At PM Pathbuilders, one of our key goals is to help our property management clients achieve what we call “Capital G Growth.” Capital G Growth is when both sides of your business—your sales and your operations—are working efficiently together to drive the business forward. You’re able to increase door count while also managing each of those doors more effectively with less overhead.
In order to get your business to a point of true Growth, you need to give both halves of the team the infrastructure to grow, and to do so together. Sales and operations shouldn’t be working in opposition to each other, they should be working together.
What we see with a lot of property management businesses is that they just don’t know where the real pain is. They know they’re not growing as quickly as they want, but they don’t actually know why. It’s crucial to do some high-level diagnostics to see where the biggest inefficiencies are so that you can start fixing them.
At first, almost all teams start with the assumption that their problem is sales. On the surface, that makes sense. If you’re struggling to grow your door count, it’s easy to assume sales is falling down on the job. In reality, though, sales can be doing everything they can with the leads that are coming in, but the lead quality just isn’t there. In other cases, they might be closing new business, but those new clients are falling off during the onboarding process or make-ready. Or you might just have a big churn problem at renewal time.
Door count is not just a reflection of sales. To really understand the underlying problem, you have to look at performance across the whole team.
To grow your door count, you need each team to be responsible for one key metric:
Together, they make up the sales conversion rate. Benchmarks for conversion rates vary significantly across markets. There are some companies out there who would be frustrated with anything below a 50% conversion rate, and others who would be delighted to see anything above 15%. In general, 25-35% is going to be a sustainable conversion rate for most companies, but it depends heavily on the competitiveness of your market, among other factors.
When you’re looking to improve your conversion rate, you need to be looking at the volume and quality of leads. If the leads your sales team is getting handed aren’t a good fit for your business, there’s not much they can do to convert them. Plus, most sales team—especially newer teams—will improve their conversion rates as they get more reps in, which makes lead volume crucial.
Post-sales, you should also be looking at your churn rate. You can add 100 new doors per year, but if you’re also churning out 80 or 90 doors per year, you’re not growing like you want to be.
Churn is also highly dependent on your market, but there are some factors every business should be considering. The biggest question is whether the churn you’re seeing is actually within your control. Oftentimes we see higher churn rates due to macroeconomic factors and market conditions. For example, a change in interest rates might cause more investors to sell their properties.
On the other hand, there are plenty of churn factors that are in your control. If you’re delivering a level of service that makes holding an investment property truly easy, you’re much more likely to keep their properties, because it’s a hands-off experience. Improving retention might also include investor education, making sure that they understand the importance of holding long-term.
Remember, Capital G growth happens when both your sales conversion rate and your churn rate are the best they can be in our market, so make sure you’re not focusing too much on one at the expense of the other.
One of the biggest factors that can drive churn at the sales and onboarding stage is a misalignment of expectations. In fact, this is one of the only reasons we typically see churn so early, unless we’re mistakenly signing owners who aren’t ready for professional management.
What we typically see is that the make-ready and marketing phase bring friction that’s carried over from the sales process. When an owner onboards and finds out that there’s a whole lot of work needed on their property—and that it’s going to cost them more time and money than they were expecting—that causes friction and drives churn. When an investor learns that the rental rate is lower than they expected and they get upset, that causes friction.
These are expectations that need to be set during the sales process so that operations isn’t left trying to salvage a floundering relationship. Sometimes that’s because sales is skipping steps in the process or overlooking potential problems in order to close a deal. Other times, though, it’s because sales is actually too engaged with a prospect.
There has to be alignment in how engaged the sales team is. If a BDM is answering calls at 10:00 PM on a weekend, that investor is going to come to expect the same thing from operations. If those expectations aren’t met, that’s going to cause friction and potential churn. Sales has to match operations, even if it makes them feel like they’re worse sales people because of it. In the long run, it’s better for the business to have alignment on expectations so that the investor has a smoother, more predictable experience.
Once you’ve gotten an investor through the sales phase and past make-ready, things tend to steady out. For most property managers, regular maintenance and rent collection are old hat, and processes are well established. For most investors, day-to-day management comes with the immediate relief of steady rent checks and a lower financial burden.
The key to Growth during this phase is response time. This is the silent killer for a lot of business, in part because it can be difficult to track. When someone on your staff forgets to return a call, or an email slips to the bottom of their inbox, it typically goes unnoticed, and thus doesn’t get factored into a larger analysis. These aren’t big fires, but they add up quickly.
This is why it’s so crucial to track why your investors are churning. Even if an owner claims that they’re leaving your company because of market conditions, there were probably a dozen opportunities earlier in the relationship to build a stronger bond, keep them invested, and make sure they don’t want to sell. It’s almost never just about the market.
A lot of property managers that I talk to are afraid to reach out to their investors unless there’s a major update. In particular, they’re scared of sending things like owner surveys, mostly because they’re afraid of ruffling feathers or getting bad news. But if you ask me, if your investors are unhappy, you should know about it so that you can do something.
Just like when you put off texting an old friend, the longer you go without a touch point, the harder it gets to connect. If you’re not in the habit of communicating with your investors, it won’t come naturally.
Effective renewals require proactive communication to keep your investors involved and aware. You should be helping them make decisions about their investments, not just standing idly by as they debate whether to drop your services. Your investors shouldn’t feel like you’re employed by them. Instead, you want them to feel like you’re an integral part of their decision making process. That way, even if you can’t convince them to hold their property, you’re in the loop early and can plan accordingly (and maybe even get a sales lead out of it).
“Capital G Growth” doesn’t happen overnight, but if you focus on sales conversions, churn, and setting consistent expectations, you’ll see a huge impact on your business. When sales and operations work together, everyone wins.
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