I see too many property management businesses either fail completely or forever fail to achieve their targets for many and varying reasons.
It’s important, just like in any business, to understand and know your market. In order to create your business plan and targets you must know the market size, potential, averages, statistics and demographics. In this particular blog I’ll focus on the critical role market potential and averages play in the success of your business.
Mistakes continue to be made in the property management industry because business owners focus on numbers and not income. There are many critical factors that can make or break the success and profitability of an agency. By understanding critical factors you should then understand that by focusing on the number of properties under management, rather than the income, you are creating a ‘Frankenstein’ for yourself and your team, not to mention disastrous consumer relationships.
To put it simply by focusing on properties under management you are focusing on quantity only. By measuring targets on income you are focusing on quality. It’s a classic “quality versus quantity” dilemma, and quality always beats quantity. A quality agent attracts quality teams, which tend to attract quality property owners and their quality properties, who in turn attract quality tenants. Next thing you know you have yourself a quality business and a quality brand. QUALITY PLUS!
Always remember – when you are tempted to focus on numbers of properties under management, when you think your business is growing too slowly, bring your focus back to your market and targets. Don’t allow yourself to become distracted or impatient.
Best of all, it’s far easier to build a business focused on quality than quantity. Yet, for some reason, the industry keeps reverting back to numbers. Stop it and stop it now. Be patient and as I mentioned in the outset – know your market… intimately!
If you continue to focus on numbers and entice your team with incentives based on the number of units under management you are more than likely setting yourself up business denigration, brand degradation and team disintegration, not to mention self detonation.
You can easily achieve 100 units under management within a few short months if that’s your target, but how, why and where did you pull that figure from? Is it a magical number? Is it because you have heard that 100 is a good number to have before you start investing in more resources? Will this number somehow produce profit? More than likely, you have no idea why 100 seems like a good number to have in order to start producing profit.
By focusing on a number and continually asking the team how many units are under management, you are seeing the number but probably wondering why there is still no profit. You will more than likely get excited and be paying the team some handsome monies for getting closer and closer to the magic 100 properties under management only to find that you are now spending more and more dollars on the property management division and only receiving more and more headaches with a business that seems to be going backwards and forwards all the time. This is a classic business in the front door with more business walking out the back door scenario.
However, if you focus on quality by knowing your market you will understand that your market achieves an average weekly rent of say $300. You will also understand, through statistical data, that on average there are 300 units leased every month in your area. Your target will then be to add 10 new units per month to your portfolio making a dollar target of $3000 in additional rent per month (not taking into consideration your fees and charges for service). This target must be achieved each month by the team responsible for developing new business. Anything that is achieved above that target can be paid to the team (individual) as an incentive. However, they now have a minimal target they must achieve that is both realistic and achievable. You as a business owner can also base your targets and budgets upon actuality, making business planning and brand protection much more simple and realistic.
Do you know your “real” market potential?Read more on Scaling