It’s a sad but well-known fact that small to medium sized property management businesses are seldom (if ever) particularly profitable. Sure, they can deliver a reasonable turnover, but increasing that turnover usually comes with an associated increase in overheads, particularly with new regulations adding to the workload. That makes it tricky for business owners to transition from making ends meet to making a real profit – a challenge we really enjoy helping our clients solve with the help of WeconnectU Community Management Solution.
One of the biggest challenges when it comes to increasing profits is the difficulty involved in scaling a traditional property management business. WeconnectU’s Community Management Solution offers a huge amount of functionality to make scalability possible for small, medium and large property management businesses. (Read more on that, here.) So, although software is a key step in helping you to be more profitable, software alone can only go so far towards helping Property Managers generate additional profits. Unlocking more value – and more income – involves some seriously strategic thinking and a willingness to think outside of the box.
Luckily, that doesn’t have to be a long, drawn-out and painful procedure. Our advice? Start with the steps below and be amazed by just how achievable better profits can be.
Choose the right clients
When you get right down to it, every community you manage – particularly when it comes to sectional title – involves the same base-level of work, regardless of size. You still need to hit all your compliance targets, attend all your Body Corporate meetings and AGMs, and perform basic financial and maintenance management. Whether those services apply to 30 units or 300 units is often largely irrelevant – they still take the same amount of work.
There are, of course, some exceptions to this rule. Larger communities tend to have more frequent maintenance issues, for example.
So if large communities and small communities involve much the same level of work, it makes sense that they incur similar costs – at least up to a certain threshold. It also makes sense for high-maintenance communities (you know the type) to pay for the extra attention they demand. Why, then, do so many Property Managers limit themselves to a per-unit fee, regardless of the size and nature of the community?
If you want to make any kind of real profit, it’s essential to address this common mistake. How? We suggest the follow steps:
- Implement either a minimum charge or a minimum community size to ensure your overheads are always adequately covered, your business model remains viable and your book turns a profit at all times.
- Offer discounted fees for reduced services – if a small community can’t afford a full-service package, they might be perfectly happy with financial administration only (for example).
- Work out a minimum hourly rate that generates the income you need to cover your overheads and generate a profit, and then measure the actual time your team spends on each community. If the fees they pay, divided by the hours they take, do not equal or exceed that rate, you need to renegotiate their contract or drop them as a client.
Short term gains = long-term drains
We realise that it’s not always easy to pick and choose the communities you manage, particularly when you’re just starting out in the property management business.
Most new and/or small property management teams end up signing every client they can get their hands on, which often creates a book full to the brim with small, labour-intensive communities that barely cover overheads. That may be enough to start off with, but becomes a serious limitation on scalability down the line. Without implementing some kind of minimum fee, those communities will never be able to pull their weight financially.
Sadly, there’s no easy solution to this one other than to approach your ramp-up phase more cautiously, with a minimum charge (or minimum community size) from day one. Yes, this may put some communities off, and your book might grow a little more slowly as a result. However, you’ll avoid the vicious circle of having to spend all your profits on hiring more staff to handle the outsized workload for every new, low-paying community.
Unlock all of your potential income streams
The usual suspects
We’re sure you’re aware of the usual income streams for property management businesses, but we’ve listed them here, briefly, for the sake of completion.
- Take-on fees for setting up a community within your property management operation. (The size of this fee should vary depending on the state the community is in, its size and its management requirements.)
- A per-unit management fee or minimum monthly fee for management services. (Typical per-unit fees range from R60 to R250 and monthly fees vary depending on the Property Manager and community.)
- Transfer clearance fees. (These range from R500 to R2000 per transfer, and cover the generation of documentation confirming that a unit’s levies are fully-paid and up-to-date prior to a sale.)
Additional income streams
What a lot of property management business owners don’t realise is that the typical fees listed above are only the tip of the iceberg of potential income. There are a huge number of ad-hoc and extra services that Property Managers provide that are frequently overlooked when it comes to billing. These include:
Some Property Managers may choose to include a limited number of site inspections as part of their property management package, but it’s more common for these to be conducted on an ad hoc basis as and when a community requests them. As such, you are well within your rights to charge for this as an additional service. If you’re going to be spending valuable personnel-hours conducting an inspection at your community’s convenience, you deserve to be fairly remunerated.
In the past, charging to send arrears notices was literally more trouble than it was worth. The legislated limit of R30 per notice simply didn’t cover the amount of work required to collect it. However, if you’re using a modern Community Management Platform like WeconnectU, this process is exponentially simplified, enabling business owners to tap into this income stream at the click of a button.
Instead of laboriously creating, sending and following up on each first notice, second notice and letter of demand, WeconnectU lets Property Managers send email and SMS notices in bulk. Any applicable charges are automatically added to the appropriate owner’s account and invoiced, reducing the time and effort involved in claiming fair compensation for this service to virtually zero.
Handovers for collection
It’s not unusual for Property Managers to have to hand over the occasional owner to attorneys for debt collection. This typically involves drawing up a fair amount of documentation on the arrears process to date, and should definitely incur an additional fee.
Of course, if you’re using WeconnectU, you’ll have a log of all arrears notices and actions taken, making it easy to hand over the necessary information to the attorneys. Those attorneys can then make notes and assign various debt collecting statuses to owners using WeconnectU’s system, enabling you to effortlessly report back on progress to directors and/or trustees.
(Remember, just because you have the tools and systems in place to make a process easy doesn’t mean you shouldn’t charge a fair rate for the service!)
Very few property management businesses registered as debt collectors in the past. Only the largest could really handle the additional workload and reporting, internally. These days, technology like WeconnectU simplifies the debt collecting process to such an extent that even the smallest property management business is able to branch out into this additional income stream if they choose to.
WeconnectU’s debt collection module is a brand-new addition to our system. Get in touch for a full run-down on its cutting-edge features.
CSOS is an invaluable resource when it comes to adjudicating unresolved disputes within communities. However, preparing for and attending CSOS hearings can be extremely time-consuming and – since the Ombud is a relatively new addition to the industry – this time is not costed into most property management packages.
For this reason, we advise Property Managers charge for CSOS attendance separately, particularly when acting as formal representatives of a body corporate.
Attendance of additional trustee meetings
Unlike CSOS hearings, trustee meetings are par for the course for any Property Manager. As such, contracts normally include Property Managers’ attendance at a specific number of meetings every year. However, if trustees or directors have requested your presence at meetings above and beyond what has been contractually agreed upon, you have every right to bill for the additional time and service.
Specialist legal advice
If you’ve managed to effectively scale your business and have the capital to hire in-house legal counsel (a valuable addition to any property management team), this can be a great way to open up an additional revenue stream. Instead of handing clients over to outside attorneys every time they need legal advice, opinions or other legal services, you can handle these needs in-house and charge appropriately for the privilege.
Specialist financial services
Having a CA or CMA on staff can be just as valuable as an in-house attorney, and the cost of their specialist services can be passed on to clients in the same way. If you find yourself performing value-adding HR functions (e.g. payslips, UIF and PAYE submissions) or compiling financial statements that would ordinarily be done by external auditors, make sure you’re adding professional service fees to your client’s account.
Staff is one of the key areas in which you get what you pay for. It may seem counterintuitive that more expensive, highly-qualified staff will increase your profits, but in our experience, a top-notch team is a non-negotiable when it comes to profitability.
Poor quality staff come cheap, but they invariably lack the autonomy and flexibility needed to scale their capacity and take on more responsibility. That means every time you onboard a new community, you’ll need to onboard new staff to handle the increased workload. That quickly erodes your profit margins before you even get started – a sure-fire way to keep your profitability goals at arm’s length.
Hiring the right people, on the other hand, enables business owners to step away from day-to-day operations and focus on working ON their business instead of IN their business – the hallmark of a successful entrepreneur. This, together with a team skilled enough to scale operations through intelligent workflows, enables you to grow your business without increasing your overheads. And as we all know: increased income + stable expenses = more profitability!
Invest in technology
As vital as it is to have the right people and the right processes in place, you still need to provide them with the right support if you’re going to tap into their full potential and the potential income streams they can unlock for you.
With the complexities of today’s property management environment, the only truly effective way to do this is through a consolidated technological solution. The traditional mismatched collection of software and old-school tools just isn’t good enough anymore, and the benefits of choosing a comprehensive, purpose-built solution far outweigh the relative costs at the end of the day. (Get in touch to find out more about WeconnectU’s pricing.)
WeconnectU’s Community Management Solution
At WeconnectU, we’ve created an end-to-end property management platform that facilitates all the necessary workflows – and then some – for fast, efficient and cost-effective property management. It not only provides across-the-board efficiencies, it also supports fully transparent interdepartmental communication, enables effortless collaboration between all community stakeholders, and makes management-level supervision a breeze.
With our software, your team has everything they need to perform at optimal capacity and deliver better service in less time than ever before.
There’s no easier way to streamline your operation and scale your book for maximum profitability, but WeconnectU’s strengths aren’t limited to day-to-day operations alone. With comprehensive reporting available at a click of the button, it’s a simple matter to demonstrate just how much work your team is putting into a community and communicate the true value your services add.
This can be a vital step towards negotiating fair rates for exceptional service and improving the minimal profit margins that have traditionally plagued the industry.