Just like you need a check up every year to stay in tip-top shape, so does your property management business, says Jo-Anne Oliveri.
Ongoing monitoring and evaluation of your property management business is key to ensuring it does not just survive, but succeeds. Understanding your internal and external environment allows you to understand your current situation and better predict your future. This allows you to adapt your business goals and targets to capitalise on current opportunities and plan for the future.
In other words, a successful property management business is one that is flexible – it plans and reviews its business goals and targets to ensure they are working towards the business’ internal strengths and external opportunities. If you, the principal, do not understand your environment you cannot understand how efficiently your property management business is operating year to year. This is when your property management business is simply ‘surviving’.
An operational evaluation, or ‘prognosis’, lets you monitor and evaluate your business to ensure business goals and targets are working towards success. Essentially, it provides a snapshot of the current state of your business operations by evaluating your systems, critical factors, income drivers and customer service standards. The outcomes should then be consolidated in a diagnostic report, which indicates where you need to adjust your business plan’s strategies concerning systems review, growth forecasting, budgeting and brand protection. This ensures your strategies are working towards achieving your new business goals and targets.
Systems are your processes and procedures used as day-to-day methods of practice. These need to be evaluated to ensure they demonstrate consistency, compliance, completion, and best practice. Systems are evaluated by crosschecking reports generated from your trust accounting software to identify the critical factors. These reports tell you how your systems are currently being managed, monitored and measured.
Critical factors determine the current flexibility or volatility of your property management business. By cross-checking the trust accounting software reports you should identify your business’ average management fee, average distance to property ratio, average weekly rent, management splits, number of owners against properties under management, percentage of fixed term leases, monthly disbursement methods and timing and arrears management factors. Evaluating these factors lets you know if your current operations are working to achieve your business goals and targets, or costing you time, money, clients and brand damage.
Most businesses simply ‘survive’ because they only monitor their management fees, meaning income is lost due to unmonitored income drivers, such as unclaimed fees. A lack of processes operating and monitoring your many potential income drivers costs you money. An operational prognosis evaluates every income stream your property management business generates and uncovers where you could be earning more. For example, it uncovers whether management fees earned equal what the cross-checked reports state the average monthly income should be, further indicating whether every management on the trust accounting software is in fact still active. This gives a greater understanding of what processes are needed to ensure growth.
CUSTOMER SERVICE STANDARDS
Customer service standards are the policies and procedures, which maintain mutually beneficial relations with your clients. If your current policies and procedures are not building such relations, then clearly they must change. An operational prognosis gives you the opportunity to evaluate your standards to see if what goes on behind the scenes, for example prospecting, arrears or maintenance policies, are being consistently followed and are actually working to maintain these relations and therefore your bottom line.
When you understand the current state of your systems, systems review can be geared towards success, not just survival. Given the outcomes, consider which areas of your day-to-day processes and procedures need adjusting in terms of demonstrating consistency, compliance, completion and best practice, and also by being better managed, monitored and measured by you and your team. It is also important to revisit your organisational culture (values, beliefs and norms) and brand messages to ensure your systems consistently communicate to your team and clients what your business is about.
GROWTH FORECASTINGAND BUDGETING
When you understand the current state of your critical factors and income drivers, strategic growth forecasting and budgeting can be planned for the next year and next five years. Strategic growth forecasting ensures retention of team, clients and brand protection. Strategic budgeting ensures your income drivers are driven towards growth. As you are now in a position to understand what team members are required and at what stage in the growth cycle, you can engage the right team at the right time using the right processes for the next five years. Your business’ income and expenses are now planned, predicted and monitored to ensure growth.
When you understand the current state of your customer service standards, brand protection becomes strategic. As your brand is a valuable asset and income driver you must actively protect it. Your operational prognosis’ outcomes allow you to review what service policies and procedures need to be changed or added so your clients are kept happy and therefore positively perceive your business, protecting not only your brand but your bottom line. For example, if the prognosis shows the maintenance policy is inconsistently followed, causing clients to feel unhappy about your service, perhaps new resources which seamlessly guide your team and clients through this procedure are needed. Your prognosis’ outcomes direct you to the most appropriate strategies.
The best time to conduct or commission an operational prognosis is three months prior to preparing your annual business plan. In any case, if you want your property management business not just to survive but succeed, then as well as ongoing monitoring of your external environment, conduct an operational prognosis every year to understand your internal environment. That way you can use the outcomes to plan and review your business plan with goals, targets and strategies that capitalise on current opportunities and plan for the future.