9 Strategies for Being More Profitable in Your Property Management Business
December 17, 2020
Property management is a recession-resistant business that has numerous opportunities for revenue streams that can help you be more profitable. In this blog post, let’s discuss nine strategies and inspiring examples of business leaders in other industries that can help you as a property manager to be more profitable in an unprofitable world.
- Be impatient with inefficiency and waste. To run a more profitable business, decide and remove what you can do without.
Solomon or Sol Price was the founder of FedMart and Price Club (which has since merged into Costco). He is considered a pioneer of the “warehouse store” retail model and launched the first FedMart in 1954 and founded Price Club in 1976. In 1993 Costco merged with (bought) Price Club to form PriceCostco. Leadership in the new organization was shared between Sol Price’s son, Robert, and James Sinegal (who actually worked for Sol Price at both FedMart and Price Club). After eight months, PriceCostco spun off a separate company called Price Enterprises, led by the younger Price. The company eventually evolved into PriceSmart, which operates warehouse clubs overseas, while the domestic operations became Costco.
Costco today is the largest membership warehouse club chain in the United States. It is also the third largest retailer in the United States and the ninth largest in the world. Costco is the largest retailer of fine wine in the world, the fourth largest optical company in the U.S. and as of 2008, the 5th largest bookseller in the United States.
Sam Walton of Wal-Mart wrote in his book Made in America that he “borrowed” “as many ideas from Sol Price as from anybody else in the business”. He added that he especially liked the idea of calling his discount chain “Wal-Mart” because he “really liked Sol’s FedMart name”. In 1983, Walton dined with Price and later that year the first Sam’s Club was opened in Oklahoma City, Oklahoma. In fact, Walton, originally wanted to merge Sam’s club with Costco instead of what actually happened (Costco merged with Price Club in 1993).
Costco was the first company to grow from zero to $3 billion in sales in less than six years. In 2010, Costo was ranked 25th on the Fortune 500. Costco sells numerous brands and has its own private label called Kirkland Signature (which is so named because the corporate headquarters were located in Kirkland, Washington from 1987 to 1996).
No one can doubt the impact that warehouse clubs have had on the retail business at large. You may wonder why I am talking about a retail business in a blog post about property management. The reason is simple. I believe it pays to study the leaders who grew such a large business and the business concepts and ideas they lived by. I also believe you need to study your competitors and learn from what they are doing (since they obviously see an opportunity offering what you do). The way Sol Price began the business is instructive and offers some great insights.
Sol Price was originally an attorney and practiced for seventeen years before getting into retail. He inherited a warehouse in 1950 and while looking for a tenant ended up in the retail business (even though he had no experience at all in retailing).
“He created a discount retailing concept—Fed-Mart—that challenged the price protection laws of the time. Fed-Mart was a mass merchandising and supermarket chain that pioneered selling national brands at a discount. He build Fed-Mart into a $300 million chain over a twenty-five-year period and then sold it in 1975 to West German retailer Hugo Mann. He was fired less than a year later.
“Sol founded the Price Club in 1976 at a time when he was unemployed, sixty years of age, and walking the streets of San Diego looking for some new opportunity to salve his crushed ego. Both he and his sons were unemployed and his creative search…was as much for them as it was for himself. He began by interviewing small retailers, who told him about the inefficiencies of purchasing commodities like candy, cigars, and liquor through wholesalers. The high cost of distribution had obsoleted traditional two-step wholesaling methods of a bygone era. The small retailer ended up getting squeezed out by the inadequate distribution systems. Wholesalers could no longer support the small retail accounts because it entailed too much labor for the potential return.” –Profiles of Genius, p. 146.
“Sol decided to find a solution for this inefficient system. He had discovered a problem and in the inimitable fashion of the innovative visionary began searching for an elegant solution. Sol evaluated the elements in the distribution equation and concluded that there were too many layers between the manufacturer and the consumer. He decided to create an operation where the retailer could buy brand-name products at wholesale but would have to come to the warehouse to eliminate the cost of delivery.” –p. 146.
Sol was impatient with what he saw as an inefficient system and build a new concept around his desire to improve the waste he saw in the inefficient system. He was able to control costs by being in distressed or tertiary warehouse space which saved him thousands of dollars on rent since he knew his customers would come to him to save money. The original concept was designed to help small retailers and self-employed or other individuals who desired high-quality, but low-cost products.
The way Price Club started is instructive as well. Once Fed-Mart had been sold to German entrepreneur Hugo Mann, Sol was fired because their management styles clashed following a turbulent year.
“Sol and his sons opened their first Price Club store in an old airplane hanger in San Diego in 1976. Sol invested $800,000 of his proceeds from the Fed-Mart sale. He raised another $1 million from local businessmen and sold $500,000 worth of stock to ex Fed-Mart employees who joined him in his new venture. They sold annual memberships to local retailers for $25. The concept was fluid and kept evolving. The owners were learning as well as the customers during the first year. Consumers were not welcome during that first year and the store had few customers and even slimmer sales. Sol refused to advertise the operation and the firm almost folded during the first year. Sales were $16 million for that first year, with losses of $750,000. Certain sectors of the general public were then invited to join the club (government employees and all self-employed individuals) and there was a stampede to join.” –Profiles of Genius, p. 149.
This is a big lesson. If your business struggles with your current customer base, you need to expand and look for new customers that you can draw in that you can specialize in serving. You’ll notice that the majority of Price Club’s initial success was due to the specialized segment of the self-employed or government employees (who had money and were a great fit for what they sold). Another big lesson ties back into the original idea I’ve been talking about of eliminating inefficiency and waste. In order to offer great prices on his merchandise, Sol had to eliminate many overhead expenses. He was relentless about cutting anything that didn’t add anything to the value given or received. You must be relentless about efficiency in your property management business as well, especially in today’s challenging new economy.
Gene Landrum makes this observation about the effect this efficiency has had on other retailers. He said:
“Other retailers had lived with these frills for so long it was difficult for them to eliminate them. Sears has since attempted such a change and become more discount-oriented, but it has met with little acceptance by a consumer grown accustomed to being waited on, scanning product ads, using credit cards, and leisurely meandering through upscale shopping areas. Sol Price changed all this, which has not endeared him to the old-line retailers, who have lost enormous business to the wholesale club industry.” –Profiles of Genius, p. 150.
Sol Price revolutionalized the retail industry because he began the concept of charging an annual fee for the opportunity to spend money. In other words, he charged people just for the chance to shop at his stores. Michael Extein, a Wall Street analyst, said: “It was unimaginable, this idea that you could charge people to shop.”
Sol also “insisted from the beginning of his stores that he would only carry a limited line of products in his stores. This is one of the major differences between a wholesale club store and a discount store like K-Mart.” Sol said: “The essence of merchandising is the intelligent loss of sales. You can’t be everything to everybody.”
In an interview in 1990, Price revealed that the secret to his success was deciding what products he could do without.
Sol Price died on December 14, 2009. Biographer Gene Landrum acknowledges that he is “the father of the wholesale club industry and is one of the great innovators of the last half of the twentieth century. His tempestuous impatience and intolerance for waste made the Price Club (and now Costco) a major factor in the retailing business in America. This ex-lawyer and unemployed discounter has changed the world of retailing more than anyone else in the last hundred years.” –Profiles of Genius, p. 153.
What lessons could you apply from Sol’s business that you could apply as a property manager?
- Believe in yourself and your passion for business. When you struggle, focus on selling and adding more property management contracts.
The business leader I’m going to profile for this lesson is William Lear, who built the Lear Jet. “He is best known for founding the Lear Jet Corporation, a manufacturer of business jets. He also invented the first car radio and developed the 8-track cartridge, an audio tape system which was widely used in the 1960s and 1970s.” — http://en.wikipedia.org/wiki/Bill_Lear
Bill Lear was born in Hannibal, Missouri and was an only child. He made and lost millions throughout his life. The big lesson I’ve learned from studying his life is that when he struggled (which was often), he got back on top by selling his inventions that he discovered out of pure passion and because he had such a strong belief in himself.
As a child, Lear “buried himself in both reading and tinkering. He built a radio set at twelve and mastered the Morse code. He was a voracious reader of books on electricity and technical innovations…Bill loved to tinker but was not enthralled with formal schooling. He had an inveterate desire to learn everything about electronics but was disenchanted with school and quit in the ninth grade. Bill loved flying and spent his time loitering around Chicago’s airfields.” –Profiles of Genius, p. 172.
His mother divorced when he was six years old. She lived with various men and remarried when he was eleven. Lear was unhappy at home and left when he was seventeen. He went to Hollywood but ended up broke and alone. He joined the navy where he learned wireless and radio technology.
As I mentioned, “his charismatic salesmanship and charm usually saved him. An example was his design criteria for the Learjet, which violated all of the traditional dogma of the time. He was ostracized by the traditionalists but always had a solid argument justifying his actions. His critics assumed he had missed the market because the plane did not meet the demands of the executive airplane market as the experts perceived them.
“These experts said the speed of the Learjet was exorbitant and overkill for the small corporate customer. Lear’s response was incisive and emphatic: ‘an executive used to 500 mph planes like the DC-8s should have a plane of equivalent speed.’ The experts said a walk around cabin was required. Lear responded with, ‘You can’t stand up in a Cadillac.’ The experts felt the heating and cooling systems were excess baggage. Lear said, ‘It is ridiculous for an executive to arrive at the airport in his air-conditioned $5,000 automobile and get into a $500,000 airplane that, until it becomes airborne, has all the comfort of a sauna bath.’ The experts said a bathroom was necessary. Lear’s response, ‘A restroom is an admission you’re spending too much time getting where you want to go.’ Lear usually had a poignant answer to his critics and was not shy about expressing his feelings.” –Profiles of Genius, pp. 172-173.
This is a big lesson I’ve been reminded of over and over in my life and have been reminded of often during our current economic times about the importance on focusing on the skills of selling. When you focus on selling and are passionate about what you do, it shines through and property owners will buy from you because of your passion and excitement for marketing and managing their properties. Selling is a transference of emotion. Lear was exceptional at this skill because he was able to push past his problems and believe enough in himself to rise above the challenges he faced.
“In the 1920s, Lear and a partner, Elmer Wavering, invented the first practical car radio, calling it “Motorola” (a combination of motor and Victrola). The two couldn’t afford the booth fees at an automobile trade show to advertise their new invention, so they parked outside of the convention center’s parking lot and played the radio from their car, attracting orders as people walked by. They eventually sold their patents to Paul Galvin of the Galvin Manufacturing Corporation (which would later become Motorola). In 1930, Lear used his profits from the sale of his car radio patents to found Lear Developments, a company specializing in aerospace instruments and electronics. Lear developed radio direction finders, autopilots, and the first fully automatic aircraft landing system. Lear also developed and marketed a line of panel-mounted radios for general aviation. His “LearAvian” series of portable radios, which incorporated radio direction finder circuits as well as broadcast band coverage, were especially popular.
“Lear changed the name of Lear Developments to Lear Incorporated and in 1949 opened a manufacturing facility in Santa Monica, California.
“In 1960, Lear moved to Switzerland and founded the Swiss American Aviation Company. In 1962 he sold Lear Incorporated to the Siegler Corporation after having failed to persuade its board to go into the aircraft manufacturing business. That company thereafter was known as Lear Siegler. Bill Lear next moved to Wichita, Kansas to manufacture the Lear Jet. On October 7, 1963, Lear Jet started test flights on the Learjet 23, the first mass produced business jet.” — http://en.wikipedia.org/wiki/Bill_Lear
Lear got into a severe cash flow bind in the process of manufacturing his jet. He “lost $12 million in 1966 primarily because he could not control his desire to continue creating and innovating and just focus on building the Learjets that were in such demand. He had concocted three more planes to design and build when he still had not completed the manufacturing cycle for the eminently successful Learjet.
He ended up selling his ownership in LearJet for $21 million when he was sixty-five years old. He once again rose up from his challenges (because of his ability to sell) and was expected to retire. However, he invested most of what he made into a new steam engine car company. He spent five years and $17 million in this venture. Next, he went through $10 million at the age of seventy-four until he was nearly out of money. When he died in 1978 of leukemia, his estate was worth less than $1 million.
Again, the big lesson I’ve learned from studying Lear’s life is that he was a master salesperson. He could rise up out of difficulty because of his desire to create and his belief in himself (he believed he could solve any problem he put his mind to).
Biographer Gene Landrum writes that Lear “risked everything he had on every new idea until the end.” He says:
“The board of directors of Lear, Inc. voted down his idea for building the Learjet in 1961. They were convinced it could never be built and if it were, it could never be sold. Lear was dismayed but undaunted. He immediately arranged for a sale of the firm he had started (grossing $100 million annually at the time). He sold the firm to Siegler Inc. on February 8, 1962. His share of the proceeds was $14.3 million. He invested all of these monies in development of the Learjet project. Within two years he had gone through all of the money. He was deeply in debt, virtually bankrupt. He sold his Le Ranch estate in Switzerland, his home in Wichita, new homes in Greece and Palm Springs, and his wife’s Rubens paintings to keep himself afloat as the Learjet was being completed….”
“Lear was so strapped during the mid-1960s that he sold a Learjet test plane—which he was not authorized to sell because it was not certified by the FAA—to a personal friend to raise cash….By the time his plane was finally certified by the FAA, Lear was forced to pursue a public offering or see everything evaporate. A tribute to his sales ability, Bill raised $5.5 million in November 1964 by selling stock at $10 per share for 40 percent of the company. Within twelve months the plane became the largest-selling commercial jet ever.” –Profiles of Genius, p. 176.
What do you do when your property management business struggles?
Do you get up and learn what you need to and sell with passion to make it through the challenging times?
I’m inspired by Lear’s belief in himself and his passion to succeed. His ability to sell got him through many tough times. I hope Lear’s story has inspired you to keep on going even when times are tough. If you are struggling, get to the next step by selling better and selling more. You can do it.
The other part of Lear’s story that is inspirational is his belief in himself. Biographer Landrum said of Lear that he was “equipped with a belief system that would boggle the mind of Norman Vincent Peale.” Another biographer quoted Lear as saying, “They said I would never build my plane. Well, I did. They said my plane would never fly. Well, it did. They say we won’t succeed. Well, we will.”—Profiles of Genius, p. 176.
A great example of this was how Lear developed the Lear Jet Stereo 8 music cartridge in 1964, better-known as the “8-track”. It was a solution to the need for a convenient music source for his new business jets. “When [the founder of magnetic recording] Alexander Pontitoff told him the eight-track tape for an automobile was an impossible task, Lear became passionately determined to make it happen. Pontitoff told Bill: “Don’t try to put eight tracks on a quarter inch tape. You can’t do it. Just can’t squeeze that much information on it.” That was all Bill Lear needed to hear. Pontitoff’s advice turned out to be motivational, even though it was not intended as such.
“Bill decided to embark on the eight-track tape design concurrent with his Learjet development….He worked day and night on the eight-track problem in 1963-1964. He finally succeeded in overcoming all of the design problems and had a working model of the new ‘Lear Stereo Eight’ by the fall of 1964.”
“This revolutionary development created a new market that reached $4.5 billion in revenues by 1975.”–p. 175, 177.
The interesting thing about Lear is that even though he was so good at selling, he often didn’t stick around long enough to participate in the long-term commercialization of what he developed. He was an innovator because he believed in himself enough to work through the challenges to come up with a solution. His ability to sell got him out of tough times. Yet, his inability to persist in what he started, prevented him from accomplishing more in his life. I think this is a big cautionary lesson that I would encourage you to think about with your property management business. We all start more things than we finish, but we need to be more proactive to determine what we should be focusing on and see it through to completion.
Jeff Bezos, the founder of Amazon.com recently said that belief in yourself is so important in any new business operation (especially where you’re doing something new that hasn’t been done before) and that three things are required to succeed:
- “you must be willing to fail
- you have to be willing to think long-term
- you have to be willing to be misunderstood for long periods of time.” –Success, August 2011, p. 50.
Bezos also warned his team at meetings during the dot-com bubble from 1995 to 2000 that you can’t allow yourself to feel ’30 percent smarter this month because the stock price is up 30 percent because you’ll feel 30 percent dumber when it declines.’ –Success, August 2011, p. 50.
Amazon.com was once referred to as Amazon.bomb. Bezos overcame tough obstacles through the ability to sell as well. His belief in what he was doing and his focus on business metrics has allowed him to create a massive company that continues to affect retailers the world over.
Bezos started his business when he observed that usage on the internet was growing at a 2300 percent increase a year. He quit his promising job and typed a business plan in his car while his wife drove to Seattle. He told his original investors that there was a 70 percent chance they would lose their entire investment. His parents signed on for $300,000, a substantial portion of their life savings. His mother said, “We weren’t betting on the Internet. We were betting on Jeff.” Today, as six percent owners of Amazon.com, Jeff’s parents are billionaires.
You may be thinking: Well, I’m not Bill Lear and I couldn’t raise a million dollars or do anything like what you just described. If you have thought that, please don’t miss the point of the lessons that I was trying to share with Lear’s life. It is about belief, passion, and selling more. It doesn’t matter if you are just starting a small property management business or a large business. If you don’t believe in yourself and have passion to get you through the tough times, you won’t. I share Lear’s story for two reasons: 1) it shows the power of learning to sell your way through difficulty and 2) as a cautionary tale to remind you to persist in what you start instead of beginning lots of little projects while actually implementing very few of them.
To help illustrate this idea that passion and belief are critical regardless of size, let me share a story about a company named BlendTec. They make high-performance blending and dispensing equipment for restaurants. You would think blenders are boring, but they created a very successful campaign on YouTube with their Will It Blend? Videos which showed CEO Tom Dickson, blending up iPhones, wood, marbles, rakes, a six pack of Coca-Cola and other crazy things. They spent $50 on the domain name (willitblend.com) and a white lab coat, a rotisserie chicken, a McDonald’s extra value meal and a few other things and filmed videos of the CEO blending up these items. The shock and humor got them noticed and within a week they had a million views on You Tube. The promotion resulted in a 700 percent increase in sales in a down economy, massive brand awareness across the world, a new revenue stream in advertising from video sharing sites who wanted the advertising traffic their videos created and now revenue from companies who want to have their products blended in one of their videos.
George Wright, the marketer behind these video campaigns said this in a recent interview about the importance of belief:
“I believed in it. I knew it was going to work. When I saw the first videos I knew it. Although I thought it might take years to get traction. But the technology proved me wrong and it took a week to get a million views on YouTube. Powerful tools are there for free. If you try them they will work for you. However, you have to change the way you think from a traditional advertiser or marketer to make it work.” –Jim Kukral, Attention!, p. 186.
Tom Monaghan, the founder of Domino’s once said of himself of his early years in business: “‘I was shy but I had a lot of self-confidence.’ He told his wife on their engagement, ‘I am going to be a millionaire by the time I am thirty,’ and he meant it.” —Profiles of Genius, p. 102. He actually accomplished the goal when he was thirty nine in 1976.
Marie Curie, the winner of Nobel prizes in Physics and Chemistry said: “Life is not easy for any of us. But what of that? We must have perseverance and, above all, confidence in ourselves. We must believe that we are gifted for something, and that this thing, at whatever cost, must be attained.”
People who achieve their dreams experience a lot of failures on their way to success, but they don’t let their failures get the better of them. They get knocked down and get back up again. They think of themselves as successful—even when things go wrong.
Jim Rohn said: “How long should you try? Until.”
Enough said. At PMI, we’ve got confidence that you can do it. We believe in our franchisees. We believe that our franchisees are making a great difference to the property owners in their market area. We invite you to join the PMI family and raise yourself out of any difficulty you may experiencing. We are committed to helping our franchisees get the best start and support as they grow their property management business.
- Spend more time learning and thinking.
A great example of this principle is Fred Smith, who is the founder of FedEx. Biographer Gene Landrum says that Smith is a “voracious reader and reads four hours a day on the subjects of history, politics, and economics.”
I recently read a book about the partnership of Warren Buffet and Charlie Munger. They are among the world’s most successful investors because they take time to learn and think. In the book, Buffet talked about how he spends the majority of his day reading and thinking. He once famously said that he lived in Omaha, Nebraska (away from the hustle and bustle and noise) because he can think there.
The key lesson here is this: if you aren’t taking the time to learn new things and think you’ll be passed up by those who do. Henry Ford once remarked: “Anyone who stops learning is old, whether at twenty or eighty.”.
One of the best statements I’ve ever read about the importance of continuous learning and education is this one I read by Brian Tracy soon after I graduated from college and first got into selling. He said:
“Some things in life are optional, and some things in life are mandatory. Taking your next vacation to the Caribbean is optional. Building a personal library and becoming an excellent reader is mandatory. It is no longer something you can choose to do or not do. It is absolutely essential and indispensable for your success. A great many people do not read very much. Fifty-eight percent of adult Americans never read a nonfiction book from cover to cover after they finish school. The average American reads less than one book per year. In fact, according to a Gallup study of the most successful men and women in America, reading one nonfiction book per month will put you into the top 1 percent of living Americans. It takes regular, persistent reading and studying for you to improve, to move to the front of your field. It is not optional.”
“One of the best tests for compatibility with your work is your desire to read and learn more about it. If you are doing the job that is right for you, you will naturally be eager to read everything that you can possibly find about your field. You will want to get better and better. You will be hungry for new knowledge. You will be determined to become excellent. And every single bit of new information motivates and stimulates you and makes you excited about learning even more. However, if you are in the wrong field, you will look upon reading about it as drudgery. If the reading and studying is a required condition of your job or profession, you will do it, but only under duress. You will want to get it over with, like a visit to the dentist. If, for any reason, you are not eager to learn more about what you are doing, it could very well be that you are wasting your time and your life in the wrong field.
“In one 22-year study of self-made millionaires, the researchers found that one of the common characteristics of those special men and women who went from rags to riches was that they were absolutely fascinated by their work. They didn’t think so much about making a lot of money. They were more concerned about becoming better and better at what they did. Their work absorbed them completely. In almost no time at all, because of their commitment to reading and self-development, they were paid more and more. And once they reached a high level of income, their fascination with their work still continued. Instead of drawing extra money from their business and spending it frivolously, they reinvested it in themselves and in their career. As a result, they became more and more proficient and wealthier and wealthier. Then, one day, they opened their eyes, looked around and found that they were worth more than $1 million. And the continuous learning, the nonstop reading, was the key ingredient.”
“If you want to get ahead, you must read things that give you new ideas and insights, not merely things that confirm what you already know. Becoming a proficient and persistent reader may not be easy to do so, but it’s certainly possible. The future does belong to the competent. Those who know more will always win out over those who know less. The more you read, the better you get. The more you learn, the easier it is for you to learn. And the more you challenge your mind, the smarter you get.” –http://www.personal-development.com/brian-tracy-articles/discipline-of-reading.htm
Jim Rohn once said: “Ignorance is not bliss. Ignorance is poverty. Ignorance is devastation. Ignorance is tragedy. Ignorance is illness. It all stems from ignorance.”
Read more. I’ve studied a lot of business biographies and this is a lesson that keeps appearing. The most successful individuals are voracious readers. They take time to learn and to think. You must do the same if you are to grow your property management businesses to new levels. If you aren’t reading and learning something new each day, resolve today that you will begin. Even if you feel like you are not a very good reader, you can learn. There is a world of information and opportunity that awaits you when you decide to learn and think more.
- Be a better competitor.
One of my favorite business leaders who emulates this principle is Tom Monahan, who founded Domino’s Pizza. His father died when he was four years old and he found solace in books and spent many hours in the library. As a child, he spent “a great deal of time alone with his books. His heroes were P.T. Barnum, Frank Lloyd Wright, and great world leaders like Lincoln. He became enamored with their rise from poor beginnings to prominence and decided to emulate them. Striving to achieve this ‘rags to riches’ dream kept him very competitive. He aspired to excellence from the insecurity bequeathed to him. Competing was his path and energy and drive were his vehicle. Tom became excellent at games and was driven to win at most childhood games he entered. It became his identity and solace.” –Profiles of Genius, pp. 99-100.
What drives you?
Many great business leaders I’ve studied have been very competitive and have a drive to beat the opposition they’ve faced in their lives. That stems from many sources, but it is usually driven by an underlying fear of failure.
“Tom Monaghan was twenty-three in 1960 when he and his brother bought DomiNicks in Ypsilanti, Michigan, with a loan of $900. He bought his brother’s interest within the year for a used Volkswagon Beetle. By 1965 he had renamed the business Domino’s and began operating three stores near college campuses. Tom struggled through two different partnerships during this period, which almost cost him the business. It ingrained in him the tenacity to never give in to adversity.”
“Tom opened his first franchise store in Ypilanti in April 1967. A near disastrous fire almost wiped him out in 1968, the beginning of a period beset by crisis after crisis that would have defeated a lesser individual. Monaghan began 1969 on a roll and expanded to thirty-two company-owned stores that were build on credit through a highly leveraged franchise program. The expansion nearly bankrupted him as he ran out of cash and faced over one hundred lawsuits arising from a $1.5 million debt owed to fifteen hundred creditors.”
It took him nine years to pay off that debt, but he paid back every single one of those creditors.
Thomas Edison is another example to me of the kind of persistence it takes to be a better competitor. He was once asked by Napoleon Hill, the author of Think and Grow Rich what he would be doing now if his ten thousandth experiment had failed to making electric light work. His answer is very instructive. He said:
“I would not be standing here talking to you. I would be locked in my laboratory conducting the next experiment.” –Dan Kennedy, How to Succeed in Business by Breaking All of the Rules, p. 69.
A great example of a brilliant businessman who was an amazing competitor is that of Soichiro Honda. He was born in Japan on November 17, 1906. He spent his early childhood helping his father, Gihei, a blacksmith, with his bicycle repair business. At the time his mother, Mika, was a weaver. At 15, without any formal education, Honda left home and headed to Tokyo to look for work. He obtained an apprenticeship at a garage in 1922, and after some hesitation over his employment, he stayed for six years, working as a car mechanic before returning home to start his own auto repair business in 1928 at the age of 22.
In 1937 Honda began producing piston rings for small engines, which led to manufacturing small engines to be used in motorcycles.
“He did this during the war until a bomb crippled his factory and then in 1945 an earthquake destroyed it completely.” –Profiles of Genius, p. 184.
Can you imagine how you would respond if your business was bombed and then destroyed by an earthquake a few years later? Would you persist and keep on going or would you give up?
“Honda was dismayed, sold out, and went into semi-retirement. His entry into the motorcycle market occurred quite by accident. Honda was faced with no gas for his car in 1946, so this visionary took one of the many surplus motors left by the GIs and attached it to his bike for transportation. The engine was fueled by kerosene. This simple but elegant solution to a fundamental problem was Honda’s way. His friends asked him to make them one of his motorbikes. After a dozen such requests, it occurred to the ever-innovative Honda that there must be a larger market for such a machine. He incorporated Honda Motor Company in 1948 with a charter to design and build motorbikes.” –Profiles of Genius, p. 184.
“Honda launched his company into the crowded motorcycle industry in the early fifties and within five years had successfully eliminated 250 competitors in that industry (50 were Japanese). His ‘Dream’ machine, introduced in 1950, was a realization of his childhood fantasy of building a better machine….[His] unique products, coupled with an inspirational advertising promotion (“You Meet the Nicest People on a Honda”), made Honda an instant success and changed this one-time stagnant industry. By 1963, Honda had become the dominant force in the motorcycle business in virtually every country of the world, leaving Harley-Davidson and the Italian bike companies in the dust.” –Profiles of Genius, p. 183.
“Honda’s excellent engineering and clever marketing resulted in Honda motorcycles out-selling Triumph and Harley-Davidson in their respective home markets. In 1959 Honda Motorcycles opened its first dealership in the United States.
“Honda remained president until his retirement in 1973, stayed on as director, and was appointed “supreme adviser” in 1983. His legendary status was such that People magazine placed him on their “25 Most Intriguing People of the Year” list for 1980, dubbing him “the Japanese Henry Ford.” In retirement Honda busied himself with work connected with the Honda Foundation. He died in 1991 from liver failure.” — http://en.wikipedia.org/wiki/Soichiro_Honda
In your property management business, do you have the vision to be a better competitor? You may end up buying the portfolio or the businesses of your competitors. Know your market well. Know your competitors better. Stand out and offer the best property management services and your business will grow.
- Have vision. Know what you want. Don’t let the fear of failure hold you back.
Do you allow yourself to dream bigger or have you shut down your dream factory? You should imagine what you could do or accomplish in your life if you had no limitations and begin dreaming again. Successful people in every walk of life dream big dreams.
The one thing you need more than any other in your life is vision. None of us sees far enough, clearly enough, or soon enough. Don’t get so caught up in focusing so much on the present that your future is out of focus. The biggest difference between those who have vision and those who don’t is that the person with vision thinks about and prepares for their future, while the person who lacks vision lives each day as it comes. Vision is the ability to see, but it is also the ability to imagine what others cannot see.
Shortsightedness is caused when we are more interested in what is going on in the present than we are in looking to the future. The proverb “where there is no vision, the people perish” is still true today. In order to succeed long-term in the property management business, you must develop the ability to project your plans and dreams for the future beyond your present situation. Those who have vision that motivates them to take action have used their imaginations to picture their distant goals so large in their conscious mind that they seem even more important than the goals of the present.
Author J.K. Rowling made this statement about how she conceived her character Harry Potter and there are several things you can learn from what she says about dreams and vision. She said:
“My boyfriend was moving to Manchester and wanted me to move, too. It was during the train journey back from Manchester to London, after a weekend looking for a flat, that Harry Potter made his appearance. I have never felt such a huge rush of excitement. I knew immediately that this was going to be such fun to write…I didn’t know then that it was going to be a book for children—I just knew that I had this boy, Harry. During that journey I also discovered Ron, Nearly Headless Nick, Hagrid, and Peeves. But with the idea of my life careering round my head, I didn’t have a pen that worked! And I never went anywhere without my pen and notebook. So, rather than trying to write it, I had to think it. And I think that was a very good thing. I was besieged by a mass of detail and if it didn’t survive that journey it probably wasn’t worth remembering.”
Don’t be shortsighted. Look to the future. Have vision. Learn to dream again.
Leonard Lauder (president of Estee Lauder) probably said it best: “We were a tiny company, but I dreamed someday of being able to run a large company….I came to realize that fantasizing, projecting yourself into a successful situation is the most powerful means there is of achieving personal goals. That is what an athlete does when he kicks a field goal with three seconds on the clock, and 80,000 people in the stands and 30 million people watching. As the kicker begins to move he automatically makes the thousand tiny adjustment necessary to achieve the mental picture he has formed in his mind so many times: the picture of himself kicking the winning field goal.”
Are your thoughts focused on who you need to be and how you need to act to get what you want?
How great is your desire to be proactive (have vision) instead of reactive (stay in the present) in your property management business?
John Maxwell wrote in Failing Forward:
“Not realizing what you want is a problem of knowledge.
Not pursuing what you want is a problem of motivation.
Not achieving what you want is a problem of persistence.” –Failing Forward, p. 97.
Mystery author Rita May Brown made this observation: “A life of reaction is a life of slavery, intellectually, and spiritually. One must fight for a life of action, not reaction.”
Don’t be someone who has the ability to see, but has no vision. Fight for your dreams. Focus on the future and you will see great things you can achieve and do in your business and in your life.
- Persist through difficulty. Live by the mantra: Profit or perish.
It isn’t easy to persist when no one believes in you, but yourself. It isn’t easy to be patient when you hold out for what you want. Yet, persistence and patience are two extraordinary qualities that are at the heart of all success. It is easy to look at someone’s success and see the end without realizing that the beginning was much different. When you are working through challenges and problems in your property management business, don’t give up. Be persistent. Develop patience. Have the courage to endure when times are tough. I’ve always loved this poem by Edgar A. Guest. He said:
“Stick to your task till its stick to you;
Beginners are many, but enders are few.
Honour, power, place and praise
Will come, in time, to the one who stays.
Stick to your task till it sticks to you;
Bend at it, sweat at it, smile at it too;
For out of the bend and the sweat and the smile
Will come life’s victories, after a while.”
Your determination to succeed and your ability to hold tightly onto your dreams will help you have the courage and the motivation to make one more sale when you are completely exhausted and don’t know how you will do it anymore. With patience and persistence, you’ll be able to the overcome obstacles that stand in your way and make your goals and dreams realities.
Big changes are happening in the property management business today. I think every property manager needs to make the “Profit or Perish” mantra a big part of how they think about their business. If it isn’t making you money, why offer it? It isn’t just about making sales. It is about how much money you get to keep after all of the expenses are paid.
When I think about all of the challenges that have come to property managers as a result of dealing with this Covid-19 pandemic, I think about this poem by Edgar A. Guest:
“The easy roads are crowded
And the level roads are jammed;
The pleasant little rivers
With drifting folks are crammed.
But off yonder where it’s rocky,
Where you get the better view,
You will find the ranks are thinning
And the travelers are few.
Where the going’s smooth and pleasant
You will always find the throng,
For the many—more’s the pity
Seem to like to drift along.
But the steps that call for courage
And the task that’s hard to do,
In the end result in glory
For the never-wavering few.”
Persist through difficulty. You can do it. Position yourself and grow during the challenging times of this pandemic.
- Don’t live in denial. Denial is deadly. To get to where you need to be, you need to raise your prices and your profits in key areas of your business.
George Cloutier makes this observation in his book Profits Aren’t Everything, They’re the Only Thing:
“Taking a cold, hard look at yourself and your business can be the toughest thing for an owner to do. But the truth test is necessary. You have to understand where the leaks are in your business, and exactly how, as the boss, it’s your fault. You have to wake up before you can make more profits. Denial is the small business owner’s worst enemy. End it now. Face whatever it takes to build a stronger business.”—p. 17.
When is the last time you carefully analyzed every revenue stream you are offering to tenants and owners in your business to determine what is profitable and what is not? If you have an underperforming revenue stream, do you have the courage to drop it and invest in more profitable options or do you live in denial and continue to offer something (ignoring the fact that it isn’t making you money)? To be profitable, you have to make tough decisions. There will be some owners who won’t like that you won’t manage their properties. But the reality is that it isn’t their business, they don’t have to pay your bills, and managing an underperforming or unprofitable portfolio of properties is cutting into your profits and your own personal income.
Remember that procrastination is denial’s best friend. Saying or thinking that you’ll get around to changing your business to add more revenue streams or continuing to manage a property for an owner that takes up all of your time and isn’t as profitable as it could or should be, limits you from being profitable with other properties.
Have you ever found yourself managing unprofitable properties longer than you should have? If so, you are guilty of denial. You have to run your business as a business and that means making tough decisions. Living in denial and making the decision to continue manage unprofitable or slightly profitable properties is a sure recipe for hastening the death of your business. A business needs profits to stay in business and you have to make the tough choices to help you remain or become profitable. Not making those tough decisions or procrastinating them reveals inadequacy in leadership.
If you need to fire an owner, you need to do it now. Procrastinating the decision isn’t going to make lower sales or profits improve. Trying to help someone else out isn’t going to help your business if your business can’t pay its bills or employ you.
Here are seven questions for you to evaluate as you think about the hard realities of where you are at and what you must change to get to where you need to go:
- Do you have people on your team that aren’t meeting your minimum standard? When will you talk with them to get them on the right track or let them go?
- If you are managing a property for owners who won’t invest in maintaining the property and who won’t take care of the reasonable requests of tenants, how much longer will you continue to manage that property? This is your time to make money. Procrastinating the decision to fire a bad owner will cost you thousands of dollars of lost revenue and profits.
- When you hear excuses from tenants or owners, how long do you let these continue before you take action? If someone keeps giving you excuses without changing their behavior, how long is it before you make a change and let a client go?
- If your property management business isn’t making a profit, who is to blame? What are you doing about it?
- How is your overall business doing? Are you where you want to be?
- What are you currently doing to increase your business profitability this year and next year?
- What will your business profitability be in 5 years? What steps are you currently taking that will help you get there?
These are hard questions, but avoiding them and continuing to live in denial won’t help you get your business to where it needs to be. You have to be a leader and take these questions on to help you get to where you want to be.
I really like what George Cloutier says in his book Profits Aren’t Everything, They’re the Only Thing:
“If there’s a difficult task on your ‘to do’ list that you’ve been putting off, do it first and do it now. Are three out of ten employees failing miserably? Fire them! Is your biggest problem that you need a new banking institution? Don’t waste time shooting the breeze with clients. Make the calls and find the bank with the best loan terms. Suck it up and do it! The longer these tasks don’t get done, the more problems will accumulate. Putting off the stuff you don’t want to do is just another sign you are in denial. Tackle it head-on and get it over with. Eat your vegetables.”–p. 15-16.
“Are you in denial? Have bad habits like procrastination and self-indulgence bled your profits dry? It’s time to assess your leadership.”–Profits Aren’t Everything, They’re the Only Thing, p. 17.
Why don’t more property management companies raise their prices or their profit margins? Here are five reasons why:
- They only offer what other property managers in their area offer and feel they can’t go above the average fees to owners. They don’t even consider the options of services they could be offering to tenants.
- They believe that if their prices are perceived to be higher by property owners, no one will hire them. Property managers reason that property owners will talk about how much higher their prices are (on online forums and with their friends) and so no one will buy from them in the future.
- They feel that charging higher prices will make them appear greedy (if anyone ever found out) and that charging a higher price for what they do (the experience and everything that goes with maintaining a valuable asset) is equivalent to stealing from the property owner. If you can’t overcome this feeling of not feeling that you and the experience you create is worth it, you’ll never be able to charge a higher price.
- They feel that property owners wouldn’t refer business to them if their friends thought they wouldn’t get a good deal too.
- They feel that property owners who will spend more money on their services are harder to find and that those owners would prefer to just manage their own properties.
Don’t live in denial. Raise your prices, lower your expenses, and increase your profits. That should be your mantra and your focal point for running your property management business.
- Be aware of your financial position at all times. Have ironclad fiscal discipline on your spending and expenses.
I want to share this sobering thought from George Cloutier from his book entitled Profits Aren’t Everything, They’re the Only Thing. He says:
“Owners always say they have a financial and operating plan, but few do. Most of these are on the back of an envelope or gathering dust in the bottom drawer, never to see the light of day again. Some owners say they have one in their head, but it only serves to clutter their brains. Most of these plans are never reviewed or modified, and changes are rarely implemented.”
“If you don’t have a strong and evolving plan for profits, don’t bother to come to work, because you will fail. Running your business month-to-month, week-to-week, and day-to-day, you’ll always be playing catch-up to meet expenses. But if you choose to live by our creed that ‘profits are the ONLY thing,’ then a disciplined plan is the only way you are going to get there. You should be focused about where you stand on your plan every hour that you’re working and implement the required changes without mercy.” –pp. 71-72.
If you haven’t ever read Jason Jenning’s great book, Think Big, Act Small, I would highly encourage you to do so. In it, he talks about Dot Foods who began distributing to the big warehouse clubs like Sam’s Club and Costco. Jennings says:
“In 1986, as the big warehouse clubs were taking off, Dot Foods began distributing to them. In only four years, that piece of business grew to more than 25 percent of the company’s total and was very profitable. Then suddenly, the industry rapidly consolidated. There was intense downward pressure on already slim margins and as the supply chain changed, Dot Foods lost a major contract. Instead of abandoning one-quarter of their total annual revenues, most companies would have desperately tried to replace the supply contract and slashed their own costs even further to accommodate margins that were continually compressed. According to Pat Tracy, Dot’s CEO, ‘We packed our bags and painfully left that business in order to apply our business capacity in other areas.’ Dot Foods, which was founded as a distributor of dry-milk solids to food manufacturers and ice cream manufacturing plants, is even considering leaving that business. Today, because that portion of the business requires more attention than its revenues and profits justify, Pat Tracy says the family may consider divesting itself of it. Dot Foods has demonstrated its willingness to abandon unprofitable business units and is even prepared to let go of its legacy business for the greater good and future of the organization.”—pp. 68-69.
I share that example with you because it is a great example of letting go of an area of your business if there is no profit in it. If you are offering a service and there is no profit in it, you need to let it go and replace it with one that will make you money.
Remember, profit is not just your price minus your expense of buying or providing a service. You also have to factor in your operating costs. Property managers who try to operate without understanding their true costs jeopardize their long-term survival in the marketplace.
In addition to carefully monitoring what services are generating a profit, you should seek opportunities that boost your profitability. Property Management Inc. offers over 50 revenue streams you can offer to tenants and many more services that you can offer to owners. New revenue streams are being created for PMI franchisees every quarter. If you are looking for more and better revenue streams with services you can offer to tenants and owners as services they are going to get anyway, you should check out the opportunities within PMI. It isn’t about selling out to being a part of a nationwide franchise. It is buying in to the opportunities for growing your business and your profitability.
Everything counts in today’s market and if there are operating costs that are unnecessary or things that can be done for less, make these changes as soon as you can. Knowing your costs and carefully cutting out unnecessary expenses will help you be more profitable as well.
Think carefully about what you will do each day and week to generate cash flow. Cash flow is the lifeblood of any business. When the cash stops flowing, the business stops growing. As a property manager, cash flow is vital.
If you are struggling with cash flow, here is Cloutier’s recommendation in his book Profits Aren’t Everything, They’re the Only Thing:
“Do an estimated cash-based profit and loss statement each week. You should know where you are at financially and adjust accordingly and aggressively. Cut, cut, and cut some more. Focus on cash flow and expenses right now. If money is tight or you forsee problems, be ruthless about slicing expenses, whether for payroll, rent, or travel expenses. If you have three useless employees, get rid of them. If the expense accounts are getting out of hand, set strict limits. There’s always extra fat to trim. You have to have ironclad fiscal discipline. Particularly in a down market, but even when the economy is robust, small business owners need to be aware of their financial position at all times.”–George Cloutier, Profits Aren’t Everything, They’re the Only Thing, pp. 4-5.
- Look for the difference. Being a part of the established brand of PMI ensures that you can offer more value to your clients.
How can you position your business to be the premier provider of property management services in your area? Can you cater to a higher clientele and offer additional services that make the experience of doing business with you more unique than any other property manager in your area?
Think about how you can raise your prices to provide unique experiences in your market. If you will do this, you may find hidden profits that no one else in your market area even realized were available (and property owners and tenants will thank you for the opportunities you provide). For example, what kind of a difference would it make if tenants could pay for a monthly insurance toward any damage instead of pre-paying a large security deposit with the hope of getting it back when their contract is completed? PMI has put together the best package of services for owners and tenants that will save them money and benefit you as well.
There is a powerful advantage in selling to more affluent buyers. They are out there, but you may not be positioned correctly to sell to them.This is something you must work on at in your property management business: to sell better to the affluent buyer. Why?
I think Dan Kennedy puts it best. He says:
“The further up the affluency ladder you go, the fewer people there are trying to sell to them. Most people, they are afraid of them. They have self-esteem issues. They have “Oh, I am not one of them. So, how do I sell to them?…Well, how do you think you get in their league? You go get 10 percent of their money from 10 of them. Guess what? You are in their league. You just need to get 1 percent of their money from 100 of them and you are in their league.” –Price Elasticity, p. 31.
I sometimes hear from property managers that they can’t get property owners to hire property managers or that it seems easier to manage one class of properties over another. While every market is different, the one truth is that it takes the same amount of time and effort with the right systems to manage a $2,000,000, or a $20,000,000 property as it does a $200,000 one.
Where do you really want to be? The national average rental price for single family properties in the United States being rented out today is $1,023. That is the average. That means that there are people renting homes that are a lot more than that and you may be able to focus on managing properties in that niche in ways that none of your competitors have previously thought about.
A good example of this is found in Omaha Steaks (www.omahasteaks.com) and Allen Brothers Steaks (www.allenbrothers.com). Allen Brothers started after Omaha steaks, yet they decided to sell their steaks for more money than the premium vendor who was already selling at the highest place in the market. Most businesses who come into a market look at what everyone else is doing and then price themselves for less than what others are selling for. This company took the opposite approach. They priced higher (where there are fewer competitors) and built a very nice business by creating more value for their affluent customers. There is a lot you can learn from studying how these two mail order steak companies are doing business in a commodity market where many people only buy steak at the lowest price they can get it for from Wal-Mart.
The key is this: No one is forcing you to sell exclusively to the market you are currently selling to. Look for opportunity to sell to another market in your area and you can increase your higher end sales and your profits. You will also likely increase the amount of commission you make from selling higher end properties as well.
There is one final reason why you should raise your prices that you need to remember and that is this: In the mind of the property owner, a higher price equals greater quality. There may not be that big of a difference between how a property is managed by one company over another. The difference is in perception. See the difference in perception between what property owners are seeing now and what they should see in the future. Simply put, in the property owner’s mind, a higher price equals greater quality. A property manager who knows all of the rules and regulations and knows how to manage a property without getting the owner into trouble is worth more than someone who is not aware of the changes that are happening in the marketplace.
If you want to position yourself so that you have more power than your competitors which allows you to beat your competitors in the property management business, you have to do the following:
- Understand the property owner’s perceptions about your business in connection with other property managers in your area.
- Understand your competitive difference and articulate it to the property owners in your area.
- Position yourself as an authority with valuable expertise. When you are an authority, you can charge more (because the experience of dealing with you) is perceived as being more valuable.
- Position yourself as the preferred source of property management in any of the four pillars (residential, commercial, association, and short-term) in your market area and in your market niche – use written and video testimonials to validate your claims.
- Improve your systems so that you can run your business more effectively and smoothly. Improving your sales and marketing systems are especially important.
To learn how you can utilize proven systems to grow your property management business, please