Building a Budget for a Profitable Department

Profit, Profit, Profit! 

• What was your profit last calendar year? 
• What is your target next year? 
• How are you tracking? 
• Do you have a growth plan? 
• Do you have a budget? 
• Do you split your profit centers?

These are questions and conversations that I hear being asked in offices and at real estate events. Do you have the answers?

Why are you in business? As an entrepreneur, it may be to, make money.  Whilst there are other benefits to having your own business, this is the bottom line.  In basic terms, making money maps back to having a profitable business.


So how do we build a profitable business?

Current position

In building a business, you must start with a clear outline of the current position.  My number one rule is that you MUST split out the various business units. i.e if you have a property management department and a sales department these should be separate cost centers.

Separating the businesses provides a clearer picture of the financial position of the property management department.  Simply all income and expenditure for that department are allocated. In the case of operational costs these are proportioned for the department. The key is accurate allocation - Start by mapping last financial year and identifying your true department profit.

Planning

All building is done with a great plan. Create a plan to build a profitable business by setting your targets for the year first. Do you want to increase profit, $ or %? Or decrease expenses.

To achieve these targets you will need to look at planning for both the direct financial aspect of the business as well as the non financial actions that must be taken to reach the goal.



Budget

• Financial planning is in the form of a budget.
• A budget identified income and expenditure predictions and the projection of profit.

Business Plan

• To achieve the financial targets there will be clear actions that must be taken. What are these actions? 
• A simplistic approach is to create projects. Using growth as an example, what needs to be done in order to grow the income of the business? 
• One aim may be to increase the number of properties under management. Great, how do we do that? What actions are needed? 
• What resources? 
• What materials? 
• A project plan will assist in creating this strategy, but of course it is the execution that is fundamental.

Next week we take look at Execution and Accountability and its role in building a budget for a profitable department.

Fiona Blayney

Do you have a learning culture in your business?

Having a learning culture in property management will take you one step beyond simply having the skills you need to deliver a good service. It will empower your staff to achieve dramatically improved results compared to traditional businesses. Because as you are enabling staff to anticipate and adapt to change, as well as grow through innovation, they will also become more energetic, loyal and goal orientated.

Creating a learning culture requires a change in the way you see the traditional real estate model – usually heavily focused on sales training. To develop a company wide learning culture, training must become a key focus in the overall business strategy and it needs to be seen as a long term commitment (not a quick fix). A true learning culture continuously challenges its own systems and way of doing things, ensuring continuous improvement for not just the business but the individuals themselves.

Training can be a strong motivating factor for your staff, for some property managers this progress and development will be more important than money, as it helps them grow and gain new skills. It will help their performance at work and make them feel part of something bigger than themselves. Your workplace can become a business that people strive to come and work for.

On a team management level it will also get everyone functioning together, trusting and complementing each other and through having common goals will be able to produce extraordinary results. To be effective, training needs the full participation and commitment of all staff, at all levels – especially you.

To get started on redesigning your learning culture, we have a great analysis tool that can help you to identify where your company is currently at in regards to learning culture, click here to receive the “Learning Culture Audit” checklist!

If you are Real+ member, click here to visit Real TV where you can watch the webinar, 'Team Management Tools'

So you think you can grow your rent roll?

We see one very common goal amongst many property management businesses across Australia and New Zealand.... Rent roll growth! And why not?

There are many different reasons a business will choose to grow - growth, asset value, profit, sales farming, ego and more... Whatever your reason it’s importantly to firstly be sure of that reason – to establish your WHY before setting your goals, as this will affect the strategies and plans you put into place to get there.

Once you’re sure of your WHY and have set your goals –you will either go down the path of organic growth or potentially look at the acquisition of a rent roll – or perhaps a combination of the two. Which is the better option for you? Well again this will depend on your WHY but it is also vital to weigh up the pros and cons of each strategy.

Organic growth – where a BDM is put in place to prospect, appraise and grow is the most common way of growing your rent roll. The great thing about this option is that you can control quality, location & fees of properties, potentially avoid bad landlords and problem properties – however this option can be a slow way of growing due to the time taken in building landlord relationships and placing a new person on board the rent roll may not be profitable until numbers start to grow.

However more and more agencies are looking to purchase a rent roll as a fast way to grow. According to Harcourts the benefits of buying a Rent Roll include:

Pros
·         Increased size gives business momentum
·         Increases cash flow
·         Irons out fluctuations of a sales department
·         Eliminates a competitor from your local area
·         Increases networks and database
·         More opportunities for sales department
However they advise we must also consider the cons:
·         Landlord rejection
·         Buying existing issues
·         Potentially poorly run portfolio
·         Integration/transition issues

If purchasing a rent roll is something you have considered at some stage this is not something to rush into. There are many factors which need to be considered and it is strongly advisable to have an expert guide you through the process.

Lucky for you, we will have expert Matt Ciallella joining us from MC Rent Roll Broking for our next webinar. He will be on board to take us through all the considerations and variables you will need to consider when purchasing (and selling) rent rolls. Register for the live session here – or Real+ Members can watch the recorded webinar on their Real+ Platform at anytime. 

If you are Real+ member, click here to visit Real+TV where you can watch our webinar 7 Secrets to Buying & Selling a Rent Roll with our special guest presenter Matt Ciallella from MC Rent Roll Broking.

Need to increase your productivity? A lesson in distractions.

By Fiona Blayney

Heading back into the office this week after being offsite for the past two months (we had our second child), I started to think 'how the hell am I going to make this work?' Many mums out there will understand that fear (but that's a whole other article).

What I want to share today is more about one of my resolutions... To increase my focus by removing my distractions.

The first part of this was to quickly establish what my primary distraction is, what was the number one thing that took me off track each day. Step 2 was to set about reducing or removing it from my work life. I knew if I could do this I would increase my productivity in the time I'm in the office, be able to leave at a reasonable hour and be 'present' for that short window of time we have with our kids between arriving home and putting them to bed.

You may or may not be surprised by what I found out about myself this week. I am the distraction!

By this I mean, perhaps I get too excited about our business but I love interacting with our 8 team members, I'm keen to be across the 'activity' in the office so I can support them, I tend to interrupt others when I have a not so pressing question, and know I can be a mosquito .... attracted to the bright shiny lights of business otherwise known as the fun stuff, the ideas.

Really I have always known this shocking reality, but as your external responsibilities grow you have a new found driver to stay focused, not over commit and communicate effectively.

So far I'm on track, I have maintained my level of awareness, empowered my team to continue to act like I'm not here, make decisions like I'm on holidays and identify their own distraction....

It's perhaps not uncanny that they too found the same distraction.... Themselves

Are you and your team up for some role play?

Don’t worry nothing too sinister here, but after our recent Scripts and Dialogues webinar we’ve had some request from our Directors and Department managers for advice on Role Playing.  Role Play is not just valuable in the new business arena but can be a great way to build up the confidence and dialogue skills of your team.

Role Playing provides your staff a chance to act out, rather than merely talk about ways to solve problems effectively – the benefits are endless. It also gives you the opportunity to provide them with supervised practice, feedback and support in dealing with “real life” problem situations.

As a manager this kind of teaching technique will come naturally to some, however for those who haven’t dabbled much in Role Play for your team, or are looking to improve we have some tips here for you:

• Try to give advance warning of a role play. Some will need time to mentally prepare for this (or time to find an excuse not to attend, which of course they won’t be able to get passed you...)
• It is helpful for you to take the lead and act the situation out first to get things off to a good start.
• Be sure to clearly define the situation and roles to be played (some may wish to write the situation and role down first)
• The staff should be encouraged to be realistic in role plays – but should also to understand that it will usually feel a little awkward and unnatural. (The point is that skills will translate naturally in a real life situation.)
• Gentle encouragement may be needed for some staff where as some staff will take at it like a fish to water (those will be your initial volunteers).
• It is fine for you to coach them to portray their roles during the action as it provides feedback and support. Always try to swap the roles to allow both parties to have a go at each role.
• Praise all role play efforts, there is no wrong, just room for improvement.
• If there is a group situation, always encourage the group to be the one to provide the feedback on what they did well, what they could improve on and their own suggestions for the situation.

For more ideas, assistance Role Plays (new business or property management) don’t hesitate to contact Hermione at Real Plus here

Time to Turn Complaints into Compliments?

I’m sure many of us in property management have noticed that our landlords and tenants are becoming more educated and demanding than ever. The skills of a property manager now need to extend to far beyond a collector of rent or a coordinator or repairs with expectations of a property manager higher than ever. This is partly because our client’s are easily educated by the internet, are persuaded by stories in the media, and are able to communicate both positive and negative experiences far easier amongst their community through social media.

Thanks to this, those we perceive to be “difficult clients” are far more prevalent in our day to day dealings and situations with potential for conflict are arising more often. At Real Plus our most common request for training is on communication and conflict resolution. What we see is that even experienced property managers in general are not always equipped with the communication and conflict resolution skills needed to cope with these increased demands, expectations and knowledge.

The most successful agencies we work have ongoing training plans into place to grow and develop their teams and business to both educate themselves, but also find ways to educate their clients, therefore becoming the expert in their field. Ongoing training will also enable them to add an array of communication techniques and training into place to help their teams avoid conflict and turn potential complaints into compliments. Some tips for ensuring you are staying one step ahead include:

• Stay educated – Ensure you know what your clients know so that you can proactively tackle any potential issues
• Keep training – Undertake ongoing internal and external training so that skills are continually being developed to deal with ever increasing client needs/demands 
• Peek out of industry – some other industries such as retail and hospitality can bring some great communication, conflict resolution and customer service skills to the table
• Look to improve – don’t assume that because it’s been done a certain way for a long time that it’s the best way to do it
• Listen – the best advice anyone working in property management can take on board, often we don’t actually listen and this is the root of most potential issues

If you are Real+ member, click here to visit Real+TV where you can watch our webinar Communication Concepts: From Complaints to Compliments

How Would You Rate Your Rent Review Process?

We all know an essential part of our property management process is the rent review. At this stage we are generally finding out what the tenants plans are and if they want to stay on, then letting the landlord know the current rental value. But what if we took this simple rent review s step further and conducted a complete tenancy review with the landlord?

What if next time the rent review comes up we conduct the tenancy review as if we were sitting at a new listing presentation with them to discuss their needs by asking questions such as:

• “Paul, before we review the rental value on your property I just wanted to have a chat about you. What are your plans for the next 12-24 months?
• How have you found the tenancy so far? What do you think of the tenants?
• What is going to be most important to you in reviewing this tenancy? Increased rental value? Or tenant security?
• When would you like us to next review the rent?
• Do you have any plans to move back in or sell in the foreseeable future? As we can work on a plan towards that together.

Perhaps the landlords wants, needs and expectations have changed since you appraised their property 12 or more months ago. Things change so quickly in all of our lives, we need to remember that our landlords are people like us and things change in their lives too, therefore we need to consider their needs which are constantly changing just as our own are.

Originally your landlord wanted a family in their property, but are quickly realising that perhaps that professional group would have been better. Perhaps they were planning to stay away for 3 or more years but now plan to return home in six months time. Perhaps they are thinking of selling in a year but may not realise increasing the rent now risks the tenants vacating closer to the sale time.

This new process of reviewing not just the rent, but the tenancy itself will enable you to best recommend options to the landlords based on their needs (and not what we assume their needs are based on our process). Most importantly, just by opening up this whole new world of communication you are improving the relationship between yourself and the landlord by showing you actually care about their wants and needs. Imagine the possibilities.

If you are Real+ member, click here to visit Real+TV where you can watch our webinar: Systemise for Success - Rent Reviews.