Honing in on Greater Profitability
Just as in gardening, it’s sometimes wise for property management service firms to trim and prune their array of services to keep their business more healthy.
And as well, managers should improve efficiency, develop new services and sources of revenue, to evolve and become more profitable. Your business and clientele are unique of course, so the point is to prioritize profitability and evolve your business.
It’s hard to argue that in any business, more profitability, new business leads, and more market presence is a bad thing. And it’s these and more we should investigate now. Once you’re into the process, you’ll find many new opportunities to grow revenue based on your local market, technology, and the needs of owners.
Back to the Future
When a property manager or landlord keeps the status quo, and “plugging leaks” and tending to short term issues only, they’re not doing themselves a favor. The future comes fast.
With our most recent theme here on improving property management revenues, profit margins, and building long term success, we thought we’d take a look at a topic we’re sure you’re into — earning more money over the next 5 to 10 years.
And if you’re in the practice of billing out more maintenance, charging renter late fees, etc. then owners might begin to see your company differently. Take a moment later, after you read this post, to check out Biggerpockets.com and here the trials of struggling rental investor/property managers forced into nickle and diming tactics, and you’ll realize why you need to take a more profitable approach.
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Restaurants Adjusting to the New Situation
As an example of adaptability, consider restaurants today which have adopted take out meal services rather than their mainstay of packed houses and alcohol sales. They’ve focused on food menus and products that sell well via pick up or delivery. It’s something that comprised a very small amount of profit traditionally.
The key deliverables for these new take out era restaurants is convenience, safety, and perhaps more profitable food menu items. Many have upgraded the dishes they’ve been producing for years. And they’re using helpful mobile apps to make operations much more efficient.
Without the tech upgrades and online ordering apps, some of this success might not be possible. It’s difficult to leave technology out of business improvement in these times.
They can actually charge higher prices too for greater perceived value. Customers who like their brand (or newly adjusted brand) are more loyal and are okay about paying higher prices. The higher price actually validates their belief that their food is more valuable right now (aided by marketing and promotion of course).
Their products/experiences they offered became worthless or had less value. Out of necessity, they refocused on new profit centers.
New Landlord Clients Are Out There During the Pandemic
For a property management service company, raising your prices and cutting services is likely not going to work well. In contrast, new landlord/real estate investor clients might see your property management services are valuable, if they know your company exists. In your marketing for instance, you could communicate a unique, new service mix with specialized services which they believe will work well for them.
A creative twist gives your company more impact and to be remembered. Ramp up your property management marketing effort and you’ve got new business during the darkest time in the last 10 years for property managers.
Build a Lead Pipeline
Perhaps your current landlord clients won’t pay more, want to pay less, make you work harder? Yet new landlords will see your new service mix in a whole new light. Building a lead pipeline is always wise. And since you’re offering a new array of unique property management services, you can price them differently. And with that unique pricing strategy, you’ll raise your profit margins and over all financial performance.
And if you’re currently charging fees as a percentage of new leases or rent collected, the cancel rent movement and the falling rent price trend is making that revenue strategy look rather dicey.
Which are Your Most Profitable Services?
Property management firms make money different ways. So, by reviewing your revenue mix, you could rank all your services and know which less profitable ones to drop or outsource, which to focus on, and which new ones to add.
And those which you discover are creating the best long term results are the right ones to prioritize, as I’ll explain in a bit. And you’ll need to reinterpret common service profitability and which services are essential to your evolving brand.
For instance, grass cutting and yard clean up might be a key service more because it’s required and it’s easy money. It’s the dirty, time consuming work that landlord’s focus on, but are these a profit and brand image drag? Is this one of many such low profit services you could outsource?
Roll Call of Essential Profitable Services
Each property management business is different, but overall, which of these 12 revenue sources might be the key building most of your profit in the next 5 years, after Covid 19 is gone?
- management fees and first year management surcharge (competitors erode this % fee)
- rental application fees (if landlord doesn’t advertise or screen well, they’ll be pay you do the extra work)
- specialized bookkeeping and accounting management (dedicated property management accounting is rare and increasingly desirable; no more quickbooks)
- building maintenance and repair contracts (landlords are besieged with scams and want to reduce maintenance costs)
- percentage of rent collection and tenant fines and fees (how are property managers faring now?)
- eviction process management (big gainer as rent moratoriums end)
- new rental leasing (turnover is up and leasing services are very valuable)
- tenant turnover reduction (keeping good tenants is essential)
- rental unit marketing and advertising (becoming a source of quality rental inquiries and market visibility guarantees your competitiveness and market leadership)
- move in move out and other inspection fees (more inspections than ever via turnover, tenant carelessness, and evictions)
- helping turnkey investors earn more on sales (bad management services reduce their potential resales value significantly)
- digital services and amenities (5G is here along with other great technologies that young renters love).
Your property management software can help you manage all 12 of these profit centers better. From well documented evictions to powerful marketing and new leasing solutions to new services, a modern tech platform makes it simpler and stress free.
You’re reaching more property owners and able to offer revenue generating value. That is what gets them to switch to another property management firm.
Time to brag about your business management software and use it to focus on your top 3 new profit generators.
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