The new year is the perfect time to set goals for your business. Not only are you turning over a new leaf, but it’s also likely the time when you review your year-end metrics. But what if you’re not happy with the results—or if you simply want your business to become more profitable in 2018? After all, the economy is relatively strong, so it’s a good time to focus on raising revenues and growing your profit margin.
The first step is figuring out how to set realistic profit goals. If your goals aren’t achievable, you’ll never reach them, which will throw your business into disarray. Here’s our advice on how to set profit goals that are feasible for your property management business in 2018.
#1: Reflect on Your Profit Goals
Take some time initially to pause and reflect on what your profit goals are. Do you want to become more profitable by a certain percentage across the board, for example; or are you aiming to eliminate areas where your profits are not as robust as they could be?
For example, if rents have been climbing in your area, you may think that a profit increase across the board is possible. However, if you have a persistent issue with vacancies, your profit goals might center around methods of keeping vacancies low to boost your profit margin.
#2: Set SMART Goals
If you fail to clearly define your goals, you’ll never reach them. You also need fully articulated goals so you’ll know if you need to redefine them or tweak your methods if you aren’t reaching them later in the year.
Many people swear by SMART goals. This acronym stands for:
Try to set goals that follow the SMART criteria. For example, say that you want to grow your profits by 10% next year.
1. First, develop specific methods for reaching this goal. Is it realistic to raise rents, given the markets in which you operate? That may be so if real estate prices have been climbing. A general rule of thumb is that property managers can charge 1 percent of a home’s value in rent each month.
If this growth is occurring in your area, great! If not, how else can you achieve your profit goals? Can you cut vacancies in half, or eliminate them entirely? Marketing for reliable long-term tenants may be a wise strategy to reduce your vacancies. Have you made headway toward paying off large capital improvement projects? Can you reduce your expenses? Examine every category from which you can derive additional profit.
2. Measure the progress you’ve made toward your goals every month. If you’re not hitting a particular goal, you may have to try different methods or reset the goal.
3. Make sure that your goals are achievable and realistic by doing your research in the goal-setting phase–before your work has actually begun. What are other property managers charging in rent? Are your rents comparable to other units in the area? If you are already over-market in your rents, you may not be able to achieve profit hikes by raising them, for example.
If you need to make property improvements, such as replacing water heaters or roofs, you may end up with rising costs, which will make the achievement of a profit increase unrealistic, at least for now. Evaluate the entire year’s worth of needs to determine the achievability and real-world likelihood of meeting your goals.
4. Associate all goals with a time-based deadline. Setting short-, medium- and long-term goals is prudent. If increasing your profits by 10% is your annual goal, for example, you need to determine what would be achievable increments for each month and quarter.
You can make some changes to affect your profit margins immediately, for example. Raising rents is one. Others, such as negotiating new leases with long-term tenants or advertising in new markets for better tenants, may take a quarter or more. Take the time you’ll require to achieve each goal into account.
#3: Set Goals for the Future as You Achieve the Present
At the end of every quarter, note what you’ve achieved in the last quarter and make notes on future profit goals.
For example, are you going to make energy-efficient updates to attract younger tenants over the long term, for example? Make a note to yourself to research which green incentives will give you the biggest bang for the buck. That way, at year-end, you have scaffolding to use for next year. Did your research indicate that rooftop gardens are gaining popularity with generation Z, the cohort that will soon be the youngest renters? That may be your capital improvement for 2019!
Setting goals is an essential part of every new year. Take the time to reflect on your profit goals for 2018. For busy property managers, goals have to be SMART. Think through ways to make them so. Evaluate your achievements and goals at the end of every quarter, so you have a list to start with in 2019.
To learn which metrics you should keep an eye on in your business, check out this article: 10 Key Performance Metrics Every Property Manager Should TrackRead more on Scaling