Ben White on The 5 Channels of Property Management Growth
Back in the day, Ben practiced law with the folks in mergers and acquisitions and capital raising at the global law firm, Herbert Smith Freehills. From there, he joined the world-renowned Boston Consulting Group as a lead consultant before heading the property management division at Ray White, which manages over 200,000 rental properties across Australia.
Yes, two-hundred-thousand properties.
Ben has authored many books, hosts a large property management conference in Australia, but most importantly, Ben is a long-term thinker who’s trying to see the big picture and see where the puck is headed tomorrow.
In this interview, we’re going to drill into Ben’s concept of ‘The Five Channels of Growth’ for property managers that he wrote about in his most recent book, Numbers Game.
If you’re looking to grow your rent roll but are tired of a “spray and pray” approach to marketing, then this is the episode for you.
- (00:36) – Ben’s background leading up to today.
- (01:56) – His experience in property management.
- (02:11) – Discussing the Ray White network.
- (03:49) – Building the property management division at Ray White.
- (05:02) – Discussing whether or not there was resistance.
- (07:13) – The differences in temperament between sales agents and property managers.
- (08:07) – Property managers.
- Comfortable with following process.
- (08:31) – Sales agents.
- See rules as something to be broken to get a transaction to happen.
- (08:07) – Property managers.
- (09:56) – The shift in focus in Australia between running a business and ‘being’ in real estate.
- (01:56) – His experience in property management.
- (11:43) – 5 Channels of Growth.
- (11:48) – Ben explains the thought process that led to the development of the five channels.
- (14:06) – The three situations in which a landlord chooses a property manager.
- (14:21) – Purchasing an investment property.
- (14:30) – Looking to change property managers due to frustration.
- (14:39) – Self-managed landlords.
- (14:54) – Ben walks us through and explains each of the five channels.
- (19:37) – Discussing the merits of the five channels.
- (20:09) – Channel One: People buying an investment property.
- (22:02) – The percentage of property management companies with larger sales brokerages than property management divisions.
- (24:40) – Channel Two: People buying investment properties that aren’t buying through the sales side of your brokerage
- (24:52) – The challenges of channel two.
- (26:09) – The ‘art’ of channel two.
- (28:27) – Trust mechanisms and education.
- (31:04) – Ben’s one wish for change for the property management industry.
- (31:04) – To change the name to something better.
- (32:01) – Reimagining the industry.
- (34:21) – Discussing perspectives on outsourcing.
- (36:03) – Ben explains the term ‘Hygiene Factor’.
- (36:22) – Hygiene factors are things that must be present when a consumer chooses to use a particular product or service.
- (37:26) – Explaining the difference between a hygiene factor and a motivating factor.
- (37:26) – ‘Trust’ as the new hygiene factor.
- (20:09) – Channel One: People buying an investment property.
- (41:21) – Commercial Break
- (41:57) – Ben gives his perspective on why events like the PMGrowSummit are important for the industry.
- (45:21) – 5 Channels of Growth continued.
- (45:30) – Channels Three: Existing investors who have their properties managed by competing agency.
- (45:34) – How to reach investors in this channel.
- (45:46) – Contacting them directly.
- (46:14) – Monitoring websites and the portals to identify the investment properties in your area.
- (46:37) – Holding investor nights.
- (46:55) – ‘The long game’.
- (47:52) – Orienting the content on your website.
- (45:34) – How to reach investors in this channel.
- (49:21) – Channel Four – Self-managing landlords.
- (49:49) – The right communication approach to convert this channel.
- (50:39) – What the research shows about this particular segment.
- (50:46) – Two common experiences.
- (50:46) – Bought an investment property and realized the inherent challenges after.
- (50:46) – Had a bad experience with a property management company.
- (50:46) – Two common experiences.
- (54:40) – Data specifics of the Australian market.
- (55:01) – Properties per agency.
- (56:12) – Properties per owner.
- (57:38) – Channel Five: The Big Ideas.
- (58:02) – Examples of channel five opportunities.
- (58:12) – Opening a second branch.
- (58:34) – Working with property developers.
- (58:02) – Examples of channel five opportunities.
- (59:53) – Ben explains the concept of ‘The Long Game’.
- (1:03:07) – How much is too much to pay for a new property management contract?
- (1:04:42) – Who do you learn from?
- (1:06:10) – What lessons do you still carry with you from your time at Boston Consulting Group?
- (1:07:33) – Are entrepreneurs born or bred?
- Numbers Game: Ben’s most recent book, where he discusses ‘The Five Channels of Growth’. (11:43).
- Cozy: Property management software that caters to landlords. (33:24).
- Jeff Bezos: Entrepreneur and founder of Amazon who Ben has found inspiration from. (1:02:24).
Where to learn more:
If you want to learn more about Ben or reach out to him personally, head over to Apmasphere.com. There you can get a free version of his book, Numbers Game, or head to Amazon for a Kindle or print version.
If you’re interested to attend his conference in Australia, check out PMC2017.com for all the details.
Jordan: 0:00:00.0 Welcome closers, today we have another episode of The Profitable Property Management Podcast coming at you. I’m your host Jordan Muela, and every week I interview world class property management entrepreneurs, industry experts, who share actionable insights to help you grow your property management empire.
Whether you manage or 100 or 1000 doors, this broadcast is designed to help you see the big picture and give you the tools and tactics that you need to get to the next level.
0:00:36.8 Today, I’m talking with none other than Ben White. The man, the myth, the legend. And I want to get his resume out of the way right up front. So rolling back the tape. Back in the day, Ben practiced law with the folks on mergers and acquisitions and capital raising at the global law firm, Herbert Smith Freehills.
0:00:57.0 Moved on to become a lead consultant at the world renowned BCG, Boston Consultancy Group. I believe it was the fast moving goods division, I’ll have to ask him about that.
0:01:06.8 Then moved on to the head of the Ray White property management division, which currently manages over 200,000 rental properties across Australia. In between all of that, a couple of tech startups with successful exits.
Currently the CEO of Apmasphere, which is a reporting and communications platform for the property management industry, which is actually a lot cooler than I just made it sound.
0:01:27.9 He’s authored a bunch of books, he hosts large property management conference in Australia, but most importantly, Ben is a died in the wool, long term thinker, who’s trying to see the big picture and see where the puck is headed tomorrow, not just where it’s at today.
0:01:41.2 We’re going to talk about a lot of things, but specifically, we’re going to drill in on Ben’s concept of ‘The Five Channels of Growth’ that he wrote about in his most recent book. Welcome to the show Ben.
Ben: 0:01:50.7 Thanks Jordan, it’s great to be here. Thanks for that introduction, it was very generous.
Jordan: 0:01:56.6 Ben, I want to give our audience a little bit of a background in context. Why are we having this conversation? What’s your background specifically with property management. In that resume, I kind of glossed over really quickly over Ray White, but Ray White’s a pretty big deal in Australia. Give me your property management background.
Ben: 0:02:11.0 Yeah, so a bit of context for the Ray White network. It’s a franchised based agency model, and there’s about 1000 agencies across Australia, New Zealand and Indonesia. And it employs collectively about 10,000 people and each agency in Australia, it’s very common for a real estate agency to be both a sales agency and a property management company inside the same business.
And so, just for a sense of scale, Ray White does about fifty billion dollars of sales transactions a year, which is about 40 billion US. And it manages about just over 200,000 doors in terms of property management.
0:02:49.4 And so, it’s a family business. I fell into it really as a – by accident, in many ways. I was – had been living in America, I’d come back to Sidney, and I was in – actually using my brother’s office. 0:03:02.3 I was looking for a job, I was using my brother’s office and my father walked past and said, “Hey you really might be interested in this meeting.” And I went to it, and it was someone pitching an idea about the future of property management and how they were going to disrupt it and so on.
0:03:16.7 And I fell in love with the industry on that day. To be honest, at that stage, I didn’t really understand it, and I didn’t know it, but it was one of those – I hate to say love at first sight, because that makes me sound creepy, but that’s what happened.
And ever since then, at that stage, Ray White did not provide a property management service to its network. It was 100% sales focused and like a lot of the industry, sales was considered to be the kind of the center piece of the game.
0:03:49.8 And we then set about building a property management servicing – service offering, which included everything from a training program for the 4 odd thousand people involved in property management through systems, policies and procedures, growth support. We have a consulting team that we built that works with the network, and so on.
0:04:12.1 And so, that’s really – that took about – I thought that would take kind of six months to build, it took ten years for me to kind of complete that project and that’s – during that time, I must have been in 500 different companies, met thousands of people. We ran conferences, and you name it. It was a real thing.
0:04:31.3 And it got to a point a couple years ago, where that business was kind of – I felt that was really achieving what the ambition was, so it gave me a chance to step back and work on some other things that I’m really interested in in the industry.
Jordan: 0:04:46.7 So this is not an uncommon story. Successful sales franchise, has a couple of folks doing property management and kind of a back office, under the radar kind of capacity, eventually somebody picks up the scent, realizes there’s a bit of opportunity there.
0:05:02.8 But you guys – it appears to me that Ray White kind of led the charge per se, in recognizing the value of the property management division. That said, early on, did you get resistance and push back to trying to elevate the status of property management in the context of a traditional sales brokerage?
Ben: 0:05:22.2 I wouldn’t say it was push back. So, I was very lucky in that I had the right last name to get change to happen. I think there are people that have tried to do, that are probably more competent than I am, and smarter than I am, that have tried in other networks and haven’t succeeded. Just because you do need a lot of institutional support.
And it’s – sales is such a part of the culture, and one thing I have noticed, is that sales – people involved in the sales side often look at property management as being the boring side of the industry. And they look down on it. And so they don’t ever really appreciate or understand what it is.
And so, the biggest push back that I got through it was, “Hey, be careful. If you ask our property…” I’m sorry, “If you ask our business owners to focus on property management, they may stop focusing on sales.”
Almost this kind of zero sum game thing of, “Hey don’t rock the boat too much.” So there was a fair bit of that, and the other thing that we got was, focus on quality, and if we’re focused on quality in property management, doesn’t necessarily translate to a focus on quality of sales.
0:06:32.5 And so there was some agencies that we believed on our side of the fence that weren’t really living up to the expectations of what the brand stood for, but they’d may have been a very large sales business. And so we would have arguments around whether or not that agency should be moved on or not.
0:06:50.0 Typically, the sales side means those arguments for all sorts of reasons, because it was still in any business, the sales is still the cash flow – dominates the cash flow of the business. Doesn’t dominate the economics of it, but it dominates the cash flow. And so, there’s still a lot of – I think there’s still a long way to go before we’ve resolved all those issues as an industry.
Jordan: 0:07:13.2 How would you describe the temperament of the type of person that the sales side attracts versus the property management side and what would you attribute that to?
Ben: 0:07:23.0 That’s a great question. It’s occupied – that question has probably occupied more of my time in the last ten or fifteen years than anything.
0:07:31.2 The – a person who’s on the sales side of the organization is – I guess it’s one of those things, you know it when you see it. I’ve been in – if you go into a typical agency, I would bet almost any amount of money I could pick who the property managers are and who the sales people are in a second.
0:07:48.7 You can tell where they sit, you can tell how the office is organized, you can tell from the energy, you can tell by how the phones ring, where the paper sits on the desk. All of that stuff, I think is, it’s real and it’s a deeply cultural – a reflection of the cultural differences between the teams.
0:08:07.3 So, I think a property manager has to be much more willing to live within and accept a set of rules. Which is usually legislation. They have to be comfortable with following process. They have to be proactive in terms of following things up to be effective. And there’s a whole series of traits. And we actually – we’re actually working with a company on developing a test for that.
0:08:31.3 Sales people are usually much more – see rules as something to be broken to get a transaction to happen. And so, I’m trying not to say – I don’t think either is bad or good, they’re just different people. And if you ask a sales person to be too process oriented, and to be paint between the lines, in my experience, those people find that very challenging.
0:08:56.4 Whereas a property manager finds ambiguity to be quite stressful. And so – which is one of the reasons I think this industry suffers. Is when the industry is run by the sales side, you have a high- level of anxiety in the team, because they lack the structure or the process to get their way forward.
Jordan: 0:09:20.1 Got it. That makes sense and I can certainly say that applied to the property manager. In terms of principals though, for the principal, the owner, the broker, would you say the same type of thinking applies? And I’ll just cut to the chase. In my view, I think that the unit economics also have a significant impact. When you take X number of dollars and you have a one time immediate payout or you take that same amount of money and you stretch it out getting paid out over five years and you call it a recurring revenue model, that in and of itself I think is a huge driver in the temperament difference. Agree or disagree?
Ben: 0:09:56.8 Absolutely agree. I think – and certainly in Australia, the last 20 years, one of the biggest trends has been a shift of focus from a business owner being essentially a real estate agent first, who just happens to run a business, to being a business owner first who happens to be in real estate.
And that shift, yeah, that shift has been a real change and the ones that have succeeded, those people who are running fantastic businesses in real estate, whether sales or property management, would have been successful whether they ran any other business.
0:10:31.0 And so I think that’s been the defining difference. And the people that have made that shift are just fantastic entrepreneurs, fantastic business people who know how to build a team, get the culture, understand the economics, connect to their customers, and all those kinds of things. And that’s what excites me the most.
0:10:46.7 What actually surprised me the most in this industry is those people. Because they are – they have to fight a lot of legacy issues to get there. To succeed.
Jordan: 0:10:54.9 Very well said, I couldn’t agree more. I think we see the same trend states. In fact, I know we do. When we talk about the professionalization of the industry. The elevation of the industry, that really at its core requires understanding and having clarity about what it is and how it works.
You have done the folks in your industry across the pond a great service with the books that you have put out in an attempt to do just that, to really formally define the different characteristics and kind of moving parts of the business.
In the most recent book that you released, you go into the concept of ‘The Five Channels of Growth’. This season, we’re focused on talking about marketing, and so I want to kind of dive in here and understand what exactly you think the opportunity is in each one of those channels. 0:11:43.5 So, can you just walk us through the five channels of growth that you describe in your book, Numbers Game. 0:11:48.0
Ben: 0:11:48.0 Yeah sure. So it started off with many years of having conversations with business owners about growth and their growth strategies. And what I have found regularly, was sitting down with people and essentially they – the questions someone would ask me is, “Look, I’ve got 300 doors, I’ve been operating for 20 years. I’ve got to 300, I want to retire in five years, and I want to have 1000 doors in five years. So, it’s taken me 20 years to get to 300, I want to get to 1000 in the next two or three, what can you do to help me?”
And it was this kind of, essentially just a declaration of an 0:12:23.8 [Inaudible] goal and somehow magic was going to happen to just make it achieve these things.
0:12:30.3 And the other thing that would happen, is those – and other agencies would hear about an agency in their marketplace that may have been growing at an astronomical rate, and they’d just wouldn’t understand it. To them it was a really alien concept of, “How are people growing 30 doors a month, 50 doors a month, what are they doing?”
And so it was – this whole growth thing was shrouded in almost myth. 0:12:54.9 And people not really having any understanding of how to grow it.
0:12:59.1 So we sat down and said, “There had to be an answer for this.” And ‘The Five Channels of Growth’ started with the idea of how do you actually, objectively work out how big an opportunity a property management company has to grow. That was problem number one. 0:13:11.9 What’s the — essentially the potential.
0:13:15.4 And then, if you understood that, how do you develop strategies to go after that potential. So that’s essentially – the book’s in two parts.
0:13:23.3 The first one was really working out – in terms of working out the size, we looked – if you look at the industry, I think one of the most interesting things about our industry is that every customer you have today, or every customer you’re ever going to have, is essentially knowable today.
0:13:40.1 Because in real estate, there is a physical reality to our marketplace. If you’re going to have an investor or a landlord work with your property management company, essentially, that property is going to be within a certain radius of your agency.
0:13:53.0 Now, different agencies would draw that line in different places, but essentially, you can’t be living in New York and managing a property in Los Angeles. It’s – I’m sure someone’s tried it, but it’s kind of outside the realms, in my opinion, of possibility.
0:14:06.2 So, if you actually look at the area, you can work out, “Well, I actually can know everybody in this area, and I can track everybody in it.” And if you go through all the research, which we’ve done, which is in the book, essentially, landlords choose a property manager in three situations.
0:14:21.7 The first one is they’re buying an investment property. That’s the dominant way people choose a property manager, is at the time of acquisition of their investment property.
0:14:30.6 The second one is, they have a property manager, and they’re frustrated to the point of they really feel like they have to change. They have to be quite upset to change.
0:14:39.4 And the third one, a self-managed landlords that managing their own properties and realize, “This is too hard, I should get a professional.”
And essentially, those are the three groups of people, and if you look through it, we defined each of those as a channel. 0:14:54.5 Now, people who are buying investment properties can either buy through your own, if you have a sales agency, buy through your own sales agency, or an affiliated agency of yours if you have a relationship with a sales agency or brokerage. 0:15:07.2 That is channel one.
0:15:10.7 If those people are buying through an – buying an investment property and happen to transact through another brokerage, that’s called channel two.
0:15:17.2 Channel three, landlords who are with an existing agency and switch.
0:15:21.6 [Edit] And channel four, agencies – oh sorry, owner/landlords that — self managing and choose to use a property manager.
0:15:29.8 And the last fifth channel is what we call the big ideas, which we’ll cover later.
But that’s essentially what the five channels of growth are. Is really trying to help you understand as an agency or as a property management company, that you can actually know all of these people.
0:15:45.9 It is possible to know who in your marketplace is in the process of buying an investment property. It is possible to know all the landlords in your marketplace. The data exists because there’s a physical reality to it. So that – at the heart of this is to work out how big each of those pools are and that essentially sets a constraint to how big it can be. 0:16:08.3 [Edit out – talk over].
Jordan: So this is really, really interesting. I think when somebody hears “five channels of growth”, they’re expecting you to list off like, SEO, pay-per-click, right? A simplified mindset would just be, “Oh you’re just going to list off a bunch of like lead sources and places to get new leads.”
16:31 But you’re orientation here is around what you just said. The definable group of bodies that exist in a given market. That there’s no ambiguity about. Right? They exist, they’re there, those are the basic buckets.
Ben: 0:16:39.1 That’s right. And it frees up people from thinking too strongly about, “Is it, do I need to buy Facebook ads or Google ads to target people?”
Because if you start looking at – for example, if you’re looking at channels three and four, which are landlords in your marketplace that are either with an agency and may look to switch, or are self managing. 0:16:58.6 Now if you want to target those people, there’s lots of ways to target them other than buying search terms.
You could for example, put on an investor night in your community and market the fact that, “Hey, we’re just going to put on a free night to talk about investing in property and the state of the market in this area.” There’s a lot of agencies we work with that do that. They do put more thought in it than just that sound bite. But real estate investors want to talk about real estate.
0:17:26.5 In Australia, we have the term, “It’s a BBQ 0:17:28.2 [Inaudible]” and you’re sitting around at a bbq with your friends, the things that everyone wants to talk about is real estate. And they want to know, is the market up, market down, and if you have an investment property, that’s a big part of your wealth.
0:17:40.7 And if you’re actually trying to develop relationships with people in your marketplace who are landlords, there’s no better way than actually trying to form a view through education.
If you can place yourself at the heart of that dynamic of we’re the educator, we’re the knowledgeable people, we have – we can help you understand the movement in the market. Is it a good time to sell or buy or renovate, what’s the latest happening with mortgages, or tax issues, or any other issue that comes up. Could be local municipality changes in terms of laws and so on.
0:18:11.8 And they’re the kind of things, if you free yourself up from too narrow a focus on those channels like Facebook or Google, or and so on as you described, I think that’s the art of growth in real estate.
Because unlike most industries, to go back to my earlier point, unlike most industries, it’s not this amorphous mass of people that we don’t know who they are, we need to buy random kind of AdWords on Google. It’s actually, “We know who they are. They’re knowable, and we just have to actually meet them.”
0:18:44.0 And that’s essentially the argument we make in ‘Five Channels of Growth’ is that. And, I’m all for Google, I’m all for Facebook, I think those – it forms a place, but I think that comes after you understand what the strategy is.
0:18:54.6 And so, if you understand you’re going after channel three landlords, which is landlords switching from one agency to another, if you interview those landlords, the biggest concern they have is, “What do I need to do to change agencies? Is it going to be a hassle? What’s going to happen with my tenants? Are they going to have problems paying rent?”
And if you were to target channel three, you would be orienting your website and your content and have sections on the website for how to change property managers and why it’s not so hard. Here’s how to make the shift.
0:19:22.3 In Australia, you kind of get it down to, “Sign this one sheet of paper and we’ll do all the work for you.” It’s not hard to change. And so you can actually orient your entire marketing strategy, in our view, around a channel. Including search purchasing and so on.
Jordan: 0:19:37.6 Let’s talk about the different merits of each one of these channels. Any time you talk about segmentation, the follow up question is, “Well which one’s best? Which one do I do first?”
Let’s talk about the relative merits and the characteristics of a property management business that would cause them to have a disposition towards one channel or the other. I assume to some degree, that would relate to maybe the stage of the business, budget, etc. Walk me through that process and how somebody would narrow down on one channel.
Ben: 0:20:09.6 So the thing – the first channel is the easiest. Certainly in an Australian context, because most property management companies have a related sales business. And so, what happens is, inside the same four walls of that property management company, they have sales people selling properties to property investors. And if you get the process right, you should be – have a natural flow of those buyers getting referred internally to your property management company.
0:20:36.3 So that is a process that is the simplest, should be the cheapest, and essentially the thing that drives that is how big your sales team is. If you have a very large sales team, then those number of leads will be bigger, if you have a small, it will be smaller. 0:20:51.3 That’s kind of just the laws of physics. Every agency should be doing that no matter what.
And one thing I’ve found, is if you work with a business, a lot of agencies stop after that discussion. Because they say, “Well of course we get all those leads.”
And then you sit and play with the data and you look at, “Well looks at your sales side, let’s look at how many properties you sold last year, let’s work out whether they were sold to investors,” which is very easily solved by a Google search. You take all the properties and Google it, and if you find out that they’ve been rented in the last – since you sold it, you can – if they’re a rental property, and then you can start working out, well what happened?
0:21:27.0 And it’s amazing how low that referral rate is. And it’s – so many things in this industry are built on a myth of things just working because they should work, but if you get into the data, that doesn’t happen.
And so, that’s a deeply cultural problem in agencies and property management companies and sales companies, and brokerages and how they work together. 0:21:49.3 And that’s a whole – that to me is one of my little bug bears is around how to get that to work. Because that’s money sitting on the floor that you should be picking up. 0:21:59.8 [Edit out] Now, yeah, go ahead 0:22:00.5
Jordan: 0:22:02.1 Well, I just want to make sure I have context here, Ben. If we take 100 property management companies in the Australian market, what percentage of those companies have a larger brokerage where the brokerage side is – the sales side is dominant? As opposed to the property management side being dominant.
Ben: 0:22:20.8 It would be probably 80% where if you ask the people, “Why did you start this business?” They would say, “I started this business because I wanted to build my own sales brokerage business.” That’s what the business owner would say.
They inevitably going to get to a point and that is – you can almost plot it on a timeline – they all get to a point where they call me or someone like me and say, “I just met my accountant, I’ve been running this business for ten years and I’m just going through, reviewing all my numbers, and my insurance and my will and my life insurance and so on.”
And they have this kind of point in their life, and their accountant tells them, “Did you know that your sales business is worth x, and your property management company is worth 10x.” And that’s the moment this lightbulb goes off where they realize that this is important. And it usually just happens by time.
0:23:14.9 And so, although most agencies, essentially have started off – they start as a sales business but they become a property management business over time. It’s just kind of a natural progression as people wake up to that. I think what you see here in Australia now, is more people are starting property management companies as property management companies, because they know that. They’ve learnt that. The numbers are pretty obvious how it works.
0:23:36.2 I think people are shifting, and they – that’s a kind of ground swell change that is going to impact our industry and I think in pretty significant ways.
Jordan: 0:23:49.2 I can certainly see why. It makes sense to me. That said, in terms of the status quo, I think that there may be a little bit of an inverse dynamic in our market. Where if you take 100 property management companies, there’s going to be far more that are absolutely property management first and they have a brokerage on the side.
And they capture those sales, but they do so inefficiently. Which makes them incredibly vulnerable when there is a turn in the market.
0:24:15.3 So when the real estate market is strong, and there’s a sell-off, they’re losing a massive opportunity by not efficiently capturing those sales. 0:24:24.0 So same problem, but potentially an inverse area.
Ben: 0:24:28.5 Yeah, and I think that the sales side of the industry, whether you’re on the buyer side of the seller side, I think that’s – the benefit of that to property management is that you meet more people. And so that leads into the second channel.
0:24:40.9 And the second channel is people who are buying investment properties that you haven’t – that aren’t buying through your – the sales side of your brokerage. 0:24:48.5 So, if you don’t have one, by definition that’s every buyer is a channel two.
24:52 And the challenge is how do you find those people and how do you plug into them. And I think that’s the beauty of having a – some form of activity that’s involved in that sales cycle. Where you can form relationships with buyers before they buy.
And there’s a lot of agencies that we work with that are going after that second channel. Buyers of properties through other brokerages. Where they actually advertise, for example, and this can be done even if you don’t have a sales business. Simply advertising a free rental appraisal or rental estimate for anyone – for any property that someone might be looking at.
0:25:30.2 So, if you have 100 people in your area, today, looking for an investment property, you should be targeting them, in our mind – targeting those people with services. And say, “Look we have a free service, we’ll go to the property with you, we’ll give you a rental estimate, or we’ll have a – some form of activity that we can actually help you buy that property.”
There’s agencies here that are increasingly doing mortgage brokering, because they see that as a way in. They form relationships with financial advisors and so anything you can do to broaden your ability to talk to people who are buying an investment property.
0:26:09.0 During that period when they’re buying, which might be three to six month window – anything you can do to be relevant to a buyer during that time, is the kind of art of channel two.
And the wonderful thing is, that very few people offer that service, and so it’s not that you have to be particularly sophisticated, it’s the fact that — actually, I think channel two is basically showing up. Is the art to this.
And so, if you have the ability to play a slightly longer game, and as we get into the five channels, each part of the channel is a longer game you have to play and you have to be more patient.
0:26:47.4 But if you’re prepared to offer value to buyers of investment properties before they buy, the conversion rate on those numbers we’re seeing, is around 70%. If you actually go and do a rental estimate on behalf of a person, or if you have some form of interaction and provide value before they buy and help them make that decision to buy, you’re in the box seat, because you’ve already earned that trust.
Jordan: 0:27:11.3 Massive opportunities. So you’re saying it’s about showing up, but I’d also argue it’s about having the right mindset to not view it as a cost center.
And as warped as that can be, there are a lot of good ideas. A lot of forms of value creation that folks tend to orient towards being a cost center. And I think this falls into that category.
0:27:28.9 As you mentioned the overall disposition, I’m thinking about guys like Jared Mahone in Perth Investors 0:27:32, and folks that are really proactive with education. Folks that are really proactive about creating value on that kind of soft intangible level.
You put a number on it, right? 70%. When you put numbers on these things, it’s easier to wrap your hands around, but when you back away from a big picture perspective, you’re really just talking about value long before you’re actually going to get that cheque.
Ben: 0:28:02.4 I think that’s right. I think that’s — the beautiful thing about real estate is that, A you know everybody, and secondly, it’s a complex area that we should know more about than anyone else.
0:28:14.8 And it’s a topical area, it’s a very important part of a financial profile for any property investor and the idea – I just reject the idea that property investors don’t want to know more about property investing.
Ben: 0:28:27.3 I don’t understand how the argument can run against it. I take your point. I think it’s a great one that it’s a much a cultural shift of, “Is this a cost or part of our revenue side of the business” and I naturally fall on the revenue side, and I think that’s a really interesting way of putting it.
I hadn’t thought of it that way before, but I think that explains a lot of this idea of why are we wasting our time putting on an investor night. And why are we wasting out time with – in Australia we call them ‘tire kickers’, I’m not sure if that’s a phrase you have, but people who just kind of checking – they’re going to get us to do a free rental estimate and they never call us back.
And in my experience, sure, there are a few people that that happens to, but it’s not the norm because it leads into a broader topic that underpins a lot of our thinking, is that the biggest problem investors have when you interview them, is that they don’t know how to choose a property manager.
0:29:24.4 They don’t understand the industry, there’s a real lemons market, which is an economic theory, but there’s a real problem with trust, there’s a real problem with we all look the same, and they don’t know how to choose people.
29:48 And if you can change that by education, or by offering value before the transaction, anything that does that is a trust mechanism that will change the dynamics of a growth strategy.
Jordan: 0:29:53.0 Absolutely. Owners do not typically have clear buying criteria, and when that is the case, there’s a massive opportunity for creating a rational buying preference. Right? So just that bias towards the person that you know, that you have a relationship with.
What you mentioned earlier, this concept of catering to prospective investors, folks that are thinking about buying. Or even existing clients that would be open to buying more. In my mind, this is the low hanging opportunity for positioning.
0:30:29.8 As a business owner, you must have perspective. If you don’t have a perspective, you are fundamentally a commodity. You’re fundamentally a cashier. You’re just taking money and rendering services.
And that perspective, it could be something wonky, something out there, but really, it should largely relate to the primary needs and wants of your desires and wealth creation through real estate is the story that so often simply is not being told. And in its place, is a basic bullet point list of services that, as you mentioned, don’t tend to mean a lot to consumers.
Ben: 0:31:04.4 If I had one wish for this industry, and had a magic wand, I would change the name from property management to something better.
Because this idea that our job is to manage the property, which essentially means to fix things when they break, to inspect it occasionally and so on, is really not the job anymore. It may have – it was the job a generation ago – if you talk to people that were doing it in – certainly in Australia 30 years ago, it was a different industry. It’s unrecognizable.
And now, the future has to be more around offering investment advice and investment value. 0:31:39.5 Because someone is always going to be able to collect rent cheaper than you and you’re essentially competing with PayPal on that. Someone is going to find – if you think your job is just find a plumber if the hot water system is leaking. If that’s the job, then that will be done by someone cheaper. By essentially by Google and all the other services that do that.
0:32:01.4 If you don’t – and I think the central challenge we’ve got as an industry, is how do we reorient our focus away from those kind of core jobs that we thought were the business, and reimagine our industry as something that is much value adding and playing into those things you describe.
0:32:17.0 And I think that’s the – that’s a generational change. It’s a very deep cultural one. And it’s hard for business owners to do that, because they may not know the path forward. It’s hard for property managers to embrace that because sometimes a business owner isn’t on the same page.
And I think we’re at this kind of inflection point now where the winners are seeing their business as something bigger and even things like outsourcing, and I know you’ve had some people on, some businesses on one of your earlier podcasts, it was really interesting how they used, how they’re breaking apart the value chain and focusing, “Look this is work that I don’t need to do, I can outsource it to someone else.”
That I think is really interesting – really interesting path for our industry. And if we don’t do that or find that, or if we don’t have the confidence to do that, I worry for those people that don’t embrace that.
Jordan: 0:33:09.1 I completely agree. And the way that I think about it is that I observe a certain level of cognitive dissonance in the mind of some of our clients in the industry in that specifically this – on the one hand there is this strong interest in outsourcing, cutting costs, streamlining operations, and yet at the same time, there is this really strong guttural belief that, of course, a company like Cozy 0:33:24, or one of the many self serve platforms that caters directly to landlords.
Of course, that’s going to be a laughable, inferior product and ultimate experience for the end user. But both of these strategies and approaches are getting at the same thing. And what absolutely is a huge, bright dividing line is trust. No matter what good or service you are talking about, trust will always be the differentiator that is a human to human factor. And while software will achieve a lot of economies of scale and be doing amazing things on an increasing level, it can never replace trust if it exists. 0:34:17.4 If you have cultivated it, if you have nurtured it.
Ben: 0:34:21.5 Yeah, absolutely. I think if you should – you should bottle that and that’s the industry. I think that’s the – that’s the challenge we’re going to have as an industry. People who that look at someone like Cozy and dismiss it, I think are deluded.
Because – and people who think of outsourcing as a way just to make life easier for me, is also deluded. I think you outsource to free yourself up to do the value added things.
0:34:47.2 And so, if you outsource you can’t say, “I’ve got the best business in the world, I’ve outsourced everyone, I have no staff.” I think you outsource the stuff that is not your core business anymore. And what used to be your core business is now not the core business.
0:34:59.3 Like any industry, it’s changed, and I think that’s the really hard part, is letting go of this idea that our core business was collecting rent and the – you’ve got to assume that’s now kind of our basically a hygiene factor, you’ve just got to assume you can do that efficiently and you’ve got to drive your costs down to enable you to employ the staff and the team and build the culture and build the relationships and play the long game to build that trust.
0:35:24.1 And you can do that – you don’t do that by being the cheapest, you do that by adding the most value and I still – I’m an optimist that there’s – because I’ve seen it. I know agencies do it well, but I don’t think unfortunately everyone’s going to make it through this transition.
And I think that’s going to be a – there will be a shake out where I think it will shift towards larger – agencies that get it will either go more niche or get very big, and I think if you’re sitting in that kind of middle ground, it’ll get very difficult to run a trust-based, value creation business at a cost that makes – that can be done. 0:36:03.6 That can be done profitably.
Jordan: 0:36:03.9 That’s an interesting bet. I would love to take off on that bet from my listeners. I hear what you’re saying and I have the same suspicions. We will see where things are born out over time. A second ago you used the term ‘hygiene factor’, can you just describe what you mean, because that’s another concept from the book that I found really helpful.
Ben: 0:36:22.7 Yeah, so essentially the idea is there’s – things that are hygiene factors are motivating factors. Hygiene factors are things that when a consumer chooses to use a particular product or service, a hygiene factor is something that must be there and it’s essentially binary. It’s either there or it’s not.
And if it’s not there, nothing else – no amount of price reduction or any marketing exercise is going to satisfy you. 0:36:49.0 And arguably, if you’re making an example of the top of my feet – but if you’re flying with an airline, I would argue that hygiene factor is that you’re going to get there safely.
0:37:00.3 If you had an airline that kind of crashed once every, even a thousand times, I would have thought that would probably be a bad outcome for that airline.
0:37:10.3 So that’s essentially a hygiene factor, and in property management, historically, I think if you – hygiene factor now is a certain amount of things get done, like collecting rent on time, risk management, managing the tenant appropriately, following the law and so on, are basically hygiene factors.
0:37:26.3 A motivating factor is something that propels a consumer to pay more or really value the service more in proportion to how many things are there. So, with a hygiene factor, you’re either safe or not safe. Whether you’re a one in ten million chance of dying or one in a hundred million chance of dying in a plane, it’s probably irrelevant.
0:37:47.4 But when it comes to motivating factors, the more the better. And so, that’s really where you’ve got to separate your business into two things.
0:37:53.7 Get the hygiene factors done, make sure you’re measuring those and are very clear what they are and that you’re achieving them, and ideally, get the process in place.
0:38:01.8 If you can outsource them and get someone to run them well, that’s fantastic. It’s the motivators you’ve really got to make your core business.
0:38:08.4 And the motivators is where you’ve got to focus your time and really create your point of difference – has to be around a motivating factor.
Jordan: 0:38:18.3 The takeaway for me here is that there is an invisible line. An invisible quality bar threshold. That’s the hygiene factor, and many folks operate in terms of level of self-promotion, or brand equity or positioning, etc in areas that are fundamentally below that hygiene bar. I would call this ‘We’re #1 Syndrome’, is what I would call this. That’s the meaningful takeaway to me.
Ben: 0:38:46.3 Well, the challenge is that if you do – and the research is in the book for anyone that can read it – but one of the things that’s most striking to me is about one in three investor landlords do not trust us as a collectively. They don’t trust us as an industry.
And so they may trust an individual property manager, but they don’t trust us all as a collective. And so, the challenge we’ve got, is by simply saying, “I’m #1”, no one believes you.
0:39:12.8 And unless you’re prepared to accept that, that – people just think we’re lying if you were to say that. Or so what. You’ve actually got to dig below that. You can’t say, “We’re #1” you actually have to build trust.
And I think trust is — the new hygiene factor now is trust. Unless you can be trusted, and you can find a way to build that and build trust mechanisms in place which – and there’s lots of ways to do that, which we talk about.
0:39:38.9 But unless you can build a trust mechanism, I think you will fail as a business going forward in a service economy. That’s the – I think that’s now hygiene. I think in the old days, maybe that – may arguably a motivator. And I think the thing now that is becoming much more of a motivator is transparency.
Things like doing what you say you’re going to do and finding ways to do it. 0:40:01.9 That’s a big bug bear in the research. Be – find ways to translate your experience into value.
And if you’ve been in the industry for awhile, you have enough experience, you should be able to leverage that experience into some form of content – content creation.
0:40:17.1 Whether it’s an event or a blog or a newsletter, or whatever it is, but finding ways to translate your experience, and be perceived as someone knowledgeable, I think that’s where the motivating factors know lie.
0:40:32.0 And just simply resorting to we’re the biggest or anything, the research shows that no one believes it. It feels good to say it, and I’ve kind of done that and everyone does it, but it’s not meaningful to our consumers. In my experience.
Jordan: 0:40:46.7 [Edit out] That’s a really important point. Before we go on, I want to mention our show sponsor. The PMGrow Summit, which is happening at the end of January in 2018. If you consider yourself a growth minded property management entrepreneur, if you’re interested in levelling up your sales and marketing game, if you want to go pro and network with other best in class entrepreneurs, emphasis on the ‘e’, and stay on the cutting edge, you need to be at the PMGrowSummit.
Ben: 0:41:13.9 [Edit] Jordan, can you hear me? Hello.
Jordan: Oh, hey thanks, we’re kicking it off again. 0:41:20.6 [Edit out]
0:41:21 Before we go on, I want to mention our show summit, the PMGrowSummit, which is happening at the end of January in 2018. If you consider yourself a growth minded property management entrepreneur, if you’re interested in levelling up your sales and marketing game, if you want to go pro and network with other best in class entrepreneurs, you need to be at the PMGrowSummit. We truly bring in the best of the best, and you can get your ticket now by going to PMGrowSummit.com. You can use the coupon code Jordan. That’s JORDAN to get $100 off your ticket.
0:41:57.4 Ben, I know that you host an annual event, you have a lot of experience with professional education, why is this such a big deal for you? Because honestly, you’re in the situation that I’m in. Spend a lot of money to put on a conference and the conference itself is not a money maker. But it’s a huge expression of our values and belief in education.
0:42:16.8 So from your perspective, why is it worthwhile for people to show up for this sort of thing?
Ben: 0:42:22.0 That’s a great question. It is a lot of hard work. And I just want to say, your conference was a standout last – early this year, and I look forward to being there for next time. And it’s commendable to you and Alex and what you’ve done.
In terms of, why do a conference? I don’t think this industry is going to change unless we change the mindset of the people in it. And you have to really do two things. You have to change the mindset and you also have to give people the tools and resources to enable them to make change easier than it would otherwise be.
0:42:58.0 And I really see my mission is to helping change – presenting a vision for our industry and helping people see it, and believe in it. That’s kind of part A. 0:43:05.7 Part B is you’ve got to have the tools and resources to actually help them change. There’s no point getting up and saying, “Hey, here’s the future, and you should change and so on” if you don’t help them do it. Otherwise, it’s just, you’re just – it’s just talk.
0:43:20.4 And there’s no point trying to go and build a product or set of solutions where you in kind of in secret build a solution but absent a vision.
And I think this industry is going to change when people like you can connect to people, your listeners, and people that work with you, and then work with the tools that are available to actually make that happen. I think that’s what change needs in this industry.
0:43:42.3 I don’t think it’s just motivation, I think there’s plenty of people in our industry that are great speakers, and they motivate you, but if you measured on a chart, the motivation of someone when they leave the average conference, they kind of get this like a sugar hit.
0:43:55.8 They leave at 5:00 on the last day, they’re all excited, they go home and they talk about how amazing it was, then they get back to their office the next day and they’ve got phone calls to return, and emails to return, and all the energy saps away within a day or two.
0:44:09.2 And I think that’s – we used to do that, I must – to be fair. And there was deeply unsatisfying when you call people up a week later and you talk about some ideas and they’d already forgotten them.
And so, I think that’s the art of a great conference, is trying to merge those two ideas together. The ideas and the resources, so that you change people’s mindsets, and you give them the tools to implement.
0:44:29.1 And that’s what motivates me, that’s what really gets me going. And I think that’s the heart of how this industry is going to move forward.
Jordan: 0:44:39.6 Spoken like a true visionary. For me, the ability to create a framework – you can call it the handles on the luggage, right? You have this concept, this idea, but it’s like this big misshapen monstrosity.
In practical terms, it’s hard to carry from one place to another. But when you put the handles on the luggage, when you make it easy to move this idea into action, that’s where – that’s really the hygiene factor for me of conferences. Right?
0:45:06.5 I mean, that really should be the bar of a good experience, is the point where ideas are actually put in action. All that to say, we’re excited to do it again this coming year in January 2018.
0:45:21.7 I want to keep moving here, because I want to get through all five. We went through the first two of the five channels of growth. 0:45:30 The third is existing investors who have their properties managed by competing agency. 0:45:33.0 Ben, how do you get at these folks?
Ben: 0:45:34.7 Well, if you’ve been doing the process well, you already know who they are, because you met them when they bought. That’s kind of problem number one. And so, agencies have been putting this in place for awhile.
0:45:46.7 So, for example, if you lose – if you go head to head to win a management, and you don’t win, you lose to a competitor agency, one thing you can start doing is, one year in, you just simply shoot them an email, or ring them up and say essentially, “How’s it going? If you’ve got any frustrations, how you can switch.”
That’s kind of – there’s more, there’s a whole body of stuff around that, I didn’t do that justice, but there is a lot you can do.
0:46:14.3 If you don’t – if you haven’t done that, you don’t know who they are, you should be monitoring all the websites and the portals to work out where the investment properties in your area.
You should have a database of every single rental property in your area that you think and who it’s managed by. Whether it’s self-managed or managed by a competing agent. 0:46:32.1 Once you have that database, matching that to the individuals all becomes relatively straight forward.
0:46:37.1 And so, your ability to actually connect to those people, either through databases or alternatively, you put on investor nights, you become a source of knowledge. You provide content to those people over a period of time. The more you can do that, the more you will find people switching to you.
0:46:55.1 And so, it’s a longer game, every sixth month you’d be putting on an investor night and be publishing down in the local media and getting people along to it. You would be forming relationships with other people who also know landlords, like financial planners, mortgage brokers, and so on, and forming relationships through those to contact them.
0:47:14.5 And so, it’s a longer game, but it’s real. And in fact, given the fact that most people buy an investment property in Australia once every seven years, it turns out that channels three and four is seven times bigger than channels one and two combined.
Because you have this large mass of people that already own their property, they’re kind of sitting there, and odds are, because all the research shows it, odds are, those people are dissatisfied with their status quo.
0:47:42.0 They’ve either got an agent and they’re not happy with it, or they are self-managing and realizing this ain’t what it looked like when I went into this. 0:47:48.8 And you’ve just got to find those people and be there, and provide time.
0:47:52.8 And it’s orienting your content on your website, it’s orienting how you buy Adwords, and Facebook, and Google, and get the right search terms. And if they search for ‘how to change property managers’ make sure that you’re – the ad you bought for that is tagged to send them to your page on your website that is oriented at the landing page for that search term is oriented for those channel three landlords and so on.
0:48:16.2 And it’s just really thinking it through. It’s really just a marketing challenge to think it through and work it through. All the tools are available. It’s not cutting edge, it’s just having – realizing this is a marketing challenge and if you don’t know how to do any of those things, you should know how to do them.
0:48:30.3 And that’s essentially how that process works. And the only downside is that it’s a longer game, but it does work, and it’s bigger than the other ones.
Jordan: 0:48:40.5 So I keep hearing this phrase, “It’s a longer game.” And related to the fact that it’s a longer game, it’s actually a bigger opportunity. That’s a pretty intuitive concept, right? This is like the idea – you could be the rent growth or you can build a channel that you actually own. The latter is better, but it’s harder. I think that makes sense to most folks.
Ben: 0:48:58.6 Yeah, and the good news is, is that no one is doing it. In my experience, if you would – if an agency would do it, or a property management company would do it, the odds are that it’s probably the only one doing it in that particular area.
0:49:09.9 So, if you’re going to want to own the search term, how to choose – how to change property managers, or something like that, then I think there’s a pretty good chance of you being able to do that.
Jordan: 0:49:21.6 Absolutely. The higher up on the food chain you go, the lonely it gets. I think that’s inevitable in any industry. Moving on to the fourth channel. Existing investors who manage their own properties. Now we’re really on a parabolic curve in terms of market opportunity size. 0:49:39.1 And now it’s really just exploded.
So, of course, we would all love to have the self-managing landlords come beating down our doors. 0:49:49.5 Two questions. The first question is, how do we get access to these folks, which you’ve touched on that, but from a persuasion factor. Going back – or conversion factor. Going back to hygiene versus motivators. What do you think is the right tenor and pitch for that specific segment?
Ben: 0:50:05.5 One thing you can usually bet on, is that the self-managed investor is finding it frustrating. Now of course, if they’re happy and doing it well, then we’re not in the consideration set, but one of the things that I used to believe was that self-managed landlords were different people from agency managed landlords. I used to think they were different people.
In fact, when we did our first round of research, we actually excluded people who said they managed their own property, because we thought they were just a different foreign group of people and they’ll never use a brokerage or an agency.
And it turns out that was completely flawed. 0:50:39.1 We’ve subsequently done all the research – people who manage their own property do it for awhile. They’re not genetically different from someone who chooses to use an agency.
0:50:46.1 They’ve either had one of two things. They either don’t understand what they did – they bought an investment property and thought it would be easy. That’s essentially a whole group of people. Or, they had a really bad experience with a property manager, and their view is, “I’m never going back to those people.”
0:51:03.2 And in fact, I equate the self-managed landlord to everyone’s had a friend who kind of has a bad dating experience and they have dinner with them and they say, “You know what, I’m never dating again, this whole thing, I’m done, I’m finished. I’m never going to do it ever again” and they essentially – that’s my mental model for a self-managed landlord.
0:51:23.7 The thing is, you come into that friend six months later and they’re married. And they’re happy and so on. And it’s a point in time where they’re frustrated with the industry. They think they can go it alone, but one of the things about our industry – it’s a real industry because there’s a real problem.
0:51:39.8 And there’s a real value we can add. And the more we start getting confident in that value, the more we start projecting that and being open to those people when they come through and not dismissing them as being a foreign person.
0:51:53.8 And so, if a self-managed landlord turned up to an investor night, you don’t turn them away and say, “Well, we’re not for you.” These people, it’s simply a matter of time before they choose an agent.
Jordan: 0:52:07.5 Absolutely.
Ben: 0:52:06.7 There’s loads of examples of that. There’s examples of agencies we work with – just jump on, you know, your version would be Craigslist, and they jump on and they find all these properties for rent through self-managed landlords and they just message free advice. “Hey, just letting you know, these photos, if you took a photo this way or that way, you might find that you get – this might be better for you. By the way, if you have any questions, call me on at my phone number.”
0:52:32.4 Now, if you go through Craigslist and drop that 100 times on ads, I reckon you would find ten phone calls would come out of that. Just because it’s hard and people are starting to realize, “You know what, this thing is not as easy as it looked.”
And finding ways to add value to people along the way, to your point earlier, kind of sounds like a cost overhead, but I think that’s actually the art of growing a property management company. 0:52:55.2 And so that’s where I’d be focusing.
Jordan: 0:52:57.9 I think it’s important to talk about pivoting off pain. Because there’s a tendency to head towards the lowest common denominator in terms of the form of motivation. And that tends to be fear mongering. So here’s a long list of things that could happen, here’s a list of laws, potential ways you could get in trouble with regulations, etc.
0:53:21.3 All of those things matter, that can be done tactfully, and well, but at the same time, the motivating factor, that really in part, relates to what already talked about.
0:53:29.7 Yes, these are existing investors, but clearly, existing investors buy additional properties must like non-investors that are looking at getting into it. I think we’re still going back to this positive, hopeful, inspiring message about wealth creation through real estate, done at a professional level.
0:53:51.8 Which requires a couple of things. One of which being that you’ve actually done that. That you own some investment properties yourself, you have that background, and acumen.
But to me, that feels like one of the lowest hanging opportunities to develop true fiduciary type professionalism, in terms of the tenor and the type of conversation that we’re having with clients, as opposed to talking about broken toilets.
Ben: 0:54:18.0 That’s – the funny thing about that, is that all of that is in our heads. That’s a decision we can make today to be that industry. It’s not something that we need to change technology or change anything else. It’s just us accepting that.
And I think that’s the thing that gives me – keeps me optimistic, is that we could become that industry tomorrow if we chose to.
Jordan: 0:54:40.0 So, one of the things you’ve mentioned and brought up is kind of the hot market in Australia, at least when I – I think I’m hearing towards the idea of investing in real estate. It’s a very popular, socially acceptable idea. I’m curious if that would be reflected in the average number of properties managed per property management company.
0:55:01.0 Do you off hand have any data or any kind of rough number on the average number of properties per agency?
Ben: 0:55:07.8 So that number is – it depends – if you exclude the kind of micro property management companies, if you exclude them, and they’re ones that are very small, then the average is about 300 doors. That’s the kind of average.
0:55:22.2 And so, a typical agency, you’ve kind of got three different classes. You’ve got people under 300 that are in ideally growth phase, and haven’t stagnated, but that’s kind of an agency with two or three staff in it.
0:55:35.0 You then go from, say 300 to 800 and that’s kind of the middle of the – not statistically the middle, but that’s kind of – there’s a big rump of agencies and that.
0:55:47.4 And then once you get above 1000, you then have a group that would have you know – if you take those big agencies, those guys would have 2,3,4000 doors. The largest I know of has 8 that we work with. 8000 doors. And their – they have – their problem has become a different set of problems. But essentially it’s the same business across the board as they grow through it.
Jordan: 0:56:12.8 What about average number of properties per owner. Do you have any sense for that?
Ben: 0:56:18.0 The average number of properties per owner is around 1.3. Properties per owner. Now that’s – the challenge in that – so, we know from the data from the research that one in seven Australians own an investment property and that the average – that one in four of those own more than one.
0:56:42.3 So, one in four landlords own more than one property and once you get over that, some of them are in 3,4,5 and 6 and so on. And so, the average – although the average is 1.3, you have 3/4 of the landlords own one and 1/4 of the landlords own multiple.
0:56:56.7 Now those people often have properties managed by different property management companies and so the property management company may be unaware that their landlord has more than one company. And in fact, just on that topic, a great source of growth for channels three and four is to ask your existing clients if they have another management.
0:57:17.9 And, whenever I ask this of a company, they all say, “Of course we all have their managements, why wouldn’t we?” And you kind of encourage them to make the phone calls, and you get, and I often get a phone call the next day saying, “We just grew 20 managements yesterday, because no one had ever bothered to ask them.” And that’s kind of how it works.
Jordan: 0:57:38.0 Makes sense. There’s always low hanging opportunities where there’s a lot of assumptions abounding. Point number five is the catch all group.
Which, again, is so interesting to me because you’re packing in the majority of stuff where I feel like the conversation would’ve started. So, this is pay-per-click, SEM, Facebook, All Property Managment, all this stuff. 0:57:57.8 Is it fair to say that digital marketing, etc. would kind of get crammed into point five?
Ben: 0:58:02.2 Yeah, so point five is anything that is a kind of game changer. So there’s all of that, but there’s also even looking at expansion plans. So for example, should you look to open another office in another location?
0:58:12.2 So if you actually get the data, a lot of – there’s a lot of – if you look at a map of your city, or your area, it may well be that if you move – open a second branch somewhere else, that you will find enormous growth opportunity.
0:58:34.2 So there’s that. There’s working with property developers, there’s working with different people that can change the way your business operates. 0:58:42.5 And so one thing that we’re pushing a lot at the moment, which is still in its infancy, but – is the role of a property management company servicing owner-occupiers.
And so, if you take all the services a property management company does, there’s plenty of people that own their own house or unit and live in it, that would value some of those services. 0:59:02.8 Like repairs and maintenance and so on.
And so, how can we broaden – and how can we broaden the footprint of our business, both geographically, service wise, should be we doing a mortgage brokering company? Should we form a relationship with financial planners?
0:59:16.8 All those kinds of things are really stretching the boundaries of where that channel five can go. And there are some businesses that are now making more money at a mortgage broking than they are at managing properties. And that’s a – that’s kind of something that’s happening today, which is wonderful.
Jordan: 0:59:32.6 There certainly are a lot of expansion revenue opportunities out there. And we’re certainly seeing a lot more push in that discussion of the mix of business that comes from the base management fee versus any kind of add on revenue. Trying to make that a more even balance between the two.
0:59:49.0 I want to transition now to the rapid-fire section of the interview. Where we’re just quickly going to through some questions and get some guttural answers from Ben. 59:53 But before we do that, I have one last question that I’ve been meaning to ask you.
And that is this, this phrase came up a bunch of times during the interview, the long game. Ben, what does it mean to you for – personally within the context of your professional career, your business, etc? What does it mean to you to play the long game?
Ben: 1:00:17.4 Well, I grew up in a family business, so long game for me is inter-generational. That’s kind of what the long game to me means. I don’t think that’s what everyone should expect of their business. I think you can get something a lot quicker.
So for me, although I’ve left Ray White and have my own business, we really think in what we’re doing, in terms of a real – of a industry shift, which I think is a kind of ten, twenty year kind of business model and what we’re trying to build.
1:00:47.0 But in terms of a property management company, I think I would say a long game is anything where you’re not putting $1000 on Google and measuring results after 30 days and deciding, “Well that didn’t work.” This whole online thing doesn’t – isn’t real. And that’s anything beyond a month, I think is long, in some ways.
1:01:09.8 Anything more than, “Well here’s a name – unless they’re prepared to choose me and make a decision in the next 30 days, I don’t want to bother talking to them.”
And that is a mindset that I think’s endemic in a lot of, certainly on our side of the pond, is that thinking is too common. That, “Well I spoke to this landlord, they’re not quite ready to shift, so stuff them, I’ll just delete them off my call list and it’s not worth my time.”
1:01:39.0 Anything – that to me is short-termism. And you’ve got to break away from that and move to, “Well, I’ve got 5000 names of landlords in my area. I know over the next five years they’re going to make a decision about how to use a property manager. I want to make sure that when that time comes, they’re going to call me, and I’m going to do what I can to bring that day forward by raising dissatisfaction with their current property manager and also raising the trust levels that they have with me and changing that.”
1:02:06.3 And that may be – some of those landlords you may not get on your books for another two, three years, but that’s – I think that’s what it means.
Jordan: 1:02:14.5 I think if we’re honest, there isn’t a lot left outside of the long game. I mean, what is left? You’ve got Ponzi schemes, you’ve got get rich quick schemes, etc. Really, everybody is somewhere on that gradation of playing the long game. It’s how far out do you extend. I think about companies like Amazon, Jeff Bezos 1:02:24.5, who was famously quoted as saying, “Your margin is my opportunity.”
1:02:40.5 Think about the entrepreneur who said, “You shouldn’t get into a business that you’re not willing to run for ten years.” Attitudinally, the competitive advantage that is gained from playing the long game is compounding. It’s not linear, it’s compounding.
1:02:55.5 Depending on your depth and your willingness to commit to that. That’s one of the things that I find inspiring about what you’re doing. 1:03:01.6 I want to transition now to go through the rapid-fire section of the interview to wrap things up.
1:03:07.5 First question for you, haven’t asked anybody across the pond this question yet. First question is how much is too much to pay for a new property management contract? I’m not talking about making an acquisition or buying a door, I’m just saying organically, customer acquisition cost, how much is too much?
Ben: 1:03:27.5 That’s a great question, and the party line we say is a week’s worth of rent is the number. Now, I have – that’s what everyone says, I think that’s too low. So a week’s worth of rent in Australian terms would be maybe $400. I think it’s probably twice that.
So I think anywhere up to about $1000 is the kind of number you would pay to get an acquisition. Now, the irony is that people buy a property management company, many – at three or four times that number per door. 1:03:59.7 So, we have a hard time in this industry talking – distinguishing between, “I’m prepared to pay another company to buy their business” in Australia it would be three times revenue, which might be $4000 to buy a door. “But I’m not prepared to pay any money to grow it organically.”
That’s kind of how it works today, which is I think a really small-minded mindset. 1:04:21.2 Which ties into how you compensate your sales team and so on. But, the short answer to your question, I think it’s somewhere in the high single hundreds.
Jordan: 1:04:33.9 The answer you gave of $1000 adjusted for US currency, that’s about even I think with what a lot of guests have said. 1:04:42.2 Second question is who do you learn from?
Ben: 1:04:47.9 So, there’s three areas. One is the people I work with in property management, both in the consulting team who are out there working with businesses, as well as the businesses themselves. I find the most – the most inspiring thing I can do is to go and sit and have a coffee or lunch with a business owner that is really trying to push out on this. Who might have, you know, four, five managements but has ambition to two or three thousand. And they’re dealing day to day with, “How do I move this business forward? How do I change my culture? How do I connect to my clients?” And those people are just living it every day.
1:05:23.5 I find those people absolutely inspirational because they’re breaking so many conventions and so many things that hold most people back. So I find those are most inspiring people around.
1:05:34.4 I get inspiration in some of my business – I’m in partnership with someone and we spend a lot of time together pushing each other to be better, and also the team.
1:05:46.8 And then generally, I read a lot. I find inspiration in books and stories of other people. You mentioned Jeff Bezos. If he can’t inspire you, then I don’t know what to say. Just the idea of – there’s so many wonderful people in this world who are doing incredible things, and I just find that motivating.
Jordan: 1:06:10.9 Ben, what lessons do you still carry with you from your time at Boston Consulting Group?
Ben: 1:06:18.1 The – I think the probably the biggest lesson – as you mentioned, I was in the FMCG side of that business. Anything – any problem in business has to relate back to the consumer eventually.
You can talk about your cost structure, or you can talk about outsourcing, or you can talk about anything, but unless you find a way to get that conversation back to the consumer, and understand how is this going to affect revenue, and unless you can understand revenue in any discussion, I think you’ve lost touch with the core dynamics of a business.
1:06:50.0 And people that focus too much on costs, absent an understanding of how you’re going to grow revenue, I think – lose their optimism.
1:06:58.1 And what’s going to come through our industry, you’re only going to get through it if you’re optimistic. If you approach this industry by, “How do I survive?” and if your mental model is, “How do I build a bunker in my – in the basement of my company to survive the storm that’s coming?” I don’t think you’re going to survive.
I think you have to see this as, “It’s going to be hard, it’s going to be traumatic, but I’m going to find new ways to get revenue, I’m going to grow my business, I’m going to create more value for my customers”, they’re the people that are going to find a way through it.
1:07:25.0 And I think that’s probably the ultimate lesson that I still live with everyday.
Jordan: 1:07:29.2 Mindset. Focus on the customer. I threw you a curveball, I love that answer. 1:07:33.4 Final question. Ben White, are entrepreneurs born or bred?
Ben: 1:07:40.1 That’s a – wow, that’s a – the easy answer is to say both, and I’m sure that what most of your listeners say – your guests say. But I think one of the things that separates an entrepreneur I think from other people, is tolerance for risk and a tolerance for risk has to start with believing in the vision.
And so, I don’t know if you’re born with a vision. I certainly wasn’t born with a love of property management. 1:08:08.6 That came late in life. But it came. And it came by accident. And I have this vision for this industry that would stop me from sleeping at night if I let it happen. It’s become an obsession, and I’ve learned to kind of channel that.
1:08:27.5 So, one of the – and everyone I’ve seen in this industry who are doing great things have this obsession with being better. Is that born or is that trained? Jeez, I don’t know. I’m sure you have to have something in your genes, in your genetic makeup to make it happen, but you have to have a lot of support and frankly, a lot of luck in the way you get it through.
Jordan: 1:08:49.7 Luck and obsession. Two words I’ve heard come up a number of times in describing high calibre entrepreneurs. Ben, I really appreciate you coming on this show. If folks want to find out more about what you’re doing and what you’re up to, where can they go?
Ben: 1:09:04.2 The easiest thing is to go to Apmasphere.com, which is Apmasphere.com. Or you can go to Amazon and our books are available on there. Search for my name and the book that we’re talking about today is called, Numbers Game.
So if you search for Numbers Game or go to our website, you can download a free version if you want, or you can – if you want a print version or on your Kindle, you can buy through Amazon. And that’s essentially it.
Jordan: 1:09:37.6 For those of you that have been to a lot of NARPM conferences and are interested in exotic destinations and international travel, I would suggest considering attending the property management conference that Ben’s company puts on annually. Ben any details on that?
Ben: 1:09:53.9 Yeah, so if people go to PMC2017.com all the information is there. If you – for any of your listeners, we don’t have a code for you, but if anyone is prepared to fly from America to go, I would be happy to give them a ticket for free.
So, just have to get in touch with you Jordan, or find me. And so that would be fantastic to have any one of your listeners – if anyone of your listeners want to come out, we’d host you with open arms. And the other way to get in touch with me is to be at your conference. I’ll be there in January and look forward to seeing them.
Jordan: 1:10:31.4 Very generous guy. Come see him stateside, see him in Australia. Ben, thanks for coming on the show today.
Ben: Yeah thanks Jordan, I appreciate it.