Bob Walters: Growth Lessons from the Godfather of Property Management
Today, I’m talking with Bob Walters aka The Godfather of Property Management in Australia and New Zealand.
Bob was an early pioneer and jump started the professionalization of property management in Australia and New Zealand by founding and growing Leading Property Managers of Australia (LPMA) and Leading Property Managers of New Zealand (LPMNZ).
Over the years, Bob has personally consulted for over 300 management companies and trained more than 25,000 property management professionals, on top of building multiple rent rolls to thousands of doors.
But most importantly to me right now, this man is the MC at the upcoming 2018 PM Grow Summit that’s going to be taking place in San Diego.
In our chat today, we’re going to be talk about how property management entrepreneurs can accelerate rent roll growth by building a better sales process.
- (00:32) – Background Leading up to Today
- (02:21) – Bob explains how he first got started in the industry.
- (03:40) – What Bob likes about the industry and what kept him in it for so long.
- (03:46) – The ever evolving nature of the business.
- (03:46) – Easiest and fastest way to build wealth.
- (05:10) – Bob’s thoughts on the differences in valuation between Australia and the US.
- (08:11) – Growing Your Rent Roll
- (08:18) – Bob shares his thoughts on the pre-requisites to growth that a company needs to meet.
- (08:18) – The business is sufficiently systemized.
- (08:18) – The customer service delivery is the best it can be.
- (08:49) – Red flags that show a business is not ready.
- (09:03) – Staffing issues.
- (09:03) – Churn in your property management team.
- (09:03) – Lack of systems.
- (09:03) – Customer service complaints.
- (09:49) – Bob discusses churn and healthy churn rates.
- (12:06) – Between 5-15% of your portfolio each year.
- (12:42) – Why you need to consider the current state of the market.
- (15:34) – Bob clarifies where a property management entrepreneur should start focusing their efforts on rent roll growth.
- (15:34) – Identifying the capacity of the business to be able to grow and at what speed.
- (15:52) – Limitations of resources.
- (18:44) – The overlooked opportunity of having a sales division.
- (19:32) – What property management can learn from sales to better themselves organizationally.
- (19:42) – Capturing and nurturing leads.
- (19:42) – Proper use of technology.
- (23:08) – Key points of advice for successfully hiring a BDM.
- (23:08) – Where to find a BDM.
- (26:18) – Answering critics and skeptics who don’t recognize the value of sales.
- (28:11) – Undervaluing your BDM in terms of payment.
- (29:32) – A common and costly mistake when structuring your compensation model.
- (31:26) – Counting doors not dollars.
- (34:54) – How to train your BDM when you yourself don’t have the skills to teach.
- (35:07) – Sourcing external training.
- (36:11) – Results to expect with a successful BDM.
- (37:26) – Real life examples from Bob’s personal career.
- (40:41) – Bob’s screening and recruiting advice for getting the right BDM.
- (42:37) – Presentation skills.
- (42:57) – Basic elements of an effective presentation in front of a set of owners.
- (42:57) – Asking the right questions at the right time.
- (43:19) – How to prequalify the client.
- (47:18) – The absolute need to build the ‘like and trust’ factor.
- (42:57) – Basic elements of an effective presentation in front of a set of owners.
- (08:18) – Bob shares his thoughts on the pre-requisites to growth that a company needs to meet.
- (47:58) – Commercial Break
- (48:25) – Bob’s take on the value of conferences.
- (55:27) – Who do you learn from?
- (56:45) – What books have impacted you the most?
- (58:35) – If you could do it all over again, what advice would you have given yourself at the very beginning of your career?
- (1:00:12) – How much is too much to pay for a new property management contract?
- (1:04:04) – Are entrepreneurs born or bred?
- Up the Organization: How to Stop the Corporation from Stifling People and Stifling Profits, Robert Townsend (56:50) – Impactful book on Bob’s career.
- How to Win Friends and Influence People, Dale Carnegie (57:31) – Impactful resource on Bob’s early career as he segued into a leadership role.
- Influence, Dr. Robert Cialdini (58:02) – Impactful resource recommended by Bob.
Where to learn more:
If you would like to learn more about Bob and what he’s up to, head on over to The Bob Walters Team website for all the information you need.
Jordan: 0:00:00.0 Welcome closers. Today we have another episode of The Profitable Property Management Podcast coming at you. This is Season 2 on sales.
I’m your host Jordan Muela, and every week I interview world-class property management entrepreneurs and industry experts who share actionable insights to help you grow your property management empire.
Whether you manage 100 units or 1000, 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.
0:00:32.4 Today, I’m talking with Bob Walters aka The Godfather of Property Management from Australia and New Zealand.
Bob was an early pioneer and really jumpstarted the professionalization of property management in Australia and New Zealand by founding and growing LPMA. That’s Leading Property Managers of Australia and LPMNZ, Leading Property Managers of New Zealand.
This is basically the Australian version of NARPM, more or less in a nutshell, and he’s personally consulted for 300 plus management companies. He’s trained more than 25,000 property management professionals in that part of the world, and he’s built multiple rent rolls to thousands of doors.
He’s a keynote speaker, but most importantly to me right now, this man is the MC at the up and coming PM Grow Summit that’s going to be taking place in San Diego in 2018.
0:01:29.8 We’re honored to have Bob joining us for that event and MCing it and speaking. This guy has so much experience. He’s the first great host of his own events. I’ve been. I’ve spoken at one of Bob’s events. It’s a first-rate, top-notch experience and it’s a pleasure to have him over in our neck of the woods and seeing what we’re up to.
0:01:51.6 Today specifically, we’re going to be talking to Bob about Rent, Roll, Growth and how property management entrepreneurs can accelerate overall growth by having a really tight sales process.
0:02:03.7 Welcome to the show Bob.
Bob: 0:02:06.9 Oh g’day Jordan, glad to be with you. I’m a little – that wonderful introduction, I feel like I’m under pressure from the beginning.
Jordan: 0:02:16.0 Well, I wouldn’t have you on if I didn’t think you could deliver Bob. Let’s get into a little bit of your background. 0:02:21.4 How did you get into the industry?
Bob: 0:02:22.7 Well, that might take up the whole podcast just talking about that.
Jordan: 0:02:30.6 30 seconds or less Bob.
Bob: 0:02:33.6 Oh ok. I’ve been in the industry now 45 years and I started in the industry as a junior and built my way up to be a property manager.
And then to lead a property management team, and then I went into sales for a few years and then opened up my own company in 1980.
I built up that property management business from 1980 to 1990. I grew just under 1000 properties during that time.
0:03:10.2 And then since that time I’ve been CEO of a franchise group. I’ve been the head of training for one of the major real estate institutes in Australia.
0:03:22.2 I’ve been consulting since the 90s and along the way I’ve grown a couple of other property management business.
And so that’s probably about 30 seconds or so. That’s the headlines of what I’ve been up to.
Jordan: 0:03:40.8 What do you like about the industry Bob? What’s kept you in property management for this long?
Bob: 0:03:46.8 I think what’s kept me in the business is the fact that the industry is always evolving. And from, I suppose, a selfish point of view, for me it’s probably the easiest and fastest way to build wealth. Because in Australia, property management businesses are extremely valuable.
0:04:13.8 To give you an example, where I come from in Sydney, you can find that your property management business is worth about four times your annual management fees, which means that with my average property here in Sydney, if I annualize that fee and come and multiply it by four, that means that every property I have under management is worth about $6000 to the asset value of the business.
0:04:52.0 And so if you grow 1000 managements, that’s in fact worth about six million dollars. 0:04:56.7 So I suppose what’s kept me in the business, apart from the the fact of the business constantly evolving, is the fact that it’s really a fast way to build a strong retirement fund.
Jordan: 0:05:10.1 Really, really strong multiples. It’s different than in the states. And having interacted with a number of American property managers, do you have any thoughts or perspective on why that valuation is so much higher over in Australia as opposed to in the United States? Off the top of your head, is there anything you can think of that explains that?
Bob: 0:05:35.6 That’s a difficult question, because there are different market and business conditions between the two countries.
But certainly in Australia, the industry down here recognizes that property management is a constant revenue stream, providing you’re doing a reasonable job. That’s constant cash flow, it’s not subject of the – too much of the ups and downs that go on in the economy, because there’s always going to be demand for rental properties.
0:06:16.5 And because of this constant cash flow, you’ve also got a business that carries no debtors. You get paid every month for what you do.
06:30 And because in Australia the market or the industry is a little bit different in that much property management is done by licensed real estate agencies and so most property management businesses are mixed businesses. They’re sales and property management.
0:06:48.5 We certainly have an increasing trend towards property management only businesses, but most property management in Australia is done by combined sales and property management businesses and therefore, a lot of business owners, because they’re sales people, or ex-sales people, they use property management as a feeding ground for their sales businesses.
0:07:18.2 And that’s why I think they’re so highly valued. Not only the constant cash-flow, not only the protection from the ups and downs of the economy, it’s also the fact that that it feeds their sales businesses.
Jordan: 0:07:31.2 Yep, that makes sense. Certainly a lot of those are common attributes and it’s a laundry list of reasons to get in to property management.
Now if you’re telling me that a 1000 unit portfolio could be valued at six million dollars, I don’t know about you, but what’s crossing my mind is, “Well how quickly can we get to 1000 doors?”
0:07:50.3 When people come to you and they want to grow, they’re telling you that their ambition is to get to 1000, 2000, 3000, whatever it may be, I know you know that a lot of folks aren’t necessarily ready, and they have a naive perspective of both what is involved in growing and their ability to actually grow based on the current health of their business.
0:08:11.8 So in your opinion, when is a company ready to grow? What are the pre-requisites?
Bob: 0:08:18.9 Well, the absolute pre-requisites are that the business is sufficiently systemized so that it runs like a well-oiled machine.
And in fact, that the customer service delivery is certainly as best as it can be. 0:08:38.9 So that if you’ve got a systemized business and you’ve got happy clients and customers, then you’re probably ready to press the go button.
Jordan: 0:08:49.3 Now everybody would like to pat themselves on the back and say, “Hey ya that’s me.” Can you give me some specific examples or scenarios, or red flags for knowing that you’re not ready? Just to flesh that out more.
Bob: 0:09:03.7 Well, you’re certainly not ready to grow if you’ve got – if you’ve got staffing issues in your business. If you’ve got churn going on in your property management team.
If you’ve got a lack of systems so that all the processes in the business are not properly documented nor complied with. Or if you’re getting complaints about your service delivery. 0:09:30.1 They’re all red flags that you’re not really ready to press go yet.
Jordan: 0:09:34.5 Ah, you mentioned churn. And that’s really partly what I was looking for, because all of those factors, in large part, could be summed up in churn.
0:09:42.6 Now there are other factors like fee maximization, etc., but churn is a great one, because you cannot outgrow churn.
0:09:49.4 In your mind, what is an acceptable churn rate and what’s kind of the churn rate that is just an obvious red flag to you if you’re looking at somebody’s books.
Bob: 0:09:59.2 Well yeah, that’s probably the biggest challenge. Certainly in our industry in Australia today – is finding good quality property management professionals and certainly because there’s a bit of a skill shortage in Australia, the remuneration packages for property managers have gone up significantly over the years. 0:10:29.5 But typically a lot of the experts down here are saying that you would get sort of three to five years service out of a typical property manager. 0:10:43.3 Now there’s certainly examples of long-term property managers everywhere.
But because in Australia we’re finding that probably about three-quarters of property managers in Australia are female and because you have now younger people coming into the industry through leasing property management business development, and coming into property management through admin, we are certainly finding that the younger generations tend to not want to stay in jobs long-term. 0:11:25.4 And so you’ve really got to have a business with lots of great culture, lots of positive energy, lots of opportunities for people to progress their careers in order to avoid excessive churn.
Jordan: 0:11:45.7 Got it. Alright Bob, we’re going to do one more take on that, because what I was really asking you about was portfolio churn. So your number of doors.
Bob: 0:11:53.1 Oh, oh, oh. I was talking about staff churn.
Jordan: Yep. I get it, I get it. I should have clarified. So one more take on that.
What’s a healthy churn rate when it comes to doors? 0:12:05.3
Bob: 0:12:06.4 Well, in Australia it will fluctuate depending on what’s going on in the sales market. But usually you will get anywhere between 5-15% of your portfolio would turn over each year.
Jordan: 0:12:29.6 Got it. So if somebody is at say, 10%, do you feel like that’s a low enough number for them to feel like it’s not necessarily a red flag and they can move on to looking at growth?
Bob: 0:12:42.5 Yes. As I said, it will fluctuate depending on what’s happening in the sales market. I mean, if it’s a strong sales market, if prices are going up, you will get a higher number of landlord clients wanting to sell their investments. So it does fluctuate.
0:13:02.1 But I suppose, being pragmatic about it all, it’s all about focusing on things you can control. I mean, none of us can control the natural movement of the actual economy and what’s happening with the sales market.
0:13:20.8 It’s really being about being able to control your service delivery so that even though you’re going to get churn, the focus really needs to be on if you’re losing properties from your portfolio, to be identifying very clearly the reasons why you’re losing that business.
0:13:40.1 That’s where we’ve certainly found in a lot of business we’ve gone into as consultants that they’re not always measuring their losses accurately. 0:13:52.7 And in many cases, they’re not verifying the reasons for those losses.
And so if property is a loss because they’re being sold, or owners are reoccupying, or things like that, you know, they’re all things that are out of your control. 0:14:10.0 But the key thing is identifying are you losing properties because of mis-management.
Jordan: 0:14:19.2 Yep, totally makes sense. If you’re going to lose the property, the double loss is to actually have no idea why as opposed to at least learning something profitable from it.
Bob: 0:14:31.1 Just to add to that, I’d certainly be reminding those who are listening that you need to be counting your gains and identifying the source of your new business, but also carefully calculating your losses and importantly, where those losses are going – what’s causing them. 0:14:54.2
Jordan: 0:14:57.0 100%. Totally makes sense. Loss tracking is a big win. It’s something a lot of folks don’t do.
0:15:02.6 So let’s move on to growth now. Let’s say that you’re qualified, you run a tight ship, and you’re ready to grow. Bob, you and I both know there are so many different options out there it can be overwhelming. “Should I focus on digital marketing? Should I focus on realtor relationships? Should I focus on the agency side of my business for lead gen? Mailers.”
Do you have any kind of an overall framework for helping to clarify where a property management entrepreneur should start in focusing their efforts on rent roll growth?
Bob: 0:15:34.4 Well, I suppose the logical starting point is identifying the capacity of the business to be able to grow and at what speed. Because when it comes to capacity, I haven’t met a business owner yet that hasn’t wanted to grow their business.
0:15:52.9 But in many cases, they don’t have the resources to put in place to put boots on the ground to get out there and grow. So, obviously the strategies that the business is going to use is going to be largely dependent upon the human resources available and how much money you’ve got to allocate to business development.
0:16:18.6 So, for me, yeah, the last time I sat down to work out how many strategies we could think of to actually grow a property management business, we had about 83 different proven ways to actually go and find new business.
0:16:43.0 But it’s like a big jigsaw puzzle. You know, you just got to put a piece at a time and not every piece works in every puzzle. You know, it’s going to depend on different marketplaces, and as I said, it’s going to depend on the resources that that particular business has.
Jordan: 0:17:02.0 What are some of your favourite growth strategies? Of those 83 that you just mentioned.
Bob: 0:17:09.6 Well, I suppose one obvious one that is a biggie in Australia and certainly may not be a biggie in the US though, is as I mentioned earlier – because most property management businesses in Australia are also real estate agencies, they have real estate sales teams and it’s really about maximizing the relationship between sales and property management. That’s making sure they capture every possible lead from the sales side of the business.
0:17:49.9 Particularly people that go through sales OFIs and things like that. I’m fully aware of the fact that most of the people listening to this podcast are going to be property management only businesses, so in saying that – I mean, one of my personal favourites, of course, is online marketing.
0:18:14.2 And, of course, I’m very much aware that you and Alex are the gurus in that space, so you probably don’t want any advice from me.
Jordan: 0:18:25.2 I don’t know! Guru is a heavy title. Digital marketing is obviously a big can of worms, but on the topic that you just brought up, you’re right in pointing out that while agency – property acquisition through the agency side of the business is probably a bigger deal over in Australia. Here, it’s almost like there’s a need for the inverses. Right?
0:18:44.1 Right now we’re in a strong real estate market. There’s been a lot of sell off. A lot of folks that are doing well with growth are going sideways. They’re gaining properties, but they’re just backfilling what they’re losing.
0:18:57.0 Now, when they lose those properties due to sales, some companies are getting absolutely gutted because they’re not capturing any of those sales.
0:19:06.4 Other companies are able to pretty much go sideways in terms of revenue because they are efficiently capturing those sales. Regardless, most people that are listening to this podcast don’t have a really aggressive sales division within their business.
0:19:24.4 I think it’s an overlooked opportunity, but culturally there’s such a big difference between property management and sales.
0:19:32.9 In your opinion, what can the property management side of the business learn from the sales function to be able to get better organizationally?
Bob: 0:19:42.9 Well, it’s really about you know, lead capture and lead nurturing. And making sure that you’ve got – that you’re using the technology that’s out there.
0:19:58.3 I mean one thing I find in Australia that is extremely frustrating, is that – if I use that $6000 per property analogy, that every potential lead that you get into property management, if it’s worth $6000, often we find that leads are squandered.
0:20:22.1 You know, that they’re not properly recorded, that they’re not followed through correctly. You know, they’re written down in people’s diaries and on post-it notes and things like that and they’re not using the technology out there to record the leads, to nurture them, to follow through.
0:20:47.7 Importantly, to have property management representatives that know how to sell their services, because property managers are notoriously – they’re more the mechanics of the business rather than the sales agents.
0:21:10.4 Now, one thing I really learned over the years is not to put growth in the hands of property managers. Growth needs to be in the hands of specialized people who know how to sell.
And so they’re all the things that you could – that property managers can learn from sales, is the fact that they – that they capture leads. That they follow up on those leads. That they stay in touch with people. That when people are ready to make the decision that they’re there to be able to win the business and they know how to get it across the line.
Jordan: 0:21:47.5 Absolutely. So you’re talking about a business development manager. You’re talking about somebody with the right attitude, skills and motivations to actually go and hunt.
And one of the big things that I’ve noticed, is that in Australia, when people talk about BDMs, they’re talking about people that are doing outbound prospecting.
0:22:06.8 Whereas, stateside, when property management entrepreneurs talk about hiring BDMs, oftentimes they’re talking about them primarily handling inbound leads.
Which is great right? Somebody who’s going to pick up the phone. Somebody who is going to call people back.
0:22:18.7 But the mindset behind handling inbound versus actually proactively hunting is pretty different in my view.
So, let’s just talk briefly about this whole issue of the BDM. For folks that have thought about, or tried unsuccessfully to hire a BDM, what are some key points of advice that you would have to actually doing this successfully?
Bob: 0:22:46.3 Well first thing I would say, that if you really want to accelerate the growth of your business. 0:22:52.7 I’m getting a police car going past. I’ll wait until it goes.
Jordan: 0:22:58.2 Are they coming for you Bob?
Bob: 0:23:02.7 Quick they’re at the door.
Jordan: No worries. Go ahead.
Bob: 0:23:07.1 0:23:08.6 So, I think one of the key pieces of advice I’d give in terms of business development is that you certainly can’t put growth in the hands of property managers except in exceptional circumstances where you have a property manager who also knows how to sell. 0:23:32.8 But I’ve come across very few that have both skill sets.
So, in terms of hiring BDMs, it really comes down to hiring someone that is not necessarily from a property management background, not an ex-property manager or anything like that.
0:23:54.5 Often it will come from – an ideal candidate for focused business development for me would be someone who maybe wants a career in real estate sales, but is maybe not necessarily ready for that particular move yet. Or someone that’s come from a very much customer focused industry.
0:24:18.1 You know, such as sales of other products and services, hospitality, etc. It’s really – and someone who’s really hungry and has high energy. 0:24:33.7 You don’t need a BDM with a lot of technical skill about property management.
Over the years when I’ve hired BDMs, we found that we can teach them enough about property management to get themselves through. We can teach them property management in a week.
0:24:55.7 You’re obviously looking for someone who’s got high energy, hungry and has a customer service focus about them. And importantly, that you structure their package so it is highly commission based and focused on the dollar value of the transactions that they are …
Jordan: 0:25:18.6 So I love what you said earlier – the metaphor that you don’t have the mechanic come up front to sell cars. You need the service center. You need the sales reps out front, but if you switch roles, it’s going to be a disaster.
0:25:32.6 What would you say to the person that undervalues the important of sales skills? 0:25:38.6 The person that says hey, “The best, most qualified person to sell the car is the mechanic because the knows all the ins and outs of the cars. He knows the exact stats on 0-60, and tire pressure, and how long this car is going to last in certain conditions x,y,z.”
How would you describe the real, tangible, demonstrable value that somebody with a sales background and a sales skill set represents to somebody that is skeptical of those soft skills?
Bob: 0:26:18.0 Well, it’s really coming down to recognizing the difference between features and benefits. A mechanic who is trying to – you know, if they swap roles with the sales people in the showroom floor, you’ve got a mechanic on the showroom floor, certainly the mechanic is going to be able to describe all the features of the vehicle. 0:26:43.8 But not necessarily hone in on the benefits.
Certainly, I find that with landlords looking for property managers, they’re looking for someone just to solve their problems, not necessarily tell them everything about legislation and all the health and safety issues and those sorts of things.
0:27:07.5 That’s why I pay a property manager for that. I just want someone that can clearly demonstrate to me how they’re going to solve my problems and how they’re going to maximize the value of my property investment. 0:27:23.8 And a lot of property managers miss the boat on that one.
Jordan: 0:27:29.8 So that makes a ton of sense to me. Layering on top of that is just the available time right? Somebody with a dedicated job is responsible for actually doing those follow ups. And therefore, they happen in a timely fashion as opposed to it being done in between 20 other functions and just kind of falling by the wayside.
0:27:48.5 The other side of that is when hiring a BDM goes wrong, one of the first things that I see is the comp model – not necessarily in terms of the behaviours that it is incentivizing, because that is some nuance that you can tweak but started off with good intention.
0:28:11.4 The first place I see it go wrong is with the owner that is just fundamentally cheap and doesn’t want to pay the right person the right amount of money. Have you seen this problem before yourself?
Bob: 0:28:25.9 All the time. It’s certainly a case of you get what you pay for. See often, certainly in Australia, they all want to grow their businesses. They’ll get the bright idea that they have to go and hire a BDM and they’ll go and put the person at their desk, give them a business card, a laptop computer and maybe a listing kit and just say, “Look, go out there and find me ten doors a month, or 15 doors a month.”
Yet, without properly inducting them into the business. Without giving them the right sort of tools that they’re going to need to be able to win that business.
0:29:17.4 And in many cases, they’ll go and hire them on a base salary and in some cases on a commission that really is based on the wrong formulas.
0:29:32.2 For example, where I see often in Australia, and I don’t know whether it also happens in the US, but what happens in Australia often is they’ll give a BDM a base salary and they’ll layer the commission over the top. But it’s a commission based on each door that they bring it and not basing the commission on the actual value of the transaction that they do.
0:30:04.0 And to me, then the business owner wonders why their BDM is signing up business at a discount because the commission structure is wrong. 0:30:20.9
Jordan: 0:30:23.5 Yeah, that totally.
Bob: 0:30:26.3 I don’t know if I explained that correctly. Do you want me to expand a bit on that?
Jordan: Please go ahead.
Bob: 0:30:34.0 0:30:35.2 I’m probably at a little bit of a loss in that I don’t have an intimate knowledge of how BDMs are all remunerated.
Jordan: 0:30:48.6 Well I think what you just described is absolutely the case. I mean, you’re basically just saying you’ve incentivized this to get you doors and they can bring you a pile of garbage and still get paid because of that compensation model, as opposed to actually tying it to profit really.
Bob: 0:31:02.8 Yeah, and you see a lot of business owners that will get excited that their BDM has brought in ten properties for that month, but fails to go and analyze the dollar value of those transactions to the business. 0:31:26.6 In other words, they just count the doors not the dollars. 0:31:30.9
And that’s a key thing that I’ve learnt over the years that – certainly my early career in the business – Rent roll growth was all about having the biggest portfolio in town.
You know, it’s sort of a testosterone thing of saying, “Well I’ve got the greatest number of properties under management.”
0:31:58.9 But over the years going into a lot of these companies as a consultant, I’ve certainly found that bigger is not always better. I’ve seen some big companies that are still in the red in their profit and loss account. Simply because they have too many staff, or the quality of the properties and the fee revenue is very poor.
0:32:25.1 And so, over the years, my philosophy about growth are more around growing the dollar value revenue of the business rather than counting doors.
And as an example, obviously at conferences you hear people talk saying they want to grow another 100 properties this year, or they want to grow another 200 properties this year.
I would much rather them be saying, “I want to grow another $200,000 worth of revenue,” or “Another $500,000 worth of revenue.” Or, “I want to take my profit from 23% to 28%.” I’d much rather have those discussion with people rather than this focus on, you know, I want to have so many doors. 0:33:23.8 Because, number of doors has no bearing on profitability.
Jordan: 0:33:28.1 That’s a great point Bob. So being a software entrepreneur with my background, when I’m talking to other software entrepreneur peers, what we tend to talk about is MRR. Monthly recurring revenue.
And obviously that’s a direct analog and application to the property management business as well, because it’s also recurring revenue.
0:33:47.4 But clearly, focusing on the dollars is more useful than focusing on doors, because some of your doors are going to be highly profitable, some of them are going to be – you’re absolutely taking a bath on. And a lot of them are somewhere in the middle. So there certainly is way too much focus on that.
0:34:05.3 You mentioned earlier when we were talking about the training aspect – the type of person that hires a BDM and they don’t train them and then that person underperforms and then they blame then, they fire them, and then they come back and say, “Hey I tried the BDM thing, it doesn’t work.”
Insert whatever the tactic or strategy is, poor execution is often the rationale for blaming a tactic or strategy that is otherwise quite effective for other entrepreneurs.
0:34:32.4 With the BDM and with training n particular, one of the reasons that I see a failure to train is that folks just want to make a problem go away. They’re not into sales. It’s not in their DNA. They’re not particularly good at it themselves and so, therefore, when they hire somebody, of course they don’t’ train them, because quite frankly, the training wouldn’t’ be very good.
0:34:54.8 What does someone in that situation that knows that they have that deficiency do so as to not basically be setting that person up for failure?
Bob: 0:35:07.3 Well what they need to do is – if they don’t have the training tools and expertise internally, they’ve got to make sure that that investment in that BDM needs to be allocated towards external training.
So that person then needs to be sent out to where ever they can send them to get good, quality sales training externally.
Jordan: 0:35:38.3 Now do you think that that training needs to be property management specific or do you think good sales training is good sales training?
Bob: 0:35:46.4 Yeah, the latter. Good sales training is good sales training. 0:35:49.7 It’s easily – selling is selling. Selling property management services, selling real estate, selling insurance, selling cars, whatever the case may be, it’s all selling. It’s only a matter of change of a bit of terminology here and there.
Jordan: 0:36:11.6 Yup, I couldn’t agree with you more. I’m all about the cross-application of knowledge from other related domains.
So, when it works, if hiring that BDM is actually working well, in your experience for the folks that you have trained, what kind of a results have you seen folks get from hiring a BDM? How many doors have you seen a successful BDM bring in on an annual or monthly basis when it actually works well.
Bob: 0:36:46.3 In my personal career, in a past life when I built up a property management business from 400 properties to 2600 over a sort of two and a half year period, the best BDM we had was a real firecracker. A young lady who was averaging 25-30 a month.
Jordan: 0:37:18.1 Wow. And this was prospecting or this was being fed from the agency? Do you recall off-hand where those came from?
Bob: 0:37:26.2 A combination of both. But in that same business, if I can just give you a little bit more detail about that story, here was a company here in Sydney – as I said, when I went in there they had 400 properties under management and that’s sort of an average sized property management department here in Sydney.
But the owner of that business was an ex-sales agent, and he thought like a sales agent and he had this big growth goal.
0:38:07.8 Initially he wanted me to add 1100 properties to the portfolio in 18 months. And so that was quite a big, quite a big growth goal for me because at that stage – this is going back about 17 years – back then I still had some limiting beliefs about how fast you could grow a property management business.
0:38:34.0 But we started off hiring our first BDM and we were very lucky that that’s when we hit the jackpot with this particular person. And she was getting really fantastic growth and so not far down the track we then hired BDM number two and BDM number three and we got up to five BDMs.
And they each had a target that – back then a door target of 15 doors per month each. So we were growing gross growth of 75 plus doors a month.
0:39:23.9 Now since that time, as I said, my focus has gone more towards in growing in revenue, not the actual number of properties under management. But back then the owner of that business was purely focused on growing the doors.
0:39:43.4 So, you know, what I learned from that experience is, if you make good hiring decisions when it comes to business development staff, you put them in the right environment with the right tools and strategies and training, that you get one right and then you get the second one right, the third one right, and it’s like building a sales team.
0:40:06.9 And on the flip side though, you do find occasionally that you think you’ve hired a firecracker for the property management business development team and they end up being a fizzer.
0:40:22.9 So occasionally you’ll make the wrong hiring decision, but if you get most of your decisions right, and with those other factors in place, then it’s not particularly hard to grow the rent roll in a very accelerated way.
Jordan: 0:40:41.6 So what advice would you have for getting the right person? For recruiting and screening?
Bob: 0:40:47.0 Well, certainly, as I mentioned earlier, it’s about finding someone who’s not necessarily from the industry. They can be from the industry, but not necessarily.
But it’s a matter of finding someone who has got a great attitude, lots of energy, is trainable, is hungry. Is hungry for success. 0:41:13.6 And making sure then that you foster that by putting them in an environment where they’re not just left to die on the vine. That they have a set plan in place for activity as well as productivity.
Often we give them productivity goals, whether it’s revenue targets or a property target, but it’s a matter of regulating and setting targets on their activity as well. 0:41:51.3 Because if you set activity targets and they complete them, then we know that productivity will then occur.
Jordan: 0:42:00.2 Yes Bob. I’ve got to stop you right there. I love what you just said because as you’re listening to this right now, think about the form of empowerment of being able to trouble shoot the ‘why’.
0:42:11.8 The ‘what’ is did they bring in enough doors? Did they bring in enough revenue? But that’s not the ‘why’. The ‘why’ is exactly what you just said. It’s tied up in those sub-activities of follow ups, outreach attempts, etc.
And unless you’re actually tracking that, you have the ability to either be happy or sad about the outcome, but you have no ability to diagnose why.
0:42:37.8 Well said on that point. So talking on the micro level about the actual presentation skills. In your mind, what are the basic elements of an effective presentation in front of a set of owners?
Bob: 0:42:57.3 Well I suppose the basic expectations would be knowing the right questions to ask at the right time. Once again, this comes back to basic selling. It’s really about knowing the right questions more so than knowing all the answers.
0:43:19.1 So, it’s about prequalifying the client to understand, if they’re looking for a property manager. What are they looking for from a property manager? When are they looking to make the decision? Who else are they going to be talking to? You know, what is it about the property that they think will appeal to tenants? Why did they choose to make contact with the company? Etc.
So it’s knowing all these prequalifying questions and then carefully listening for the answers. 0:44:00.1 And knowing what lights them up and focusing on just the things that are important to them.
Some BDMs get carried away with wanting to demonstrate every aspect of their services and they turn up with a 50 page listing kit and want to go through every little aspect of what they do in property management, when in fact what they’re doing is selling themselves out of a deal.
It’s really about finding what’s really lighting the people up and focusing on them and if there is any resistance along the way, to know how to identify it and neutralize it.
And finally, to know how to close the deal. How to ask the right closing questions to walk away with a signed management agreement.
Jordan: 0:44:58.5 Can you walk me through any of those questions? Are there any that come to mind to kind of set things up in the right way? I know I’m putting you on the spot here.
Bob: 0:45:09.7 I know in our business, I mean, we have a standard checklist that we follow whenever we are dealing with a prospective client. And there’s a whole bunch of questions on that checklist that we ask and get answers for and tick off as we go through, just to make suer that we’re not missing anything.
0:45:40.8 You know, and I’ll give you one quick example, where it might be that you’ve had somebody contact you about your property management services and the BDM goes bouncing into a response and starts rattling off how wonderful they are at property management and how they can help them and all the things that they can do. Only to find that the client may be putting his property on the rental market late next year.
0:46:21.1 And so, in other words, if they ask a few simple questions in the beginning, they can determine the actual motivation of the person and if it’s a preliminary inquiry about what the company does and wanting a little bit of market information about what’s happening in the rental market and things like that, that they don’t waste their time and a whole lot of the person’s time rattling off about stuff that’s not relevant at this point of time.
Jordan: 0:46:56.6 Hmm, so what I hear you saying is, you want to have a really tight discovery process of consistently asking the highest number of questions that are going to both give you context but are also going to progressively going to build relational investment as somebody is disclosing more and more about themselves. About their property, etc. 0:47:17.9 That makes a ton of sense to me.
Bob: 0:47:18.8 And it’s really – amongst all those questions is an absolute need to build up the ‘like and trust’ between the perspective client and yourself.
Because you can represent the best brand on the planet and you can have the sexiest looking listing presentation kit and the most beautiful set of marketing materials, but ultimately it’s still a people business and if they don’t like and trust you, you’re not going to get the business.
Jordan: 0:47:58.6 Absolutely. Before we go on, I do want to mention our show sponsor, the PM Grow Summit. This is taking place in January 2018, San Diego. Bob is going to be the MC. Incredibly excited to have you there, Bob.
Folks, if you’ve been listening to this podcast, you know about the event. You know you can go get a ticket at PMGrowSummit.com and you know that you can use the coupon code JORDAN to get $100 off your ticket.
0:48:25.9 Bob, I’d love to hear your take on it. You put on events year after year, how many LPMA events do you think you’ve put on over the years? I know it’s probably hard to count, but what’s your guess?
Bob: 0:48:39.3 Oh, well LPMA has been going for 11 years now. The New Zealand Leading Property Managers has been going for about six years. But prior to that I was involved with one of the state real estate institutes for a number of years and so – to simply answer your question, I’ve been putting on property management conferences since the late 90s and so probably I’ve put on about 30.
Jordan: 0:49:16.8 So you’ve got a lot of perspective in that time and you’ve done a lot of selling. You’ve probably written a lot of sales copy to get people there. But you’ve also seen it first-hand attending these events and you know the impact being a property management entrepreneur yourself.
0:49:31.3 If you were just going to succinctly describe what somebody can walk away with from a well-run property management conference, what would you say it is in a nutshell?
Bob: 0:49:41.6 Well I think it’s a matter for anyone who comes along the conference to really be open-minded about when it comes to growth.
The fact that people come in with maybe some preconceived ideas or some limiting beliefs about their ability to grow or the speed to which they can grow.
0:50:09.3 And I would really believe that at the PM Grow Summit, you’re going to be listening to, not necessarily experienced platform presenters, but practitioners. Practitioners who have successfully, actually done what they’re preaching.
And to me, that’s the key thing in any conference that you go to, is the fact that you’re hearing from people that have walked in those shoes. That have had those challenges. That have had a lot of success, but likewise, a lot of failures as well.
0:50:51.7 Because you can learn just as much from failure as you can from success. So it’s really about hearing from people that have walked those shoes, that have had the successes, had the failures and – we know that these things work in real life. That they’re not just theory or text book type things.
Jordan: 0:51:18.0 Now as the conference host, I’ve been in your shoes. You’ve done it way more times than I have, but I certainly know that from my perspective, there really is a fine art of both getting those practitioners but also getting people outside of the industry that are willing to care enough about tailoring what they are saying to our industry.
0:51:38.1 I’m thinking of one example last year where we failed to do that. We brought in a very qualified, competent, professional speaker that more or less bombed because they did not expend the effort and energy required to tailor their message to our audience.
How have you navigated through that when you’re recruiting speakers from outside of your own industry at your own events?
Bob: 0:52:06.8 Well, very much the case of talking to that speaker well in advance of the event and giving them a thorough knowledge of the types of people that are going to be in the room and what people want to get out of that person’s session so that they can contextualize the material that they’re going to speak about.
Because one of the problems with hiring non-industry speakers is that you can find someone that gets up on stage, is extremely motivating and entertaining, but for me, all that motivation tends to get sucked up through the air conditioning ducts at the hotel because often by the time people get out the front door the motivation has sort of dissipated.
So, it’s a matter for me – and I know there’s a balance there. Any good conference needs it’s mix of industry – good industry content and general business and motivational speakers as well. 0:53:34.6
But with motivational speakers I’ve just found that they’re there for entertainment value often, but there’s not always a lot of take home value, because as we all know, motivation comes from inside. It’s really a matter of internalizing all that because nobody can successfully motivate anybody else. It’s got to come from inside. 0:54:03.1
Jordan: 0:54:02.9 You know, it is a really tough balance. I have hesitated in the past for bringing folks in that are more on the motivational or the personal development side of things.
I place value on the personal development world, training – you talked earlier about limiting beliefs. Those are things that have really helped me but there’s certainly a subset of people that feel like that is fluff and unless we are talking about something technical or very explicit it is of dubious or questionable value.
So it certainly it is kind of a tightrope to navigate through that, but I think at the end of the day, we’re trying to deliver people an experience where they can walk away saying, “I learned things that I can take away on day one. Tomorrow I’ve learned things I can implement in my business. 0:54:53.3 But I also have more clarity on the path – that on a one year, two year, five year time horizon that I can better course correct. I’ve got more clarity on where I’m heading and I know the levers that I need to pull over the next couple of years – they’re going to take me to that long-term goal. Whether that’s 1000 doors or a ten million dollar 0:55:15.2 [Inaudible], whatever it may be.”
0:55:16.7 I want to transition now to the rapid-fire section of our interview. I’m going to just ask you a series of questions and I just want guttural answers from you. 0:55:27.7 And the first of those questions is this, Bob, who do you learn from?
Bob: 0:55:32.0 Who do I learn from? Every time – certainly every time I put on a conference I learn from every single speaker. You know, one thing or another. 0:55:44.8 Edit Out Is that a quick answer?
Jordan: That is a quick answer. 0:55:48.5 Let me just probe a little bit deeper than that? Have you had any mentors over the years? Are there any public figures that you’ve really looked up to?
Bob: 0:56:01.4 Over the years I’ve had various mentors. I suppose none of which people listening to this podcast would know, but I worked in my early years when I started in the industry I had my first boss who was my mentor for about the first 20 years of my real estate career.
When I worked for that fast growth aspirations, the owner of that company was one of Australia’s leading real estate identities and I certainly looked up to that person and learned a lot from that person.
Jordan: 0:56:45.1 What books have impacted you the most over the years?
Bob: 0:56:50.0 Well, if I go back to my early career, my first boss gave me this book called, Up the Organization. It was written by a guy called Robert Townsend who turned Avis Rent-A-Car around from being almost out of business to become massively successful.
And that book just has a lot of just simple tips and principles, business principles to follow and there’s been many rewrites of that book since. But I still refer to it from time to time.
0:57:31.7 In my early career when I was sort of starting to get into more of a leadership role, I was given the book, How to Win Friends and Influence People, which I think is still relevant today.
And also, probably one of the best books I’ve read on selling was a book called, Influence, by Dr. Robert Cialdini. 0:58:02.6 I don’t know how – well he’s an American.
Jordan: 0:58:06.1 Oh it’s a classic. Yeah.
Bob: 0:58:08.4 College professor. And I was just fascinated. Fascinated reading that book about the universal rules of influence. Why people reflexively say yes to a request without thinking about it and all the research behind it. I just found that fascinating.
Jordan: 0:58:30.7 All the micro-influences, and even the subliminal stuff that we’re not aware of. Yeah, I completely agree.
Jordan: 0:58:35.8 Bob, if you could do it all over again, what advice would you have given yourself at the very beginning of your career?
Bob: 0:58:46.5 Well, one simple piece of advice I’d give to a young Bob, would be that I would understand the value of a property management business in terms of its asset value.
Because certainly in my younger years working for other people, and I had some degree of success in growing property management business, but in fact I was growing somebody else’s asset, not my own.
0:59:28.0 And so if I could wind the clock back, I would have started much earlier at building my own business rather than building someone else’s business.
And I know that there is a big difference in asset value between Australian businesses and American ones, but certainly where I come from, if you can build a six million dollar asset over a five or ten year period, as well as make some profit along the way, that to me is a pretty good business to be in.
Jordan: 1:00:08.5 Yeah, I would say you’re doing well. The next question is actually related.
1:00:12.3 In your mind, when you think about the marketing and sales expenditure, how much is too much to pay for a new property management contract?
I’m not talking about buying a portfolio, but if you tabulate things and you look at a marketing campaign and you look at per door – your overall client acquisition cost, how much is too much to pay in your mind?
Bob: 1:00:39.4 That’s a really tough question because I suppose it depends on the property itself. Because not all properties have an equal value and sometimes some are more valuable and better to acquire than others.
1:01:00.7 But I suppose, I suppose if I could try and quantify it a bit, I would say that if you’re paying north of half a year’s management fees to actually acquire that asset, than that’s too much.
Jordan: 1:01:24.4 Ok. Now that’s really interesting. I’ve never had anybody give that specific answer before. Talk me through that’s a sensible way to look at it. In your mind.
Bob: 1:01:33.1 Well, as I said – this might be a bit we need to scrub out of it because I think there’s too big a gap between Australia and the US in answering this one.
Because if I use the Australian example for a minute and say that here in Sydney, with a property management business, if someone will pay you four times annual management fee revenue to acquire that business.
So once again, if someone’s prepared to pay $6000 for each property on your portfolio and there’s a ready number of people that are prepared to do that, then you might say, well as long as you spent less than six grand acquiring it, then you would be better off. You’d be still better off that way.
Jordan: 1:02:44.6 I mean, that’s how I would back into it Bob. That’s a sensible way to look at it in my mind. You’ve got the lifetime value, and your customer acquisition cost is obviously purely a function of that.
The way that most people look at it is just emoting. Emoting, thinking about the dollars coming out of my wallet to spend on sales and advertising. And on that sense, you know, we’d all love the number to be as low as possible.
1:03:07.1 The number that you mentioned earlier: six months worth of – let’s call it revenue. Not just management fees. Because I can orient around that easier. 1:03:14.1 If we take $200 as your average revenue per property, per month, on average, and that’s including all ancillary fees, not just strictly management fee income. Multiply that times six, we have $1200.
1:03:28.6 And that’s within reason of what I hear – that’s on the high side of what I see folks being willing to spend.
But again, there’s a difference between the two markets. So that’s actually – that seems like a reasonable approach even though I haven’t heard anybody articulate it quite that way.
1:03:47.4 So, it’s interesting. We’re going to dig into that a little bit more at the PM Grow Summit. We’re doing a benchmarking study to look at the norms of customer acquisition cost, lifetime value, etc. So hopefully we’ll have some more data by then.
1:04:04.2 My last question for you, for the day, is this, Bob: You mentioned earlier that if you could give yourself a piece of advice, the advice that you would give was to put yourself in the owner category sooner to value the asset.
1:04:22.0 You’ve been an entrepreneur for many, many years. You’ve helped and worked with many entrepreneurs. You’ve really shaped the lives and the work of a lot of entrepreneurs. So in your opinion, are entrepreneurs born or bred?
Bob: 1:04:38.1 I think they’re bred because it really comes down to the environment that they spend their time in. Particularly in the early formative years. And who they associate with.
Because often, and once again I’ve got to be careful of the political side of things here, but in my view Australian schools often have school teachers there that sometimes are not as encouraging as they could be for people to take risks, to perhaps be non-conforming and to be ambitious.
Jordan: 1:05:45.3 This is the tall poppy syndrome right?
Bob: 1:05:46.9 Yeah. Yeah. I always believe that the best lessons are learned from people who are successful and sometimes I found that some school teachers are people – the ones that are actually shaping the minds of our future adults, are people that have not been successful themselves.
They can sometimes not be the most encouraging of people to be entrepreneurs, to take risks, to think outside the box.
Jordan: 1:06:33.2 That certainly resonates with me. I lean towards to born answer but I would certainly be a complete ingrate to not recognize the multitude of lifelong influences that put me in a position to both desire to be an entrepreneur but also to be able to manifest that vision successfully.
1:06:54.9 So I certainly think there is a balance between the two. I’m always interested in hearing the opinion of each guest. I appreciate you sharing, and I appreciate you coming on the show.
But even more than that, I appreciate you flying halfway across the world to be the MC and a keynote speaker at the 2018 PM Grow Summit. Bob, I appreciate you coming on today, I’m looking forward to seeing you in San Diego. Thanks again for your time today.
Bob: 1:07:21.4 Pleasure. And I’m certainly looking forward to being over there with you guys as well.