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Breaking Down the Profitability of your PM and Sales Business

Week 4: Our Transform Masters 2017 Supersix learn about the science of profitability with Fiona Blayney

Transform Masters 2017 is brought to you with thanks to our sponsors Property Tree, and Real+

In this preview of her next Transform Masters Coaching session, Real + CEO Fiona Blayney talks about which numbers are the magical numbers that impact your business.



Hi, I’m Fiona Blayney, the Head Coach at Elite Agent for Transform Masters 2017.
The first numbers you want to be around is creating not just your P and L, I wanna know exactly what the profitability is of your property management business if it was a stand alone entity.

Initially, we need to understand what that silo is of property management, and how then it is influenced, and how it influences the other factors within your wider business. Once you’ve got your P and L though that’s your current position.

We then want them to start looking at budgets, so, how can we make more money? How can we improve our profitability? Then we start to look at the actual management of the portfolio, and that then leads itself to how many properties can a Property Manager manage. That’s all about things like maintenance, arrears, lease renewals, rent reviews, routine inspections.

We want to look at the average tenure of a tenancy, so we can start to say, “What are the mechanics of how we’re going to manage that tenancy turnover? But, equally how are we gonna profit from it?”.

The relationship between staff numbers and profit is varied across the country. 15 years ago, 20 years ago even we were told 33% staffing cost, 33% operational cost, 33% profit, wipe that blackboard clean. What I’m earning in Goondiwindi per property versus what I’m earning in Sydney per property, there could be a 50% variants in rental value and rental return there, in terms of management fee, income, and ancillaries.

However, there’s typically not a 50% difference in terms of staff wages. What you want to be looking at is, how long does it take based on the efficiencies in your business to actually manage a property? How many properties do you have? Therefore, how many hours of manpower do we need in order to offer that service? And that’s gonna give you a baseline costing.

Then we’re going to look at profitability, we’re going to look at obviously operational cost in regards to that, and we’ll say, “What can we do to improve the ratio of people to property, so that we can get our efficiencies up, and obviously get our profitability per head count up.” Then secondly to that, what can we do around the operational cost and where can we start trimming some fat.

Inefficiency and waste I turn straight to the car park, so, a portfolio of properties and rent roll is like a car park. There’s a certain number of cars that you should be able to park in that car park at any one time.

So, if your full capacity in that car park is 500 managements, and you’re currently sitting at 450 we’ve got a 50 property inefficiency, a 50 property loss. So, we need to get that car park filled really quickly.

We often talk about average management fees etc, and that’s about profitability. But, what we say is, “How can I just maximise the amount of income that could be potentially generated by this rent roll as it stands right now, based on our workforce?”.

Where are we just spending money that we really don’t need to spend money anymore, and that could be things like online subscriptions, or even advertising accounts that you forget; Facebook’s a great one, boost that post. Next minute you’ve spent thousands of dollars across a year without even realising it.

Do versus delegate as a principal is one of my favourite topics. What you wanna do though is work out what is your highest and best use, and equally what do you think you are worth per hour?
So, highest and best use might be you’re good at it, it makes you money, and you actually enjoy it. So, if you can hit those three that’s the tri-factor … But, secondly to that, if you’re doing something and you think you’re worth $200 an hour, and you could otherwise pay somebody $30 an hour to do that job, well you’re losing a hundred and seventy dollars per hour because you should be off doing something that is of that value, and of course worth a greater return.

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