The Seven Portfolio Multipliers That Every Property Manager Should Master

The Seven Portfolio Multipliers That Every Property Manager Should Master

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By Jeremiah Cundiff, PMI Executive Director of Operations

I’ve had conversations with hundreds of property management professionals during my career in the industry, and I’ve noticed a common theme that separates the smaller property management companies, or “Solo Property Managers,” from the property management companies that dominate their markets, “Strategic Property Managers.”

What Strategies Set Strategic Property Management Masters Apart?

The key difference between the Solo Property Manager and the Strategic Property Manager is that the Strategic Property Manager is laser-focused on developing their business in seven key areas, areas I refer to as The Seven Portfolio Multipliers. The Seven Portfolio Multipliers are exactly what they sound like, seven areas of your property management business that, if mastered, will accelerate the growth of your property management company. You need to be forewarned, mastering The Seven Portfolio Multipliers requires determination and discipline as a business owner. However, if mastered, you will propel your business to an entirely new level of success. The Seven Portfolio Multipliers are:

  1. Lead Generation
  2. Sales Conversion
  3. Revenue Per Door
  4. Operating Efficiency
  5. Profit Margin & Financial Health
  6. Referral and Networking Activity
  7. Management Contract Retention

I’m going to provide an overview of each multiplier and why mastering it will accelerate the growth of your property management business. Remember, if it’s your goal to maximize the revenue and profits of your business fully, each multiplier needs to be optimized. Neglecting a multiplier will inhibit your ability to accelerate growth.

1. Lead Generation

The Strategic Property Manager understands how to invest revenue to cost effectively generate leads for their business. It is important to differentiate between leads generated by investing cash and leads generated by investing time (more on that later). In my experience, Strategic Property Managers utilize six to eight lead generation programs. There are two key components to an effective lead generation system, the channel used to reach your audience and the message to that audience. If your message doesn’t clearly communicate the services you provide and how they solve the most pressing problems an investment property owner faces, you are going to generate fewer leads. Likewise, if you are not driving that messaging through the proper channels to reach property owners who want to hand off their problems to a property manager, you are going to miss opportunities and waste marketing dollars.

2. Sales Conversion

What is your closing rate on the qualified leads you receive? Strategic Property Managers have mastered the process of walking a lead from initial contact to a signed management contract. Some of the Strategic Property Managers I’ve worked with are so effective at the sales conversion multiplier they can close contracts on the initial call with a property owner with a closing rate of over 50%. The biggest difference between the Solo Property Manager and the Strategic Property Manager when it comes to sales conversion is that the Strategic Property Manager establishes trust very early in the sales process and communicates the value of their services in such a way that the property owner becomes less focused on the price of the services and more focused on the fact that the Strategic Property Manager understands how to solve their most pressing concerns as a property owner.

3. Revenue Per Door

This multiplier has a tremendous impact on the long-term profitability of the business. The Strategic Property Manager is an expert at offering services to tenants and owners that drive value for both parties but also generates more revenue per door for the management company. For example, one service Strategic Property Managers use effectively to increase revenue per door is a credit reporting service for tenants. The tenant pays a nominal monthly fee to have their on-time rent payments reported to a credit bureau. As the tenant pays rent on time, their credit improves due to the positive trade account being added to their credit history. The tenant wins! Now that the tenant is working to improve their credit, they are more likely going to pay their rent on time, giving the property owner more consistent rent revenue. The property owner wins! The management company wins because they charge the tenant a fee for the service, increasing their revenue per door!

4. Operating Efficiency

The number one cost to a property management company is labor. Property management is a service business. As the portfolio grows, the requirement to hire more personnel to maintain quality service also grows. The Strategic Property Manager understands this and implements systems that assist with automating key business processes, helping their team manage more doors without increasing payroll. In fact, the Strategic Property Manager monitors the ratio of doors under management per full-time employee and is always looking for ways to improve the ratio without sacrificing quality of service.

5. Profit Margin & Financial Health

Top line revenue is great, but the Strategic Property Manager understands that it’s the money you keep that counts. The Strategic Property Manager ensures that the total fixed costs to operate their business are maintained with a specific percentage of revenue. The Strategic Property Manager seeks to maintain a payroll that doesn’t exceed a specific percentage of revenue. Ultimately, the Strategic Property Manager has a profit margin percentage that they are striving to uphold as an operator. This is vastly different than the Solo Property Manager. The Solo Property Manager has a financial model that is focused on making a living, while the Strategic Property Manager is focused on creating long-term wealth by investing 10% of the cash flow of the business in assets outside the business.

6. Referral & Networking Activity

As previously mentioned, there is a low dollar cost, high time investment strategy for generating leads. This is accomplished through referral and networking. The Strategic Property Manager understands the importance of building relationships with clients and allocates time to participate in the referral and networking activities that will put them in front of opportunities to grow their business. There are many opportunities to network in each local market. Strategic Property Managers identify three to four events they can focus on consistently, so they become known as the expert for property management within their sphere of influence, and don’t neglect online channels. The Strategic Property Manager also pays real estate agents a referral fee to refer business to them. The challenge most Solo Property Managers face is that they are so focused on managing the properties in their portfolio that they don’t allocate time to referral and networking activities.

7. Management Contract Retention

The Strategic Property Manager understands the value of a management contract and does everything they can to extend the lifetime profit value of the contract by providing astonishing service to tenants and property owners. The Strategic Property Manager puts systems in place to solicit feedback from property owners, so they know how to strengthen their service offering each year. Ultimately, the Strategic Property Manager tracks the number of years on average they retain a management contract and works to extend the owner relationship every year. The Property Management Power of the Seven Portfolio Multipliers I’ve seen firsthand how property managers accelerate the growth of their business by optimizing the multipliers. I’ve also seen property managers become stuck at the same level of operation year after year because they neglect these multipliers. There is more than one way to build a property management business, but if you want to dominate your market, roll up your sleeves and master these multipliers.

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