EPM

Building Your Business Part 1: Where Have All the BDMs Gone?

In Macquarie Bank’s last Real Estate industry survey, it was noted that more than 90 per cent of offices wanted to build their rent rolls either organically or through acquisition. However, in a recent survey of Property Management businesses by the PPM Group, it was revealed that only 15 per cent of offices hire full time Business Development Managers (BDMs). If you are serious about growing your rent roll, a full time BDM may be the way to go. Story by Samantha McLean.

If you were to ask a business owner whether they wanted to grow their rent roll and how they planned to do it, the two most likely responses would be either acquiring a rent roll, or “organic growth”.

Buying a rent roll is not always an option. The option to buy will always depend on the economic forces of supply and demand in your area.

Then there is the strategy of “organic” growth – growth that comes from the existing business. Lots of business owners use the term organic growth to mean picking up new managements when time permits.

Organic growth, however, in the strictest economic sense, can be negative as well as positive. You may pick up the odd referral from your sales department, but then you may lose other managements the same way. Then you may also have landlords moving or even lose some managements to the competition. I read once somewhere that you should only use the words “organic” and “growth” in the same sentence if you are talking about farming. And I couldn’t agree more. Real growth is usually the outcome of a carefully planned and executed strategy.

Why hire a BDM?
Even though it’s the other side of the office that is called “Sales,” Property Management is still a sales business. The end goal is to sell your management services to both tenants and landlords in order to create economic wealth via management fees.

A Business Development Manager has specialist skills to help you grow your rent roll, whilst allowing your Property Managers to maintain focus on managing the current portfolio. It should be the BDM’s primary focus to grow the rent roll in a controlled goal driven fashion.

Lots of business owners use their existing Property Managers to develop business “on the side” whilst they continue to maintain focus on their primary duties. The primary focus of their job will always be the priority. As a result, Business Development activities are only able to get some focus in spare moments. And we all know that when you are a busy Property Manager, there are very few spare moments! The result is only a small amount or even negative “organic growth.”

Property Manager: def: person or company who is focused on the day to day operational aspects of an individual property such as inspections, physical maintenance, repairs or renovations, rent collection, payment of expenses, chasing arrears. a.k.a. jack of all trades, counselor, mediator, advisor and many others.

Business Development Manager: def: person who uses a number of techniques designed to grow an economic enterprise, for example marketing, sales, information management and customer service.

As you can see the basic definitions of both positions are quite different. It makes far more sense to have your employees 100% focused on what they are good at.

Budget, income and expenses
Hopefully, by now I’ve convinced you that hiring a specialist BDM is a good strategy to grow your rent roll. However, before you place that advertisement on SEEK, you must have a plan.

The first step is to make some assumptions about income, salaries, bonuses and targets. You may even wish to conduct a sensitivity or what-if analysis to work out the best or worst case scenarios. Either way, if you are going to hire a BDM to grow your business, you need to know what your breakeven point will be.

Here is a simple calculation:
Let’s assume we pay our BDM a base salary of $60,000 plus on costs (20% pa), $72,000. On costs are defined as things like superannuation, annual leave, desk space and other expenses. We give our BDM a KPI of 15 new managements per month (180 per year) at an average management fee of 8%.

Let’s also assume that the average weekly rent for the purposes of this exercise is $300 per week.

Letting Fees
Average 1 weeks rent = 180 x $300
$54,000
Management Fees
Assume 8% ($300 x .08 x 52 x 180)
$224,200
Total New Income
$278,640
BDM Salary
$60,000 pa + on costs at 20%
$72,000
BDM Commission
$100 per management
$18,000

New Property Manager
$50,000 pa + on costs at 20%
$60,000
Costs associated with RR growth
$150,000
Approx Net Revenue Benefit
$128,640

Note: This is a simple calculation, which is designed to give an annual estimate based on the above assumptions.

Qualities to look for in a BDM
The very best BDMs are like consultants. They don’t sell, but rather are good problem solvers. They understand the importance of delivering value to both their prospects, clients and their employer. There is not much point investing in a BDM that only brings in business that is at a lower average gross margin than you are already achieving. Fifty times zero still equals zero.

Great BDMs are also awesome self-marketers. They understand their personal unique selling point and use this to generate leads. They understand the power of databases, CRM systems, and regular customer contact. They are masters at generating new business by referral.

Lastly, great BDMs are results, KPI and commission driven. You will need to make sure you offer a good incentive plan to ensure that the KPIs set are achieved.

Checklist: what to look for in a BDM

  • Has a consultative “selling” manner
  • Goal/KPI driven
  • Good problem solving ability
  • A strong personal profile
  • An expert self-marketer (eg newsletters, linked in, facebook, blogging etc)
  • Confident public speaker
  • Understands databases/CRM and is able to leverage both
  • Knows the importance of networking
  • Is confident in asking for referrals
  • Understands margins, thinks like a business owner

Summary
If you are serious about growing your Property Management business, and acquiring/buying a rent roll is not an option, you should look at hiring a specialist BDM. If you decide to choose this as a strategy, make sure you have a well defined strategy and be prepared to monitor results and adjust the plan if necessary. Don’t employ Property Managers and expect them to grow management numbers on the side. Their usual workload will always get the priority and growth will be slow. And lastly, use the words “organic” and “growth” together only when you are talking about farming!

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Samantha McLean

Samantha McLean is the Co-Founder and Managing Editor of Elite Agent and Host of the Elevate Podcast.