Growing Your Business Without Growing Your Headaches (Part 1)
As a small business owner the most difficult part of being the boss is that you get to do everything. Often it is hard to get one thing done in a day let alone the myriad of tasks that are all competing for your time and attention.
In this article we are going to focus on what type of business do you want so that you know how to grow and where to focus your attention to make that growth happen. In part two of this article we will focus on the specifics of how to manage the tasks to get the most accomplished, stay focused on what is important, and how to deal with all the other demands of your time.
I think we all need to stop and assess why did we want to be a business owner? For most business owners there is a passion about what they do, pride in offering a service or product, and last but not least the noble idea of being one’s own boss which we think means working when we want, spending time with family, and having a good living and eventual retirement etc.
However, more often than not it is the complete opposite. We work 24/7, pour all our resources of time, energy and money into the business often at the expense of our family and our own health and wellbeing. We get sucked in and can’t seem to find a balance. We end up burned out, and less well off financially. But, I am here to tell you there is a way to have the dream.
I strongly believe it is important to decide upfront your end game. How much growth do you want? If you grow too quickly you risk damaging your reputation that worked so hard to establish. I am a firm believer in consistent growth. This allows you to prepare for and manage the growth. Banks also like to see this as well. You are a stronger candidate for bank loans or lines of credit if needed if you can show consistent growth.
My next question is what type of growth? Growth can be measured in number of properties or in revenue. I decided to keep my number of properties the same but grow the revenue. I went after higher-end properties that had less maintenance and produced more revenue. I also started to aggressively offer value added services to clients which allowed me to create additional revenue streams while still managing the same number of properties.
Survey what your competition is offering. Then seriously look at what you offer and see where you might be able to offer other services. An example might be you offer tenant placement services. Not all companies offer this. Look at what you are currently doing that you are not charging for and start charging for it; such as if you accept pets in your properties offer a Pet Program this is where you go inspect the property 2 times per year and the tenant pays for your time. This has been very successful for my company. I now have Owners more willing to allow pets, and the responsible tenants are more than ok with it, and now you can charge higher rent for allowing pets, which means more money to you in your management fees.
All too often I find that people undersell themselves and work for free. If you aren’t confident in your value and what you bring to the table then how can anyone feel confident in hiring you to manage their investment property.
Look at your management fees. Please don’t just be the cheapest in town. Know your value and charge for it. Even if you raise your management fees just a half percent I am sure clients won’t leave over this and all those half percentages add up to a real boost to your bottom line.
Review your rents, can they be increased? If you spend a lot of time handling maintenance calls and repairs do you charge a coordination fee to deal with the vendors?
Start looking very seriously at all the things you do in your business and see how you can monetize it. I am the most expensive company in town and I have a thriving business. So don’t let fear of losing clients keep you from offering services and charging what you are worth.
If you do decide you want to grow in number of properties. There is a tipping point where if you have too many properties to handle you have to hire more employees and then the cost of additional staff outweigh the gain in the properties. You need to focus on your numbers so you know what properties are producing and then you can do the simple math to determine what is the maximum number of properties you can handle before you need to hire more staff? And, if you want to grow what is the number you want to reach and then hire for it first which means you need to build up money to pay additional salaries until the new properties are covering those expenses. You need to plan for the growth otherwise your employees who are now over worked, and over stressed might leave and then where would you be?
I think everyone who runs a small business will attest to the ratio 80/20 that means you spend 80% of your time managing 20% of your clients. I have always felt this was extremely unfair to the other clients you work for. The 20% are essentially stealing from the other 80% of your clients. They all pay the management fee yet some get less of your attention. You can handle the 20% in two ways. Let them go or increase their management fees to cover all the time you spend with them and on their properties. I chose to cut them lose. I also let go any owner that I didn’t like working with and instead focused on quality of property and quality of owner. My business has grown through referrals and I want referrals of great clients not referrals of needy and demanding clients. Just eliminating the 20% will not only free up time, allow the great properties to come into your business but 80% of your headaches will go away too!
This is what I did in my business and it worked for me. I grew my business 20% per year since purchasing the company in 2005 while keeping the number of properties about the same. That continued growth in revenue allowed me to get a SBA loan to purchase my office building, and remodel it. It also allowed me to refinance it at better terms 2 years later. I was able to pay myself instead of putting everything I earn back into the business.
I had the right employees (that is another article about how to accomplish this) who could run the office without me being there and this allowed me to work in the office only 3 days a week and work remotely as needed the other 2 days a week while I performed parental caregiving. This was a true blessing to be able to spend time with my loved ones at the end of life and not feel torn between my responsibilities at the company.
I challenge all of you to take a serious look at your business. Decide what type of business do you want and then decide what you need to do to get there. Have the right number of employees to support your goals and start the plan. If you stay focused on the plan you will be able to have it all without the headaches.
Lastly, but not least of all please join NARPM and other professional organizations. They are a fantastic resource of ideas and education to support you and your business. Not least of which is the moral support of knowing you are not alone.
Try just one recommendation here and let me know how it worked for you.