t want to leave. She’s been a rock star. She’s been amazing. The things that she’s helped our company to do, but we would not have found her if we were just hiring. We had to go recruit her, we had to go get her. That’s what you have to do in every position in your company. You have to go find stuff.
I’m not saying go steal people away from your competitors, but you have to find those people out there that are successful and get them. Once you get them, you have to retain them. You have to train them well, you got to pay them well, which is one of the reasons you need to have good profit because good people aren’t cheap, but that’s what’s going to lead to a long-term success, and unless you take a step back out of the day-to-day stuff at the end of the day.
Jason: Yeah. I think it’s important to point out what you’re saying is not that people are easily replaceable, that you can pop somebody else in. You’re not saying that at all, and I think every business owner knows that if you have a seasoned team member that you’ve invested in, that you’ve trained, that you’ve developed, there’s nothing as good as that, like having somebody that’s been with you for years. I have team members that has been on my team for maybe six years and he’s a rock star.
I have a competitive advantage over most companies in that our teams are virtual, so I can source the best talent from anywhere pretty much in the world. But yeah, this can be challenging for property managers that are looking for somebody locally, they’re looking for somebody nearby, they’re looking for a particular set of skills may be. But ultimately, if you find somebody good, you want to make sure you retain them and that you keep them happy. You can compare it to a wine, you can compare it to anything, but over time they just get better. If they’re good they get better, if they’re not good, they get worse.
Marc: That’s the other side of the coin. That’s where just like we talked about earlier with owners. This is what we started this whole conversation with you get a bad owner, what do you do? You need to let them go. Well if you made a hiring mistake, you need to fix that and correct that as well and let that person go, because we’re going to make hirings. We are very good at this, but we make a lot of hiring mistakes. We just do, it drives me crazy. But when we do that, we correct it quickly. We’re going to move that person on very quickly when we make that mistake. Why? Because the longer they’re sitting there, the longer the right person isn’t there. You’ve got to make that correction when you made a hiring mistake.
Jason: I think it’s amazing when you bring in a new team member, it changes the entire team. It either changes the entire team for the better or for the worse, especially if that team member that you just brought on is taking off of your plate everything. It changes your role as CEO. It changes your role as an entrepreneur, and it affects everything from you. It’s pretty significant and it’s important to make sure that they’re the right fit. We we’re all going to make hiring mistakes. You have to kiss a few frogs and you have to suck a little bit at hiring in order to find the good people.
Marc: It’s an art, and a skill set to hire someone in no way translates over to property management. It’s not like, “I’m a good property manager. I’ll obviously be good at hiring.” No, there’s no correlation there. It’s completely different. The other unfortunate thing is, the smaller your company is, the more important it is to make that first good hire. Now we’ve got 20 people. If we make a bad hire, we got one in 20 then who’s bad. They can fly under the radar a little bit, they’re not going to stick to the company.
If we’ve got two people and then we make a bad hire for number three, so we never got 33% of our workforce that’s a low performer. The smaller you are, the more important it is that you take the time to get the right person in. A lot of it is just time. You’ve got to slow down the hiring process. These ideas of we had a phone conversation and we interviewed him, it’s not enough? Are you kidding me? No, you want to do multiple interviews. Anybody can come across as a positive person on that first interview. You want to have multiple interviews with multiple people. You have to dig, dig, dig on that before you make that job offer.
Jason: I think where I’ve made a lot of mistakes personally in the hiring process is I love to delegate and its delegating too quickly. Some people will micromanage, they’ll control too much, and I think some people will do the opposite. They’ll bring somebody on and they won’t give them all the training, all the tools, all the support they need to really be the rock star they could have been.
I’ve made both of those mistakes to be transparent. I think onboarding is a really important process to make sure you’re meeting with your new hires on a regular basis daily initially, then backing it up to weekly and so on, so that every day like where are you stuck? What do you need? What are you confused about? Often, they’re not going to just volunteer all that information to you. But when you’re meeting with them daily, they’re going to feel supported, they’re going to feel like they’re invested in the team. I think onboarding is a really big deal. That’s where I made mistakes.
Marc: We still do one-on-one meetings every single week with every one of our team members. It doesn’t matter how long they’ve been. I’m a huge believer in that, I guess if you wanted number six, there is number six, right? Have one-on-ones every single week, sitting down with them, even if it’s for 5 or 10 minutes, touch base, see what issues are going. Those have been critical for our people in their success.
Jason: We have a bonus, number six.
Marc: You got a bonus, number six, because you’re so good. What did I leave out? I’m curious. You talk to a lot of PM companies. What do you think are characteristics of success may be that we didn’t hit on?
Jason: I wasn’t even thinking this, I was so into yours. I think all these things are really fantastic. I think if I were to add a seventh here that I think is absolutely critical, so imagine you have an orchard, you’re at the top, and this is like a reservoir of hopefully money and or water or whatever you want to call it. There’s outflow, you’re paying your team, you’re spending money, things like this, and investing your team.
I think where most companies are flawed is there’s no inflow at the top of the orchard. There’s nothing above the entrepreneur feeding into them. I think this is why it’s critical. I probably spent at least six figures annually just on coaches and mentors. I have three coaches right now affecting different areas of my business. I think it’s that inflow that I’m able to get that allows me to consistently have value to offer to the marketplace and to benefit my clients.
It comes out in ways that I don’t even expect, like a client will ask me a question or be stuck on something mindset-wise or be challenged with something, and I’m like, “I had that issue and I worked that through with my coach,” or, “I have done that in that training that I had done,” or whatever it might be. I think as entrepreneurs, we need to invest in ourselves if we’re expecting other people to invest in us. When you go to prospects or clients and you say, “Hey, invest in me, spend money with my company,” and you aren’t willing to invest in yourself or in your company in a similar fashion, I think there’s a little lack of integrity. Energetically, something’s off.
If there were a seventh, I would say that’s a big one is make sure that you’re investing consistently in your own development, not just your team so that you have something to give. I think that’s the inflow. You don’t want to be a dead sea, there needs to be in flow and there needs to be outflow and that’s where there’s life. That’s where it’s a healthy business.
Marc: For the person that would say, “Hey, that sounds great, but I’m working 70 hours a week. I don’t have time to invest in me. I’m just give, give, give.” What would you say to them?
Jason: I would say they’re ineffective, they’re inefficient because if we’re doing, doing, doing we moved out of the mode of being affected. That means most of our time is tactical instead of strategic. Any business that lacks, the business owner lacks strategic time, the business isn’t growing. There’s a direct relationship between the amount of strategic time, planning, looking towards the future, coming up with ideas, or getting trained or learning new things, versus their growth. If all their time is tactical, they’re dealing with maintenance, fires, leases, managing their team, emails, phone calls, if all their time is tactical, their business can’t grow.
It will stay basically where it is. I think what I do with clients is I start them with a time study and we create time. Everybody is spending time doing stuff that’s unnecessary, or low dollar an hour work, or silly, and it’s pretty simple to start getting clarity on that first and then that helps them see what they need next. My entire foundation, my company really has been built on time studies.
That’s where I think fundamentally there’s a huge difference between how I would coach operationally a business to run versus something like traction or a rocket fuel or these other systems where they’re saying, “Here’s the magic org chart and here’s the roles that you have to have.” Ultimately, a business should be built around the entrepreneur and what they actually need. The only way to really see that is to know where your time is going.
Marc: Good stuff.
Jason: That’s my two cents.
Marc: I like it.
Jason: All right, so that’s number eight maybe. I don’t know.
Marc: It’s number eight.
Jason: We’d better stop before we add anymore.
Marc: We’d better. I know. You’re making me think of too many things.
Jason: Marc, it was really awesome hanging out here with you. This is really fun. You’re welcome back anytime. Before we go, how can people get in touch with you if they’re curious about some stuff that you offer for property managers or they want to learn more about your business or whatever?
Marc: The best way to reach me is through our website which is propertymanagementsystem.org and we got a handful things on there, a lot of video resource things. We’ve got our system manuals, we talked a little bit about that, our actual system manuals, we offer those. You can download samples of those and we got packages on those.
We do ancillary business training, some coaching stuff from that aspect. One thing I’m pretty excited about, we’re just putting in place, we actually just put in place and I’m happy to share with any of your folks if they’re interested, they can drop me an email. We put a business health checkup form where you answer some questions and it spits out a number to let you do that business health checkup. If anybody is interested in that, drop me an email, go on the website, reach out to me from there, will be happy to send it to them.
Jason: Cool. All right, Marc, thanks so much for coming on the DoorGrow Show and excited to see what you do in the future.
Marc: Jason, thank you, it was fun.
Jason: All right ,so if you are property management entrepreneur and you are struggling, you are feeling challenged in growth, be sure to connect with us over Door Grow. I would be honored to help you out. As I said during this call, I’m a firm believer in getting coached, getting coaches, and even if it’s not me, somebody like Marc, there’s lots of other […] there that can coach you. Get somebody that can give you some value, help you grow your business, help you achieve your goals, and figure things out. Until next time, everybody, to our mutual growth. Bye everyone.
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