In this episode, Andrew is joined by Bluefield Group CEO Michael Smith for a discussion about how to get laser-focused on churn, and how Bluefield drove their client churn rate from 33% down below 10%, all while also adding doors. Michael touches on why resident and investor experience both matter, and how they've shifted over time.
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Season 6 Episode 6 features Michael Smith, CEO of Bluefield Group.
The Triple Win Property Management Podcast is produced and distributed by Second Nature.
Andrew Smallwood
Hello, professional property managers Andrew Smallwood here. We got a triple win podcast and a special guest today, Michael Smith, who's the founder and CEO of Bluefield, which Michael, I was just seeing. You guys are a four time, Inc., 5000 company. You've got a robust real estate business. We're going to focus on kind of the property management piece of that today.
But you guys also do HOA brokerage, a few different business lines. It's, it's great to have you on. Thanks for joining us.
Michael Smith
Yeah. Thank you so much. I'm happy to be here. We actually just got our fifth Inc. 5000, which were super excited about, and, yeah, we have a handful of different divisions. We refer to them within the company.
Happy to kind of dive into all that as we go.
Andrew Smallwood
Yeah, absolutely. Well, congratulations on the fifth. My notes are dated here.
Michael Smith
Thank you. Yeah, I think I think we just announced it, like, a month ago, so. Okay, cool. Very cool. Pretty new.
Andrew Smallwood
Yeah, for those who don't know you, maybe you could talk a little bit. Just what's the 30 seconds on how you got into property management and and really, what you're doing with Bluefield Group?
Michael Smith
Oh, 30 seconds. That's tough. Okay. Yeah. So, let's see. Started my kind of real estate journey as a real estate investor, first and foremost. So bought a few rental properties and was in the mortgage business down in Florida for a few years and then moved up to Greenville, South Carolina, where we are now just about ten years ago.
I actually just celebrated ten years of having my real estate license. So, my mortgage job moved up to South Carolina, got my real estate license and was with Keller Williams for about three years, started a team there. And then in 2019, we, formed an independent brokerage with a handful of agents and a couple of staff members.
And pretty, pretty shortly after opening the independent brokerage, one of our clients asked, do you guys do property management? And my answer was, yes, we can. We can do that for you. And so, you know, about seven years ago is when we started offering property management as well. At the time, I think we had ten real estate agents.
And I had just opened the company, decided to stop taking clients myself. So I kind of got down to the day to day of working with buyers and sellers more, focusing on recruiting and training and managing real estate agents. And thought property management would be a fun little side hustle to Adam on top of the brokerage. And yeah, that's what got us kickstarted about seven years ago.
Andrew Smallwood
That's, I'm sure a lot of people listening to this, that's their story, too, of kind of started in sales and then saw the recurring opportunity. Great way to keep a relationship with clients, etc.. Okay. And it often starts as a side hustle, but it seems like you guys have really committed to like really run it, you know, running a property management organization.
It's not just, yeah, we'll collect some rent and handle maintenance.
Michael Smith
Yeah, I'll tell you, if I could go back in time. That is definitely one thing I would do differently is put a lot more emphasis on the property management side of things. It didn't really click for me until maybe 3 to 4 years ago. How much value there is in the property management side of things?
You know, when interest rates shot up and the real estate market really slowed down in 2023, you know, obviously the profitability on the brokerage side of things took a bit of a hit, but our property management was still just very consistent, very predictable growing. So, you know, that whole concept of recurring revenue became really, really attractive. And we also have an insurance agency that's very similar.
It's a recurring revenue type model, very predictable. So, you know, as we continue to grow, obviously the brokerage is still a big focus for us. And that does still make up the majority of the revenue for the company. We're definitely putting more and more emphasis on property management, management, insurance, those types of more predictable type business models.
Andrew Smallwood
Yeah. Very cool. Very cool. So part of what got our attention and kind of sparked us wanting to jump on here and talk was, you know, as an industry professional, property management has, you know, a challenge. I would say with churn, if you look at industry benchmarks, it's it's common for people to see 20, 25% churn, you know, on an annual basis, and many even far above that, depending on what's happening in the sales market, you know, etc. And people who are just really focusing on it, are able to get to 15% sometimes, you know, 10% is kind of like that magic number. And, and that's kind of a journey you've been on of, like recognizing, hey, that was an opportunity for you guys and a big focus. And I think you guys have moved from was it 33% down to ten or under ten?
Is that right?
Michael Smith
Yeah. So a year ago I looked at our KPIs and, saw that return rate was 33% and it hadn't always been that high. And it kind of creeped up over a year, year and a half. And, you know, I realized, hey, we have a problem that we need to fix because the higher our turn rate goes, the lower our lifetime value of a customer and the less margin we have to work with.
And, you know, that's really a dangerous place to be when your turn rate is that high. But aside from just like the financial engineering aspects of it, it really meant that we weren't providing as good of a service to our clients as we should have. And so there's obviously some underlying, you know, things contributing to that that we had to diagnose and fix.
But yeah, that basically became, you know, a huge focus of mine was, was tackling that, that problem. And the turn rate is, is really the symptom of the underlying issues. And, you know, you can always make excuses for why the churn rate is high. Oh, it's because, you know, they, they sold for this reason or they weren't the right clients for us anyway, or they just don't understand.
You know, you can always make excuses for it. But, we decided to take ownership of it and get to the root of the problems, fix them and hopefully see an improvement. And over the course of the last 12 months, we went from a 33% turn rate down to 9.9%.
And the goal that I had was to get it under 10% within a year, and we just barely did it.
So very excited about that.
Andrew Smallwood
I love that. I'd love to get more into the specifics of that just because, again, I'm sure a lot of the challenges you face, some of them may have been acute or somewhat unique to your company, but I'm betting a lot of them are, you know, pretty, pretty universal.
So maybe you can just talk about, okay, we saw this as a problem. Talk about like how you did your analysis because there's so many things that can go into churn and how, you know, what's what's driving that or what's influencing that. So how did you take a look at that to try to understand, like here's the different things that are going on and which ones should we prioritize first.
Michael Smith
So I think there's empirical and there's anecdotal. So on the empirical side of things, you know, we want to look at the data as much as possible. So we did a cohort analysis basically and looked at every property that we had lost. And we looked at the, you know, start date of when they went under management to the date that they turned on the portfolio and just kind of normalized all that.
And we realized that the vast majority of the churn was about 13 months after we took management. You know, there was a little bit within that first month, and part of that could be misalignment of expectations, listing something that was too high. We knew that was never going to rent, you know, things like that happening.
Once we got them rented, pretty much no churn until the end of that first year lease, when tenants are moving out, whenever you have a vacancy, that is, you know, the vast majority of time when you're going to lose an owner client for various reasons. So, you know, vacancy is the biggest expense to an owner, whether it's just the opportunity cost of not having that rent coming in, but they're still making a mortgage payment.
Sometimes there's money they have to put into the turn to get it ready for the next tenant. And it's just a a point of frustration and financial strain on the owner. So anything that we can do to minimize vacancy is going to going to help that. We also realize that if we got past that kind of 13 to 14 month point, the churn dropped dramatically.
So if we were able to get a tenant moved out, turn it, put it back on the market, find a new tenant, you know, and enter into that kind of second year of a relationship with the owner. At that point, we were doing a really good job of keeping them for two, three, four years. So really our biggest opportunity was when we take on a new client and then the tenant moves out a year later, making sure that that process either prevented, you know, prevent it if we can, by keeping the tenant happy, handling that, you know, their initial move in process, all the maintenance, everything that goes into keeping the tenant happy so that they're more likely to renew at the end of that year. So that was a big kind of a moment for me, was just doing that cohort analysis and realizing, hey, most of this churn is happening because we've got tenants that are moving out, creating a vacancy. And, you know, if an owner was on the fence about selling, that's when they're going to do it.
It's when the tenant moves out. So, sometimes it was well, I was thinking of selling. Anyway. Now is my chance. I'm going to go ahead and put on market. Other times, you know, they'd get hit with that big repair bill because the tenant, you know, didn't take the best care of the property, different things like that. So that's kind of the empirical analysis that we did just looking at the data.
And then of course, we did the anecdotal of just asking for feedback and asking questions. So we spent some time calling owners that we no longer manage for and just asked what was your reason for leaving? What were the biggest pain points? What are the things that we could be doing better? And just listening to that feedback from former clients?
Andrew Smallwood
I love this because, I mean, we're on the Triple Win Podcast, so I think we got to lay this out of, like, identifying where that resident experience and that resident churn that leads to vacancy impacts the investor and and yeah, it's it's not just the I mean, especially in the market right now. I mean, we're recording this in fall 2026 and days on market right in the time to lease a property has changed right over the last few years, where properties are often staying on market longer.
The rent growth is, you know, much less than it was in 2021, 22. But, you know, the inflation and the cost to complete a turn right has gone up over the last few years considerably. And so it's never been more painful to have a vacancy or more expensive to have a turn. And that emotional moment, you know, for an investor, can be, you know, something that has him looking for a way to escape that escape that pain.
And so I love you sharing, hey, how can we prevent that? Plus, when it is happening? Because it will happen to some degree always. How do we do that? The other thing I took away is most people start with like, hey, what's happening? While you actually started with when like understanding the cohorts and who. Yeah. Like a different question than most people would come into that with.
But that's what revealed that insight that gave you a focus to see, okay, when is this happening? Who is this happening for? And then what can we learn about that to, to address that?
Michael Smith
Yeah. So one of the, one of the things that we actually started doing differently after realizing that was really pushing for two year leases on all of our rentals.
So that's something that we really prioritize, is trying to lock tenants in for a longer period of time upfront, and really reducing the chance of a vacancy happening at that one year mark, which made a big difference. And all of our renewals as well. Over the last 12 months, as leases have been coming up for renewal, we've been trying to renew them on two year cycles as well, just to keep them longer.
Andrew Smallwood
I've seen some other property managers do that and swear by it as well, you know, 2 or 3 year leases, even. A question about that. Do how do you handle the rent amounts and potential increase? I mean, that's probably played out very well in recent history, given what, you know, the market is today. But are there, is there an automatic increase at month 12 that's just predefined?
Is it, yeah, we're just going to have that increase two years later? How do you guys handle that?
Michael Smith
Yeah, we do build in an automatic increase for that second year. And we typically make the percentage a little bit lower of an increase in what we're increasing them right now. So if we're doing a renewal and we're putting their rent up by 3%, we're going to say, hey, if you do for two years, then next year we're only going to bump you up by like one and a half or 2%, you know, just to let them see the benefit of doing that and taking some risk off the table of what that rent is going to look like over a longer period of time. Yeah. I mean, getting that, getting that commitment up front, you know, probabilistically looking at it against a percent and you'll have the chance to right size that, you know, 12 months later after that, right when the initial initial two year term comes up, you just don't want it to get too far divorced from. But in the market when? Right now, I mean, at least in our area, rents are pretty flat. We're not doing dramatic increases like we have in prior years. I mean, I forget what year was I think it was 2020, 2021. There was a point in time where we were renewing people and it was like a 10%, 15% increase just because that's what the market was.
But we're not seeing that right now.
Andrew Smallwood
Right. Okay. That's great. What are a couple of the other things that you kind of focused on changing? You talked about the move in experience and the terms in particular. What are some of the things that as you were looking into that and saw opportunities there, the changes you feel like that have made made a real difference?
Michael Smith
Well, I think the most important thing that we did was just really make it a focus for the whole team, you know, and talk about it consistently and make it a shared goal for everyone, regardless of what their role was. Whether it's our property manager or our field coordinator, our maintenance coordinator, administrative coordinator, resident services, like no matter what your role is within the property management division, that was the one KPI that we were constantly looking at was a turn rate.
So everyone was on board. Everyone knew how important it was. You know, we looked at the number on a weekly basis and we even compensated people based on it. We put a bonus structure in place, where the lower our turn rate got, the higher their bonus would be. So they were definitely incentivized to help us get there.
And then everything that we talked about, like, every, every experience, you know, we, let's say we miss something and, you know, led to a poor moving experience for a tenant. You know, the sign was left in the yard for three weeks or something, or, you know, they move in and the ice maker is not working, or, you know, this bathroom didn't get cleaned properly or, you know, any little thing like that.
How does that affect the churn rate? Okay. Well, if the tenant has a bad moving experience that puts a bad taste in their mouth, that sets the tone for the relationship now between them and us. And I think, you know, if you were to look at, I think property has some really good data on this, like the number of work orders that it's in, it puts in during their first like 30 days in the property really highly correlates to whether or not they're going to renew at the end of their lease.
At Broker/Owner in New Orleans early this year, I forget who said it, but, there is some data on this of people make the decision of whether or not they're going to renew, like within the first 90 days, not in the last 90 days, but in the first 90 days shortly after moving in, they've already kind of made up their mind as to whether or not they're going to stay there for, for more than the first year.
So, you know, any issue, we wanted to connect the dots and help our team members understand how this ultimately would impact the turn rate. Because, hey, if this tenant has a poor moving experience, they're probably not going to renew at the end of the year, which means there's going to be vacancy, there's going to be lost rent, there's going to be turn expenses.
And that is the moment where we're at risk of churn. And that means there there's a unit leave in our portfolio. So we really just did the best we could to help connect the dots of every single thing that everyone does, from the maintenance person to the inspector, all the way down the line, across the department, how their performance and their specific role would ultimately impact the turn rate.
So the most important thing that we did over the last year is just identify it and talk about it and align incentives across the whole team. And, you know, we just, we're honest with ourselves about the issues that we did have. I mean, we had an issue where we weren't as proactive in our communication as we as we should have been.
And that's something that we've really focused on as well, being a lot more proactive as opposed to reactive. If we think there's going to be an issue, pick up the phone and call the owner. You know, just communicate, communicate, communicate. We've never lost a client because of too much communication. But I can tell you, we have lost clients because not enough communication.
Andrew Smallwood
Yeah, a lot of great points in there. I think making this measurable, hey this is something we're looking at as a team every week. People are properly empowered incentivized you know in order to make progress against that. And there's different roles in different ways of touching this. But everyone working on it together and seeing the impact of that month over month over month.
You know, and start to see the progress that I'm sure that was encouraging to see it. I mean, you guys really made a move over 12 months to move it as much as you did and, and reach that single digit point is, you know, you could imagine the momentum, right, that people are feeling along the way as they're seeing the progress that direction.
Michael Smith
Yeah. And 10% was that threshold where if we get below ten, that's like the maximum bonus that everyone can earn. So now everyone's just really incentivized to keep it under that 10% mark. I was having a conversation with our property manager a few days ago, and he was like, we're never going back over 10%.
Like, it's not going to happen. So it's definitely a focus.
Andrew Smallwood
It's great, but everyone knows here's what it takes to accomplish that and get that. So the new standard there.
So okay you talked about the move in moment and this like onboarding moment. That's really important. And I've seen some of the same stats like two thirds of people within 60 days or something like that have made their renewal decision based on their experience at that point.
Stepping back for a second, like when you think about the modern like resident experience and the experience for residents that they're getting today, you know, how has that evolved over the last five years? And where do you see that kind of going, you know, in the years ahead?
Michael Smith
Yeah, that's a good question. How is the resident experience evolved over the last five years?
I think in general, everyone's expectations are a lot higher of, you know, people are just not very patient. They want to be able to pick up the phone and talk to somebody or send you a text or send you an email, like, whatever their preferred method of communication is, they want you to meet them on their terms where they're at and help solve their problem, you know, without them having to jump through hoops.
So anything that you can do to reduce friction, you know, in the experience, whether it's about the move in process or, you know, a maintenance issue or a renewal issue, I think it really is about trying to create a wow experience for them and not just, you know, bare minimum of okay, we said we did what we say we were going to do, you know, trying to create a really powerful and impactful experience for them is definitely something that we're focusing on. But I know a lot of other people in the industry are as well.
Andrew Smallwood
Yeah, I think we hear from a lot of folks, like where there aren't great expectations, making sure we're being more clear and great communication, but also where expectations are moving and rising. I mean, trying to pull that down is like fighting against gravity a little bit.
Hey, how can we understand what those are, where they're moving and find ways to meet it, beat it. And responsiveness is one that it's challenging. Because you gotta you’ve got to resource that to make that happen. And you know ultimately ultimately fund that.
Michael Smith
Yeah, the maintenance experience is probably the most important, no matter how good someone's moving experience is, if if they're refrigerator goes out or their air conditioner goes out or something, and, and they have a poor experience around that, I mean, you're just going to undo all the goodwill that you built up during the move and experience if you don't handle that correctly.
So, responding quickly, even if it's just to acknowledge, hey, we received your ticket and we're working on it, rather than waiting until you have somebody scheduled. So anything you can do to just speed up the process of just confirming for them that, yes, we recognize there's an issue. We're working on it as quickly as possible.
And, you know, just being proactive, like if you're waiting for a part and the part takes three weeks to get in, it shouldn't be three weeks until your next communication. You should be periodically every few days, you know, hey, just want to let you know. Unfortunately, we're still waiting on that part. We're going to continue to check in and try to expedite this.
So, you know, in general, if you have to wait for them to reach out to you, it's not going to be a positive experience. You know, I've heard it said that if you reach out to a client or a customer, usually it's a, you know, 32nd phone call. If you wait until they're reaching out to you, it's probably going to be a 30 minute phone call.
Andrew Smallwood
That's such a good point, because obviously, what's on the other side of a client who has taken the time right to reach out to us and done that is– there's clearly some emotion right or violated or broken expectation already that's motivating that. And so how can you get ahead of that emotion or ahead of that kind of experience, critical moment and be guiding and leading things right along the way and resetting expectations all along?
I love that. I mean, that's simple but practical, practical advice. I'm kind of stunned by this last thing, Michael, which is like just what we've covered on our own. I feel like is a podcast episode, like box it up and thinking about operationalizing churn, but I think kind of like the most amazing thing about your story and your company is that while you did this, you also grew your unit base by 50% in the same time period.
So I mean, like most people are saying, I've got to choose either growth or operations and experience. Like I can only focus on one thing at a time because oftentimes those things feel at odds. I mean, when you're growing unit growth and it's, you know, like, so can you maybe speak to that of what was driving your-- it is easier to grow your door grows when they're not all going out the other end at the right.
Michael Smith
Yeah, that's part of it.
Andrew Smallwood
But yeah, like maybe you could speak to what you guys did to focus on I mean 50% growth is excellent. And doing it while reducing turn the way you did, you know, is, is really commendable. Could you speak to that?
Michael Smith
Yeah. I mean, obviously reducing the turn rate is part of that equation. Right. Making sure that you're not losing people on the back door at the same rate that you're adding them, so that that's a big part of it. If all you do is fix your turn, you should see an improvement. You know, the rate that you're able to add net new doors. But we also invested into some additional marketing channels and, you know, really, really focused on that, you know, and align incentives is a big part of it. So, you know, we kind of restructured our comp plan a year ago. And for our property management, our property manager who runs that division, his bonus is really tied to change in net door count every quarter.
So, if we're not growing, he's not earning a bonus. It's as simple as that. You know, it's amazing how much you can accomplish just by aligning incentives.
Andrew Smallwood
Yeah that's great. That's great. Okay, well Michael, I kind of want to open it up. Like if, if you were listening to this and obviously being on the other side of this, you know, something that we didn't cover today or a question you wish I had asked here.
If you're a professional property manager thinking about this and how I can grow my business, reduce churn, right, move my business forward where we are in 2026, what advice would you give folks or what question would you ask and answer?
Michael Smith
Yeah, I think obviously look at the data. That's really important. If you if you don't have, you know, KPIs that you look at, if there aren't things that you're measuring on a consistent basis, you're kind of flying blind, you know?
So I what are the most important metrics that will help you gauge the health of your business and make sure that you're tracking those on a consistent basis and reviewing those and, you know, being on alert for things that kind of get out of whack, like if you see your churn rate go high, obviously that tells you that you need to make some changes.
So having the data is a big part of it, but also taking the time to actually have conversations with your current clients, your former clients, and get those anecdotes. I mean, you'd be amazed what you learn when you just pick up the phone and talk to people and ask for honest feedback. That's been really beneficial for us.
Andrew Smallwood
Yeah, I love that. Hey, we should be able to make this measurable and manageable, but also getting the qualitative insights that make it real, make it stick and make the numbers kind of a real thing. And some insights you probably wouldn't get just staring at a spreadsheet, putting those two things together, measuring it, incentivizing the team, continually working at it.
You know, great, great advice, sound counsel. So, Michael, really appreciate you joining us. I'm sure it's not the last time we'll see you or hear from you. Yeah, maybe. Maybe that's it. Like what's next? I mean, okay, where you guys are today, what's kind of as you look to the next 12 months, what are you most excited about for the business?
Michael Smith
Yeah. So I mean, like I said, the brokerage portion of our business is still the biggest. Our team sells about 2100 homes a year. We've got over 200 real estate agents. So that's a big part of it. But we're super excited about continuing to diversify, you know, and continuing to grow the property management side of things.
The insurance agency that we have, we just launched HOA management in the fall. We have a mortgage division now as well. So, you know, we're it sounds like we're doing a lot, but these are pieces of the puzzle that we've slowly added. You know, over time, I would not recommend that anyone jump into like, all five things at once.
You know, but it's definitely something to consider. Like, if you're someone who is in the same boat, you know, I was several years ago where you're running a real estate brokerage or, you know, maybe do a little bit of property management, I would really think long and hard about what's going to add the most value to your business long term and definitely, you know, prioritize growing the property management side of things.
If you currently are only doing property management, if you feel like you're doing it really well and you have the bandwidth to to take on more, then, you know, look into other things like maybe it's mortgage, maybe it's insurance, you know, different things like that. But the way that I've done it over the years is, whenever we want to launch, like a new division or a business line is, I'll typically wait until we have the right person to help me kind of spearhead that.
You know, I wouldn't just go run out and start a whole bunch of things from scratch by myself. That's, not a fun, you know, not the not the best way to learn. Like HOA management, we launched last year, and that's something that a lot of our clients have been asking us for for years, but we just never felt like it was the right time to do it, because I had never done it before, and I felt like I'd be learning on the job and wouldn't be able to actually provide great service to our clients.
So, happen to partner or hire someone last year who had previously owned their own management company and had sold it. And so this person had, you know, decades of experience and it just the pieces kind of all came together and the stars aligned and it worked out for us. So, even if it's not something you're going to do on your own, maybe you can partner with someone or hire someone that has the expertise to to add those just ancillary services to your business.
Andrew Smallwood
Yeah, I think this is great. Like when you think about some of the great real estate companies that are out there and in some cases they're taking like vertically integrated approach and working with the same customer across like every touchpoint. But even short of that or that kind of ambition, these adjacent kind of businesses that can kind of be pulled in, you know, another one is like a maintenance business, right?
People will talk about start to pull in some in-house maintenance, but I've seen plenty of people also try that, and then after a couple of years like, oh, maybe I need to. So having the right person identified who's like the right profile fit and again, give that person great incentives, you know, to be invested in building it for the long term, you know, is great. So it's cool to see how you've expanded. And, I mean, mortgage insurance, obviously sales, you know, where you started the property management business now, now. O that's a that's a really exciting business. So congratulations on all your success. Thank you for joining us. This was great to get to know you a little bit better and know your story.
And thanks for sharing. I'm sure people will appreciate it. And there's some great just practical, actionable things people can take from this.
Michael Smith
Yeah, I hope so. And anyone who has any questions are welcome to reach out to me directly.
Andrew Smallwood
What is the best way to get connected with you? If people wanted to reach out?
Michael Smith
Yeah, probably just send me a like a DM through Facebook or something.
You can go to our website, Bluefield Group.com and find me there. Shoot me an email.
Andrew Smallwood
Cool. We'll put a we'll put a link in the show notes and people can connect that way. All right. Have a good one.