How To Grow Your Maintenance Service Profit
As more renters pile into the US rental market every day (2654 per day), a corresponding slower increase (544 per day) in new landlords is happening. For you, it means more properties and more clients needing maintenance services.
The growth of renters and new apartment and house construction starts across the US (or the UK and Australia) creates profit growth opportunities for property maintenance companies. And we should add, the HOA management market is growing fast too.
Should you Buy a Property Maintenance Business?
Given the suffering pandemic economy and the plight of apartment landlords, you might be able to buy a maintenance related company at a bargain price. And there are those looking to launch their own HOA management company or handyman business or property maintenance companies, some as franchised startups.
But before doing it, you’d better have thought through the profit-generating challenge first. Asking prices seem to range in the $500k to $650k range.
This summer of 2021 will likely bring a turnaround in the apartment and multifamily sector. Apartments have to be readied for the post-covid rental market, and a growing housing market makes it interesting.
Regardless of what it will cost you is the more important question of your money-making strategy. That’s our topic of discussion today.
Your New Strategy is More than a Repricing Tactic
If your property maintenance company isn’t making money nor doing the services that make money, then it’s time to strategize a more successful year for 2021.
As you’re planning your marketing and business strategy, keep in mind that some landlords may see maintenance companies as scammers who nickle and dime charges to inflate their revenue. In the property management forums or Facebook groups you’ll hear of “pricing gimmicks” as the route to higher profit. There’s an image issue that you need to know about.
The profit strategy might be one of altering perceptions and lifting attitudes. It could mean re-positioning your services against key profit centers of landlords. And perhaps create a new brand as the bringer of beauty and cleanliness at a time when people need that.
Property Management vs Property Maintenance
Have a close look at property management companies who position their key services of rent collection, evictions, move-ins and outs, leasing, and renewals to charge maximum price. Although maintenance services are a key part of the service mix, the focus is on those other elements. The perception is that they create more profit.
Some maintenance services aren’t appreciated by landlords (including preventative maintenance), and as well may not add enough to your revenue stream. So how about removing the “commodity” tag and find ways to make your services special and then charge a suitable price for value delivered?
Where Will Profit Growth Come From?
Any property management entrepreneur will be wondering how to maximize profitability and where the most profit could be generated. There’s the what and the how of creating more profitability.
Generally speaking, profits rise when you:
- add distinct value to each service
- increase marketing
- grow new services
- improve your pricing strategy
- increase market range
- flaunt your licenses, training, certifications, and insurance coverage
- specialize to become the noted expert in a specific service area
Landlords normally want maintenance services as a package for one low price. Your profit on the other hand comes from the opposite — value-added service menus. And some of these listed below could be key assets that drive bigger revenues.
Service Packaging and Pricing
Pricing strategy is a vital part of the revenue growth quest. And you want to avoid a price based service model. The focus is on increasing value.
A static pricing model might be too vulnerable. Flat pricing (hourly service charges, multi-property schedules, fixed prices of packages) may result in commoditizing your services.
Instead, adopting one that captures the value-added, and hedges against threats – such as emergency calls, rising labor and parts costs, canceled services, higher vacancy rates, etc.
You need to get the landlord to refocus on service value which helps them raise rent prices, renew leases, attract quality tenants, and make tenants feel comfort and security. Consultative selling uncovers their needs and lets you offer custom price quotes.
And a pricing model broken into components helps to communicate value. A pre-priced standard package might draw attention but where do you go from there? The end result is a canceled contract in tough times which is not good for long term performance.
And this may well be the most important action you can take to grow your revenue. Because no matter how you arrange your services, if landlords/owners don’t really value what you offer and consider it a commodity, it will be a challenge to raise revenues from them.
Clearly, you must change owner’s perception of your services. They’re putting their real money into other areas of business.
That’s where your property management marketing efforts come in. Put a closer focus on the value delivered to tenants and what tenants value most in their living experience. Certain services delivered well will help draw desirable rental tenants (e.g., upscale females who love gardens, parks, and immaculate well-groomed grounds).
You can do more for re-leasing than the leasing agents who make big bucks.
Property Maintenance Service Mix
There’s a good range of services being offered by property maintenance companies. You can use this list to revision your service mix. Each of these listed provides ways to add value to the customer and allow you to add incremental price increases.
For instance, you can cut grass and leave in on the lawn for one price, or you can haul it all away for an added price. You can do landscaping and gardening, planting plants, trees flowers and hedges to bring life to sterile properties and create demand for lawn and garden maintenance for the years ahead.
- snow removal and salting
- lawn rehabilitation and lawn cutting (most lawns are in terrible condition)
- tree trimming and hedge clipping
- fall season cleanup, leaf mulching or removal
- HVAC maintenance (twice per year plus emergency breakdown charges)
- pool cleaning and maintenance
- clutter, garbage or waste material removal
- major storm cleanup
- minor carpentry and cabinet and window repairs
- roof and gutter cleaning
- pest removal
- flooring maintenance (new floors will be needed for bigger pricier projects)
- property inspection (ongoing inspections via your digital property software)
- deep cleaning and disinfecting vacant units (Covid, mold remediation, and other health hazards)
- maintenance on sports and recreational facilities (focus on disease prevention, safety, security)
- laundry equipment maintenance (washers smell bad, and break down a lot)
- add a service charge on replacement parts or charge no markup as an incentive that beats your competitors)
- painting & wallpaper removing (tough work but how much could raise future rents?)
- after-hours emergency response (ensure highest prices are between 6:00 and 9:00 pm)
- digital administration management (many landlords haven’t gone digital so why not let them use your system?
- provide maintenance reports to help them plan. Don’t give it to them for free)
- moving truck, trailers and container rental for renters (big fees for moving services, and storage)
Which Services will be the Most Profitable?
Which are most profitable depends on your clients and circumstances. Property inspections, moving services, landscaping and gardening, as well as carpentry services are likely going to be the most profitable.
Keep in mind what attracts the best tenants because you want to help landlords achieve best results.
One excellent new business source is maintenance for private homeowners. And this is where marketing, pricing models, and multiple services can allow you to grow revenues. Many house owners are considering selling their properties in 2021 while some want to beautify their work at home environments. How about focusing more on Realtors to offer the best mix of property selling price enhancers?
One tip might be to not sell an affordable essentials maintenance package because you’ll end up doing extra work and not getting paid.
Property Maintenance Pricing Strategy
Research what your competitors are charging for each of these services in 2021. What are they cutting back on and leaving out? How can you add to each service area to make your offer much better?
In terms of pricing, a baseline price per project is wise. This model makes it difficult for the landlord or property owners to compare vendor services. Your special mix price can’t be argued on the basis that someone else is offering the same thing. Don’t offer the same services as the competition.
Your unique value proposition points to the special value the landlord or property owner wants. By asking them, you can get back to them with a customized service offering designed to get the deal signed.
Unique, relevant and personalized, that’s the winning formula. And do look into the value of specialized expert services — a level your competitors can’t compete with. It makes you stand out as a quality company with professional staff.
There’s little advice online for property maintenance companies, future business models, and how they can avoid falling into the low price commodity trap. If you’re using ManageCasa, you can track your revenue and expenses and determine what is generating the most profit.
Check out more on the ManageCasa property management blog. We’ve got insight into building a successful property management company, from maintenance to service pricing strategy, we hope to help you improve.
The final word on maintenance service profitability is that no one tactic will make a difference, but rather following a thorough integrated strategy while using software to automate will get you where you want to go.
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