How Property Managers Can Do More With Less
Five ways to maximize financial efficiency so property managers can do more with less and become good at resource management in the short and long term.
Many property management companies have endured challenging issues with managing ongoing expenses — a result of rising costs, competition in the market and staffing difficulties.
In the quest to do more with less and maintain high levels of service with limited resources, industry leaders have already identified ways to trim costs first. When options are exhausted there, partnership with a financial services provider can help identify proactive strategies to make the most of available assets.
Solutions will take time because increasing operational efficiency and maximizing revenues can seem like competing interests, but there are helpful considerations to address pressures of costs, competition and staffing. Property management continues to be heavily associated with maintenance expenses and advice, but that addresses only a portion of the financial picture when balancing resources. For example, budget and asset review can reveal new opportunities to adapt, targeted marketing can counteract tightening prices and retention strategies can mitigate hiring costs over time.
No matter the size of the management portfolio, there are essential components to consider for efficient resource management in the short and long term. Beyond practical cuts, property management companies should start by reviewing well-rounded approaches to the financial picture of their businesses.
Five ways to maximize financial efficiency
Efficient changes can be a great alternative to having to make extreme cuts, but some of the opportunities likely require smart financial investment to combat inflation and the ever-present talk of recessions. When focused on reducing costs, considering broader investment choices alongside immediate operations choices can seem counterintuitive. However, strategic responses to economic factors can potentially drive higher revenues and strengthen business relationships. How can a business, along with its bank and other financial advisors, partner together to find ways to build financial flexibility both directly and indirectly?
- Examine workforce costs
The higher prices of goods takes a toll on take-home pay, and employees may want to renegotiate compensation based on the current market and outside of the annual review schedule. Prepare for this by revisiting the budget in an effort to have a plan to respond to an influx of requests. Wage pressure can happen at any level, and clear and transparent conversations about what’s being done can make a big difference. This can include talking with a compensation specialist to evaluate the status of the current wage scale and receive objective data to help align compensation levels.
Conversely, there are property management companies struggling to fully staff their organizations and are involuntarily operating with a reduced staff. A solution growing in popularity is hiring remote employees or virtual assistants to fill accounting, maintenance coordination and business development roles. While property managers can recruit remote hires on their own, many are turning to staffing companies that specialize in the property management space to help find top talent across the globe at a lower cost.
Many successful companies have implemented “lean management,” a set of principles created to improve the efficiency of processes and reduce perceived inequities between leadership and associates. Nonessential roles on a team may be taking up too much budget, and clients may not be seeing enough return on investment.
As property managers look to acquire other companies as part of a business growth strategy, a decisive factor is the size of the team they will have to put on the ground as a result of the acquisition. Property management companies making acquisitions where they already have a geographic presence may not need to make as many new hires as a company that is entering a new market through an acquisition. A sound growth strategy should determine a minimum number of units a company needs to acquire in a new city in order to make the purchase a sound investment and scrutinize the accompanying hiring implications, consolidating when possible. - Revisit financial investments
Property management companies with an abundance of cash may consider investing in higher-yield assets with growth potential to keep pace with inflation. Investments in property and equipment assets historically keep pace with rising costs during inflationary periods.
To invest in growth through an acquisition or another expansion strategy, consider a line of credit through a bank that specializes in property management. With higher interest rates, many banks may be willing to lend, but that doesn’t ensure the rate will be consistent. A banking partner established in the property management space can help secure financing that fits a company’s long-term needs.
Both property management companies that are in a financial place to invest in growth and those that are not can explore other avenues to boost financial efficiency. A banking partner should help analyze opportunities to optimize. If a company’s state doesn’t allow property managers to earn interest on trust accounts, their banking partner may be able to help identify potential ways to offset banking and third-party costs through an earnings credit rate program. Banks that specialize in property management work with vendors to do this, and help clients earn credits that lower costs and maximize every dollar. - Evaluate pricing and marketing strategies
Remember to consider the big picture when making tactical shifts to business plans as the current economic environment is unlikely to persist long term. Rather than implementing an across-the-board price hike, consider limiting price increases to targeted components or where particularly necessary, potentially within application or other management fees.
Conduct competitor research to gauge the processes of competitors and better align with the marketplace. Rather than paying owners the earliest or charging the lowest fees, consider the financial benefits of maintaining a higher monthly average account balance and the ways to leverage financial credit earned, all while still following a standard payment timeline. - Trim expenses through strategic consolidation
If property managers don’t have the expertise in-house, work with a consultant to find other expenses that can be reduced. A major expense — that impacts other operating expenses as well — is a company’s software stack. Consolidating software may not only be more cost effective, but also more convenient and functional. Consolidating accounting software with a maintenance coordinator is one example of a way to do this. Migrating to a new software provider is not a small undertaking but can be a smart financial decision that pays off in the long run. - Fine tune communication
Encourage open communication between leadership and employees. Never underestimate the power of transparent and empathetic communication in increasing employee retention. Additionally, many clients and vendors will be reconsidering expenses, and maintaining and strengthening connections during instability is crucial to the bottom line. Consider scheduling meetings to nurture the relationship base, and look into profit sharing programs with vendors.
Reliable partners are essential during changing phases of a market and can help reduce pressure while operating a business with limited resources. Property managers should tap into their resources and network to build partnerships with specialists — from a banker to an auditing consultant — who can help find additional ways to maximize efficiencies, through deep understanding of an organization and its financial situation, and the industry as a whole. Together, a team of advisors can help property management companies find strategic ways to adapt to new circumstances and set themselves up for future financial success.
This article was first published in Rental Housing Journal.
