Rent roll growth is consistently the hottest topic in property management.
I have been fortunate over the past 20 years to experience rent roll growth efforts across a very broad spectrum of businesses.
From the “no budget startup” phase of growing my own portfolio or a new property management department from scratch, right up to the huge efforts required to generate rent roll growth organically in the “several thousands” of properties per year, the challenges are significant.
To really ‘go big’ with rent roll growth requires both a plan and a budget and involves a lot more than just recruiting and running a large team of BDM’s.
Here are some key differences in approach worth considering when you are looking to generate high volumes of new business:
The business takes control of lead generation, rather than relying on individual team members
Big growth requires lots of opportunities to be generated.
To generate those on an enterprise scale requires specific skills, which can be very different to standard sales prospecting skills.
It’s extremely difficult to consistently produce really big rent roll growth numbers if you are simply trying to do that by running a team of BDM’s and focusing on managing their individual plans and execution.
Taking care of lead generation also means that BDM’s can focus solely on the nurturing and sign-up elements, rather than constantly needing to switch between “hunting” and “gathering” activities.
This also allows BDM’s to spend more time fine-tuning their objection handling, negotiation, and general listing skills to maximise their success rate, and minimise the number of missed opportunities.
Growth has a cost, and you need to know what your ‘cost of acquisition’ is
Growth is definitely not free.
Every property you sign-up right now has a cost associated with it, but the question is, do you know what that cost actually is?
Any activity or service you use to assist with lead generation, along with the costs of technology, and wages and incentives paid to staff who sign up new managements, all form part of your ‘cost of acquisition’.
I have worked in businesses that would regularly generate around 1000 new managements per year, right up to almost 3000 new managements per year.
While the actual cost to acquire these new managements varied year-on-year, according to the growth programs that were running at the time, the key point is that we always knew how much it actually cost to sign a property up.
In real terms, on a large scale with all the human, technology and business costs accounted for, the ‘cost of acquisition’ for a property was usually somewhere between 0.8 and about 1.1 times the notional annual management fee.
Now, those numbers can be a little shocking at first glance, but it is still a significantly smaller number than actually going out and buying rent rolls to grow at a multiplier of three times that amount.
It’s also a lot easier to manage the onboarding process with a reliable steady flow of new managements coming into your business, rather than the challenges presented by a bulk onboard when you buy a rent roll and have to integrate all the properties, clients and staff into your business at once.
There’s always a lot of chatter in industry social media forums about “the scourge,” that is “fee-free periods”, and giving away three months free management to a new client.
But put simply, if you knew that it usually cost you 1.1 years management fees to acquire a new property, and you could sign one up for half that cost by offering three months free fees, then you are actually a long way in front.
NB – there’s also a cost attributed to the team member signing the property up, in addition to the cost associated with the fee-free period.
Businesses executing this well, in high volumes, often use the technique to actually get a better fee.
This results in improved long-term rent roll value.
If the choice is getting a higher fee, with an initial one-off discount, or a slightly lower fee with no discount, then I would aim for the higher fee every time.
It’s fine to hold the view that everyone should be magnificent negotiators and get full fees, with no fee-free period, but try getting that to work consistently across large teams, with huge numbers of opportunities to convert.
This is not an endorsement of discounting, but in reality we will never see a time when this does not happen.
If you work in a marketplace where your competitors commonly use this tactic, understanding the underlying reasons will hopefully assist you to spend less time being enraged by it, and more time being laser focused about your own value proposition and how you will counter that enticement.
Measuring success not just cost
Over a decade ago, Chris Rolls, who was my boss at the time, handed me a book called Tested Advertising Methods by John Caples and I could hardly think of a dryer or more boring topic.
Shockingly, it was actually quite interesting.
The key point to me was that it doesn’t matter what you decide to do to generate new business, you always need to have a way to measure how effective it is.
The ever-present challenge of all growth efforts is you want to do more of what works, and less of what doesn’t.
This also involves having some agility in your approach, and not remaining wed to an idea that isn’t showing the results that you need.
Commitment bias, or an escalation of commitment is a real thing, and the battle for most people is deciding to stop doing something they thought was a killer idea but doesn’t deliver results.
Part 2 in this series will be published on Wednesday, 31 January 2024.