Property Management Success
00:35:15 · Stephen Glover
[00:35:15] S1: Like they're early on, we did have this thing where like I would I would hire some really some higher level people, and some people in the team would be like, Well, what about me? And I'm like, Look, hey, if we're you're playing a pick up a game of you know, you're playing D1 basketball or pick any sport, or well, let's stick with basketball. You're playing D1 basketball, and your coach tells you in his prime we could bring Michael Jordan on the team. Would you say no? Because what about you? Like, if if you're opposed to bringing a Michael Jordan on your team, we're not on the same page. We want to win, and we can do that. Michael Jordan on the team is gonna make you better, right? Like, and it's gonna make all of us better, and it's gonna allow us to uh you know increase revenue and have more opportunity. I could go on and on. But the idea is like we need to be proud and happy and celebrate the strong team members, whether they're hired above you, below you, beside you, and we need to work together to win. And that's the culture we have on our team. We understand that the stronger players that we have on our team, the more we're all gonna accomplish together. The weaker players we have on our team, let's say we hire, you know, some entry-level folks, the idea is the quicker we can get them up to speed, we want to make them stronger than we are. And so of course it doesn't always work, but the goal is is to, if anyone is underperforming, to strengthen them as much as possible so we have a stronger team. Why would we just want to eliminate them? Because you always eliminate the weakest link. You're just left with one person on the team eventually, and you can't operate. There's always going to be a weakest link. So, anyway, yeah, that's the mindset. And and definitely, yeah, we've learned these things. We certainly have made a ton of mistakes along the way and a lot of lessons learned, a lot of tuition paid. Um, but we've learned a lot over the past few years about building a team, who should be on it, what seats they should be in, how quickly you should make uh hiring and firing decisions. We've we've made all the mistakes uh and still will continue to make mistakes. But um I think the idea is we're willing to take some risks, but we're also willing to make quick decisions and take action when we need to to keep moving forward.
00:37:20 · Tony Cline
[00:37:20] S0: All right. I I I teased a little bit earlier about the profitability. So I want to come back to that. Uh and then um I want to talk to people about what you're been what you've been doing as you've removed yourself more and more from the day-to-day. But take us back to when you said, I need to grow. We don't have the money to grow, I need to add some more people to the team. I need to change my compensation model. And I work with a lot of people, a lot of companies where we go through this process. And so I want you, as somebody who has not been through our program, to talk about what you did and how you decided what your fees should be. We don't need to talk specifics and numbers, but a lot of people are so afraid that I can't change what I'm charging because nobody in my market is charging that. I can't implement this fee or add this service because my competition doesn't do that. And they get so locked into standing on the edge of the pool wanting to jump in, but they're too afraid to jump in. So walk us through that. What did you do? What was it like? How did you just finally make the decision? And then what was that outcome? You can't add fees if there's no value behind them.
00:38:33 · Stephen Glover
[00:38:33] S1: So if you're scared to add a fee, you either should be because there's no value behind it, or you don't know how to, you're not focused on selling the value of the fee. So, like if you should be okay rolling out fees because you believe in the value that stands behind them. If you're just rolling out fees to make a profit, then yeah, it's gonna be terrible because you're not gonna be able to justify any of them, or you're not gonna know how to justify them. You're gonna say, oh, these other companies are doing it. You need to figure out why these other companies are doing it. What value does that provide to the tenant, to the client, et cetera, et cetera? If you can find the value, you can roll out as many fees as you want. As long as there's value behind it, people are willing to pay it. And so you shouldn't be ashamed to roll out fees. And so again, this is stuff I've learned over the years. I did not think like this a number of years ago, but for me, it really came from a place of not desperation, because like I was paying myself a very low salary, we were paying the bills, but like the company literally uh was making like a couple thousand dollars a year, like net. Um, and so out of out of all the revenue we were making and growth, we weren't making any money quite quite literally. And so um, but I needed to figure out because it was now a company that I owned, that I owed people for, that I had majority equity in. I had employees, and and you know, we were gonna build this thing, and I didn't want to give up. So I need to figure out how to make it worth it by finding profit. I had um really leaned into the property management. Community. That's about the time I was already in NARPM, but I wasn't really taking advantage of NARPM members in the in the sense of like building relationships with them. Um, but I was already in NARPM, so I I was getting a feel for like who was out there in different states and different markets. And then I just reached out to them and just started having conversations and saying, you know, hey, I don't know anything. Uh, I'm new at this, like, I'm gonna sound ridiculous in everything that I say. Um, would you be willing to spend, you know, 30 minutes with me and let me ask you some questions? And they probably hung up and thought, this guy is never gonna make it, right?
00:40:42 · Stephen Glover
Like the probably the dumbest questions didn't make any sense, but they um they never gave me that impression. They were always, you know, uh the Adam Willis's and the Sean Johnson's and the you know, Matt Tringales and the and the the number of guys that I had uh reached out to for advice early on in those in those years were like, yeah, heck yeah, let's let's talk. And they gave me some great advice and kind of led me in the right direction. And and the and the the idea was I had a different mindset. My mindset was we were gonna win by now. I knew we were gonna be a really high quality company, um, like fat lightning fast responsiveness, great communication. We were gonna take ownership, prioritize relationships. We were gonna be different in that way. Now, I also knew that that meant that we needed to charge a premium to do that. And I was never the cheapest in our market on purpose because I thought that correlated exactly with our value. But what I didn't know, and I was a naive at the time, is I thought really it was only leasing fees, renewal fees, and management fees. And I thought I just need to have the highest management fee to establish my value, and then that would be okay. And so that's what I did. Everyone else would come back and say, hey, this other company's doing it for 8% or whatever percent, you know, this other company's doing it for this percent or that percent. And it would always be lower than mine. And I would say, no, I I understand the value we bring, I understand that that would be more attractive to you, but if you want us to manage your asset, this is our cost, you know, and then they would many times end up going with me, or maybe it wouldn't be a good fit and they just wanted a lesser cost. And so, anyway, I but that's what I thought would make me win is get more units at a higher management fee, and I eventually would see profit. And then 2020 taught me that 400% revenue growth still break even at the end. That's not the deal. And so early 2021 started connecting with people. I learned about RTMs, um, started hiring RTMs. I restructured the team, I restructured our fees, fee model, uh, which were pretty transparent about that, but uh restructured the fee model um largely off um the the fee max program that Tony puts out. Um we we took some of that and worked with that. We kind of modified some of it.
00:42:53 · Stephen Glover
We took some stuff that other people are doing and modified it, made it our own. We left plenty of fees out that I didn't feel comfortable justifying, uh, that had enough value that I could justify or felt comfortable justifying. Um, and then we implemented that. And within, again, I don't know exactly, but I'm gonna say within six months or so, it was a massive difference on our monthly uh income statement for for the um for the company. Um, and we eventually made a decision to roll it out um retroactively. I don't know if that's the right word, but basically to all current clients, uh, a modified version to start collecting to have a higher adoption rate of some of these fees, some of the more critical fees at least. It might have not been 100% uh fee rollout, but like a pretty heavy load. Um, in that rollout uh out of a good deal of clients, I think maybe we're again maybe around like 400-ish, 500 units at this point, uh very little multifamily. Um we had I think six clients that never signed the new PMA. One client terminated um just because she was probably gonna terminate anyway, uh, and she was gonna sell her house, but she terminated at during that conversation, I think, with like made it easy for her to terminate. The six that never responded, we just kept them on the same PMA. They stayed for years. We just didn't make fees off of them. And so our our company just changed, like it was it was fine. We were good. Um, and then that allowed us to hire more people, to become overstaffed, to uh hire higher levels of talent, um, get the right technology in place to take our company to the next level. And then we held our standards through the relationships we won under management uh even more because we were making a good profitability. We had the leverage in the and the conversations, we weren't desperate for doors. Uh I was able to hire a BDM and kind of get get out of the sales um and then sort of replace myself in the almost all property management activity outside of being the principal broker.
00:44:47 · Tony Cline
[00:44:47] S0: You you mentioned something, I want to circle back to it because I want to reinforce this point. But you said that if if you don't feel like there's value behind the fee, then you shouldn't be charging it. And I 100% agree with that. I tell people that and and there are people out there, you mentioned Todd, there's there's some others. Um as a matter of fact, Mark Cunningham and I back in 2015, we we put on an event where we went through and talked about just various fee structures and not telling people what to charge, but just going through the different models that that are out there. And you know, one of the things, even when I did that back then, I had not yet made the connection that it it shouldn't be about how much can you max. There are people out there that promote fee maxing and maximizing, you know, if you can squeeze a nickel out of somebody, you should squeeze a nickel out of them. You know, I don't believe in that. But what I do believe in is maximizing the value you deliver and then being appropriately compensated for that value. And one of the ways that we do this, that we coach people through, is you you I had a mentor 30 some years ago tell me one time, he says, stop giving people what they want. Find out what they want and sell it to them. And a lot of times our clients don't know all the stuff we do in the background. They don't know the things that we're doing for them to make their property rent for the highest amount possible or to to be able to continue to rent at market or to be able to put the right tenant in there that's going to be able to pay the rent. They just don't get everything that happens in the background and they shouldn't have to worry about that. But if we can slice off the things that we do, we can slap a label on it, and now it becomes a valuable service we can deliver. And if we can stand behind that service, then again, we should be appropriately compensated for that value that you deliver that the person or the company down the street is not promoting, that they're delivering that value.