Property Management Growth with DoorGrow DGS 156: The 4 D's To Revenue In Your Property Management Business
Take a look at your portfolio, investors, who you're targeting, and methods used to find out how they line up with the 4 Ds to revenue in property management—deals, doors, duration, and dollars. The 4 Ds is a framework/concept that helps you figure out how to grow your business and improve it. Property management growth expert and founder/CEO of DoorGrow, Jason Hull talks about the 4 doors (or numbers) that equal the gross revenue of your company when multiplied by each other.
You'll Learn...[02:19] Why the 4 Ds are so important in your property management business.
[02:43] 4 Ds to Revenue: What are they?
[02:47] Deals: How many deals are you getting on?
[03:15] Doors per deal: How many investors are you getting that have 2 or more doors?
[04:20] Duration: How long can you keep them as a client? Connects to lifetime value.
[05:45] Dollars: Money is needed to generate revenue. Revamp pricing structure/model.
[08:00] Identify Ideal Prospects: What would their situation look like regarding the 4 Ds?
Tweetables"We need some money in this equation. Otherwise, it's not going to equal revenue."
"You want to make sure you're getting paid really well."
"Price sensitivity is created artificially by my clients. They don't realize they're creating it and how."
"Colder leads are going to have a much higher price sensitivity than warmer leads."
Resources TranscriptWelcome, DoorGrow Hackers, to the DoorGrowShow. If you are a property management entrepreneur that wants to add doors, make a difference, help others impact lives, and you are interested in growing your business and life, and you are open to doing things a bit differently, then you are a DoorGrow Hacker. DoorGrow Hackers love the opportunities, daily variety, unique challenges, and freedom that property management brings.
Many in real estate think you're crazy for doing it, you think they're crazy for not because you realize that property management is the ultimate high-trust gateway to real estate deals, relationships, and residual income. At DoorGrow, we are on a mission to transform property management businesses and business owners. We want to transform the industry, eliminate the BS, build awareness, change perception, expand the market, and help the best property management entrepreneurs win. I'm your host, property management growth expert, Jason Hull, the founder and CEO of DoorGrow. Now, let's get into the show.
I had a hard time coming up with what to talk about today. We just had Christmas and New Year's is coming up. We're sort of in this time period where I think for a lot of business owners, we tend to start focusing on our business because we've got a little bit of downtime, a little bit of free time, and some quiet moments maybe. Then we're also spending a lot of time focused on family and spending time with family.
One of the things I wanted to talk about today is what I call the Four Ds to Revenue in Property Management. I also sometimes call this the Four Doors to Revenue and sometimes visually, we'll showcase four doors when I'm explaining this, or coaching clients on this, or teaching this. The Four Ds to Revenue is really four numbers that when multiplied by each other, equal the gross revenue of your company.
Just to drive this home with multiplication, each number is so important that if any one of these four numbers—metrics-wise—in your business is zero, you make $0. That's how important they are. If you move any one of these numbers, if they're a one, for example, and you move it to a two and you double it, you double your revenue. That's how important multiplication can be in generating revenue in your business.
Let's go through these Four Ds to Revenue. The first D is Deals. In looking at the revenue of your company and trying to grow your business, you want to get on clients that are bringing to the table multiple deals or deals on the regular, and you need to calculate how many deals we're getting on roughly right now. That would be some sort of number. You're getting on a certain number of deals.
The next number, the next D would be Doors per deal. The reason I separate this is a lot of clients, especially in single-family residential property management, equate these things to the same thing. They're like I get on a deal, it's a door. Now that second D, to separate that out is important. That second deal of doors means doors per deal. If you move the needle on this just from like a one to a two, you double your revenue.
For example, this could mean that you're getting on more investors that have two or more doors on average. Maybe your average moves from a one to a two, or maybe to a four. That can be a significant multiplier in your business. If you're getting on clients that are bringing on lots of deals or doing lots of real estate deals, they have multiple doors, and maybe each of their doors or each of their deals has multiple doors, then these numbers tend to add up quickly.
The third D is Duration. This is how long can you keep them as a client. This connects heavily to lifetime value. There is a 10 times difference, for example, between an accidental investor that's only going to stick with you for a year and a 10-year buy and hold. There's a 10 times difference. If somebody is going to keep their deals and the rental properties in place for a decade, that's massive.
Where I see a lot of property managers really struggling in terms of growth is that they have so much attrition that they have to replace almost every door that they get on every year, or at least half. If half of your portfolio are accidental investors, for example, or one-year shorter term that they're not going to stick with you, then you're going to have trouble growing your business because you have to replace all of those doors every year.
I've seen clients have is a majority of their portfolio when they came to us, were these accidental investors that couldn't just sell the property and they decided to rent it out just for a year until they could get it sold. Or they might have half their portfolio as this, but even still, usually the number of doors they're adding every year equates the number of doors they're losing every year and, so they end up not growing.
The last D is Dollars. We need some money in this equation, otherwise, it's not going to equal revenue. The last D is dollars and what's important to note there is you want to make sure you're getting paid really well.
One of the things I do with every client that comes through our program at some point or another, usually is to revamp their entire pricing structure and their pricing model. Most property managers only have one major fee that they charge, it's one sort of percentage, something typically like 10% or something like that in lower-end markets. In higher-end markets, it might be maybe 6%, or something along these lines, 7%, 8%, whatever.
Or they'll have a flat fee like $99 or $79 in really low rent areas where it's really tight. They'll just have one major fee though. They might also have a lease-up fee for when getting the property rented out. That's pretty typical as well, but that's about it.
If that is the case for your business and you only have one option that clients can choose from when signing up, then you're leaving a lot of money on the table. There are probably a lot of other leaks in relation to pricing as well and then there are a lot of psychological hacks to decrease price sensitivity.
If you've ever been frustrated and dealt with a potential prospect that came to you and pushed back on the price—I'm sure this has happened to you—or they ask for a discount, a lot of times that price sensitivity is created artificially by my clients. They don't realize they're creating it and how. A lot of times it's created artificially by their acquisition source, so how they're getting these leads. Colder leads are going to have a much higher price sensitivity than warmer leads.
If you want to reduce the number of people that are asking for discounts, or eliminate your temptation to fold on your pricing, cave on your pricing, and give in order to get business, my clients don't have to do that. You need to be more effective with your pricing. Dollars is really significant as well.
If we take all four of these things together—this is a secret, this is one of the secrets in property management that I teach—if you work this backward, this will help you identify your ideal prospects. It takes just as much work to get on crappy clients, maybe more, than it does to get on good clients. If you want to sit down and figure out what's my ideal client, look at these Four Ds. What would their situation look like in relation to these?
Well, ideal client, right? If they're helping you maximize deals, that means they're probably bringing multiple deals to the table, they're doing real estate deals on the regular, they are an investor, they want to do more deals in the future. Doors, they probably have multiple doors, maybe each deal they do has multiple doors, multiple doors per deal. The doors metric is high.
Duration. They are in it for the long game. They want to invest. They want to grow a portfolio, so their duration is lengthy or high. That's a high metric.
Then dollars. That means they're willing to spend money with you to make sure things are taken care of. They're not the cheapos that exist out there. They're not so price-sensitive. They want a better experience and maybe they're more of a premium type of buyer. These would be your ideal prospects.
This is one of the tools I go over with clients to help them recognize who are your ideal customers. What would they look like? Then we can work backward and figure out how do we connect with these people? What resources do they currently have? Who would be good referral partners that connect us to these people? That might already get some wheels turning.
Take a look at your portfolio, take a look at your investors, and take a look at who you're targeting and the methods you're using to target new clientele and get new business on, and see how it lines up with the Four Ds to Revenue—deals, doors, duration, and dollars. These are the four doors that you need to open to make the magic happen in order to grow your business and identify and attract really great clientele.
If you have any questions about this, feel free to comment or hit us up inside our Facebook group at doorgrowclub.com or reach out to us by going to doorgrow.com. We'd be happy to help you grow your business and maybe sit down with your team, as you're planning out things here at the end of the year.
It's almost New Year's here as I'm recording this. I just want to let everybody know I really am grateful for our clients and grateful this holiday season for those that spend their money with us, that have allowed us to help them increase the amount of money that they're making. It's really exciting for me to show up each week on the group coaching calls that we do as a mastermind group and see clients winning and sharing their success, talking about the doors they're adding, talking about how they're closing more deals at a higher price point, talk about how they're no longer offering discounts and how they're establishing themselves as an authority and as an expert and that these clients are willing to spend and pay more money.
I love this. This is so rewarding for me. I really enjoy getting into what I do and I'm really honored and grateful that I get to do this. Those of my clients who are listening, I really appreciate you and I'm grateful for you.
Anyway, for everybody else, I appreciate you listening to this show as well and I hope that the Four Ds to Revenue is a helpful framework or concept to help you figure out how to grow your business and improve it. And that's it for today. Happy New Year, everybody. Until next time, to our mutual growth. Bye, everybody.