Your Numbers Tell You What To Fix Next

We sit down with Chris Mercer to get brutally clear on what real estate agency numbers actually reveal and why benchmarking beats gut feel every time. We dig into rent roll strategy, acquisition reality, and the productivity standards that separate busy teams from profitable ones. 
• Chris’s background and why he focuses on the business of real estate 
• How a standard profit model makes benchmarking fair and actionable 
• What a rent roll should predict about future sales volume 
• Why some agencies manage well but miss listings and market share 
• Profitability vs valuation in property management and how banks are changing the rules 
• Acquisition myths, debt sanity, and why payback often takes longer than planned 
• The scoreboard mindset: numbers reflect actions, not wishes 
• Property management productivity as properties per total staff count 
• Why software alone hasn’t lifted portfolios per head and how utilisation matters 
• Proactive systems that prevent problems and reduce overservicing 
• Scaling to 2000 managements with churn maths and smarter growth timing 

If anyone is interested in finding out more, I use it in my business, I love it. So you can reach out to Chris or you can reach out to me and I’ll put you in touch. www.reapdashboard.com.au or chris@thelivegroup.com.au

This podcast is kindly sponsored by Longreach

This podcast is sponsored by West Oz Trades.

West Oz Trades are the team to service and install your air conditioning systems in Perth Western Australia. WestOz Trades Air Conditioning Services | Perth, Western Australia

Transcript

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Why Profit Talk Matters

SPEAKER_04 0:00

So joining me today, we have Chris Mercer from the live group all the way over from Sydney.

SPEAKER_00 0:06

That's correct.

SPEAKER_04 0:07

Excellent. So like we've got Interstate Guests, which you actually got my first interstate guest space, which is very exciting for me. But we've got an event tomorrow. He's got an event tomorrow called the Perth Profit Symposium. And so I thought a great opportunity to have him in to talk about profit and money and all of those juicy things that we don't talk about. Why? For a group of real estate agents. Actually, sorry, hold on. No, let's not go there just yet. How about you just give us a little bio of who you are, where you've been, and your credentials? Sure. Yeah.

SPEAKER_00 0:40

So I've been working in Australia for 20, 21, 20, uh, sorry, 25 years now. 21, 25 years. And I've been running my own company now for 20, the 20th year of the life group. And look, I cut my teeth with Ray White Real Estate and I worked across the international sort of platform of the group. I had a big part to do with understanding the profit model and looking at how people made money in real estate. So I got to look out the window and build solutions and model business cases for different states. So all the different states, slight different variations in how they were set up and what was the norm. And we had little shops and we had big shops. We had early shops starting and those that have been around for a number of years. So that sent the last 25 years of coaching, working with nothing but real estate agencies. Naturally, it started

Chris Mercer And The Live Group

SPEAKER_00 1:30

off a lot in sales, but then of course, one day I realized I think I know a lot about property management. Again, it was seen as a static division. So I've gone and sat with people with four and a half, five thousand properties under management many times, big franchise groups have got more than that. So I've been able to work hard on that division as well. And so when it comes to financial performance and productivity, back-end services business does everything end-to-end, the live group from doing settlements and property management trust right through to payroll commissions and completing Bass and superannuation forms every quarter and monthly, depending on the client's needs. So two and a half thousand real estate agencies later, I think we know a fair bit about how people operate their businesses.

SPEAKER_04 2:11

So I use your REAP dashboard. I actually don't know if I knew that you did all those extra things.

SPEAKER_00 2:17

Yeah. Yeah. So look, we one of the problems when you're running a spoken wheel model, which is we're a professional chartered accounting firm. Essentially, I'm a chartered accountant, so my background there means I'm capable of doing anything from valuations to financial forecasting. We've built this benchmarking data solution, and then we provide back-end accounting services because naturally I understand how to do the books well. Most business owners didn't set out to start doing bookkeeping and accounting and paying their bills. And that's a big part of actually understanding your numbers. You would have benefited from the standard model that I've got, which shows the income, cost of sale, fixed overheads, and the three divisions which we use, which are sales, property management, and that magic one called directors, if it's needed. And that's the way we're able to standard have a standard view and compare people amongst each other in a real way, which has a proper and fair distribution of costs. So people don't think, oh, hold on, black business is like that. We don't sell houses like that. You've been through that, and you can see how quickly I can easily identify with that technique after many years, simplistic way of saying you do real really well here, but in this area, you might want to look at a few things and you you'd be even better.

SPEAKER_04 3:29

Yeah. So it's one of the things that and I remember how I how and why I got in touch with you must have been maybe a year ago, maybe a little bit longer. And I had it's always stuck with me because I remember the first meeting we had, and that meeting, I remember you were so straight with me, and you said you pulled up on our sales department and you said, How the hell is your property management performing in the way that it is and your sales department not? And I I don't know if you remember, but you actually said to me, Ash, it is basically like someone's walking in the office and the sales rep is closing their eyes and running in the other direction because it should not be performing

A Standard Model For Benchmarking

SPEAKER_04 4:10

that way. And no one's actually ever said that to me before. And so I that's what had really stuck with me. But it also reminded me of the so of our profit. And I was number one, we all know what our, we all know roughly what our PLs are, but we actually don't know how they benchmark. Is it good? Is it bad? Is it normal? I don't know. So that's something that's been super helpful. But the other thing that when I describe your product to my clients, what I say to them is that we have a really good profit margin at Soko. If I was to just go, oh, look, SOCO is going really well, it's got a great profit margin and not do anything more and just keep on doing it, that's probably okay. But you actually identified two other areas or the dashboard identified two other areas which we weren't performing well. So what it did is gave me a focus point to go, okay, there are two areas that we can improve. And that is what is completely missing in all real estate agents.

SPEAKER_00 5:04

Yes. I think it's the whole view of a business. A lot of people get caught up in their one to say in a sports game, I'm good at attack, but my defense is not so good. We're in tennis, I've got a great forehand, but my backhand's not so good. One of the things which people forget when someone like me has looked at thousands of businesses over 25 years and understands the big picture is I get to ask questions about why things aren't in line. So, for example, if someone's got a thousand properties under management, they don't know this, but I do, that five percent of them sell a year. 50 sales. If you only did 20 sales, I'm going, why didn't you do the other 30? Oh, I didn't even know there were those. What's the natural sale percentage of properties in Australia? Five percent. Maybe four and a half an acquired year, four a really bad year. And in COVID, it got up to six point three. How's that sound?

SPEAKER_01 6:05

Yeah.

SPEAKER_00 6:06

So somewhere between four and six, so if say it's a low year 40, but if you only sold 20, you definitely miss 20 sales. Now that will say then, oh, and I've come across this, the market says you're a great property manager, so I like managing my property through you, but I wouldn't sell my house with you. And so the business owners that don't realise that go, that's probably because you're crystallizing that attribute. Yeah, we love managed property, but no, we don't like doing oxygen. We don't, and so those types of things mean that you're letting go potential value. The second thing there is if you don't look at the whole transaction, then you're satisfied with your sort of your rule of thumb or your own thing. Is that self-perpetuating? Because at the end of the day,

When Numbers Expose Missed Sales

SPEAKER_00 6:50

you're parking a listing with a rental. Good sales business owners don't look at property management as a rent role. They'll take the benefit of it, but the reason they're parking a listing is to get parking, putting a management together is to parking a listing. It comes straight out. They see that as a future sale. That is not a property management. They see that property coming up for sale and they're waiting for it. So there is a different view on how people have a rent role. It's like they're not even looking for it to be that's that that continuous thing which we always keep. They go, no, we can't wait for it to come for sale because they know that releases what the appropriate percentage for their market of the house value. And so that's what the agent-style business owners are looking for.

SPEAKER_04 7:36

Do you think that that's a could you consider that to be a right or a wrong way of thinking?

SPEAKER_00 7:43

So the data I have, where we look at large sales businesses, yeah, they have a large rent roll.

SPEAKER_01 7:50

Yeah.

SPEAKER_00 7:50

But the profitability of it's low. Because they're not looking at it to be a maxed-out profit business. They are looking at it, they're put probably cutting deals here, overstaffing it, they just don't want headaches. So they haven't looked to wring the neck of profitability and really max out the percentage of profitability. They have accumulated a big rent roll, but its purpose for it being was not maximize profit. So a large sales business, we define over 10 agents selling and selling effectively. And WA, that might not be a large sales business, that might just be one of the of those sales-focused businesses, normal-sized business from history that I've been around. But the thing there is when I look at a large property management business, which means that they're focused on property management, their profitability is higher. So I do think it matters. You'll see that culturally, why's the business got a rent role? What part does it play? And the question is, if a business owner who just call it the chief C the CEO, the person that's really the owner, if they are a listing and selling business owner who are focused on selling houses, PM will get a look in, but it'll be something that they can't really stop to do because they're valuing the sales side more. If they are a property management and logistics person, so they have a much more business management style approach to the business, and they have an eye for detail and what we call the this call logistics and refined, and looking for adjacent income streams and clipping the ticket on smaller items, and they see value in that, then you'll see a very well-run, well-run portfolio of property management. And so while their sales business could still be thriving, they will get that additional profitability from PM. The final thing is the valuation of the PM. No one needs it to be profitable to be valued at any more money. So for people that just try to ramp up the value of the rent role, profitability wasn't a factor. Now that's changing. People might not know that. Banks are slowly but surely looking for interest coverage, which means profitability of a rent roll before someone can buy it. Up until 2015, it was worth the revenue at a multiple. So profitability didn't play a big part in property management's outset. And for those that are trying to survive on property management, they've created profitable businesses. But as far as the valuation of it, it's not worth any more money because it's profitable.

SPEAKER_04 10:42

Okay, because my question was going to be do these selling agents realize how valuable their rent rules are?

SPEAKER_00 10:48

Yes, they do. But they don't see the profitability component

Rent Roll Purpose Profit And Valuation

SPEAKER_00 10:52

wasn't part of what they're building into it. So they do know it's worth money, but they're not looking to really get into the nuts and bulps. And they see it as a complaint line.

SPEAKER_04 11:02

I I find it dumb, to be honest. Like really dumb that they wouldn't want to build a really good asset yourself.

SPEAKER_00 11:09

They all, it has become, particularly post-COVID, they all want the big rent roll.

SPEAKER_04 11:15

Yeah.

SPEAKER_00 11:16

What they don't want is the headaches. They don't want the complaints.

SPEAKER_04 11:20

No pain, no gain.

SPEAKER_00 11:21

No. So just understand, for all the effort, they go, hold on, flip this over, and this person's come and it's no good. The problem for people is the property management division's come out of the sales business and it's grown and it's it's flourished in the last 20 years, particularly. When I started in 2001, the property management division, it was low tech, it was whole in our homes, it was rentals. Of course, they were done, but it was there was no sophistication to it. It really was, it was really a sort of a division that was met by people that were just good at details and organized and could deal with the forms because all manual. Regulations come in. So that that division didn't have the bells and whistles for it. And it was, you know, I know certain franchise groups didn't even charge a franchise fee for it. You know, not didn't even they didn't even bother charging a fee. That's all changed now. So it's certainly growing out of the it's now become a it's now become a nuclear weapon of business owners. They're all looking for the big rent roll.

SPEAKER_04 12:21

Yeah, I feel like in Perth, there's a few that have started now thinking, oh, we want to start a property management department. But to be honest, I feel like they're really late to the party. They should have been thinking about this four years ago.

SPEAKER_00 12:33

Yeah.

SPEAKER_04 12:34

So slow.

SPEAKER_00 12:35

Yeah, yeah. And look, from anyone's today's the best time to do anything, right? So if you miss the boat, it's like 20 years ago or today, two best times to do something. So those that missed 20 years ago, do it now. It's the organic thing versus acquisition. As a business case, acquisitions have completely valid way to grow. Yeah. If your balance sheet's unencumbered or you've got balance sheet, use it. People say, Oh, I grew my rent roll to a thousand, thinking some prudent company here. But almost everyone's built their rent roll to that size. Outside of that, most people would have picked up an acquisition along the way to help turbocharge growth and get from say 300 to 700, and then that last 300 to 1,000. Often it's an acquisition involved. I've got some very strong views on acquisition, which is something to my deep understanding of the industry. But people often should wonder why they're buying a rent roll just to catch up and all that. But it's a great thing to do, but it's just like any other asset class, you've got to know what you're doing and you've got to pay off the debt, and you've got to look at making sure you've got enough profit to cover the debt repayments and so on, and deal with the staff. But for me, anyone in real estate, there's not a better real estate sector, there's not a better asset class than a rent role. Compare it to commercial property or residential property. I think it wins by a long way on the cash return that you can get versus any of those asset classes. So for a property management sales business, I think a rent role is an excellent asset class to invest in.

SPEAKER_04 14:09

Yeah. I was talking to Travis Whelan, who's the rent role broker the other day on a podcast, and we were saying how let's just call them multiple three, just for argument's sake. And a lot of people do go, oh, I can pay that back in three years. From my experience, it does take longer. I think if you were really strict about it, sure you could. But the thing is that market changes, life changes. And for us, our experience, we acquired a portfolio in 2010, just a small one. And I do think it took us about 10 years to pay it back because we, yeah, there was market that we had tax issues, it was just COVID. It's all paid off now, but it's it wasn't the three years that people just had that.

SPEAKER_00 14:50

Look, I say to people about this that you've got a lot of a lot of people's got these set things, almost like pillars that they go, these are non-negotiables, rubbish. The one thing about business is take always takes a lot longer than you think to do things, but because it takes a lot longer to master the issues that you've got to confront in business, you don't come across them. Treat it like a treat it like you're going through down a river, whitewater rafting. You don't know, you don't know where the river's ebbs and flows are. And so you can't really know what you're gonna face in business until you've been through business a bit, so-called winters. So what you talked about then is you had a tax scene that popped up, and we had

Acquisitions Payback Time And LVR

SPEAKER_00 15:32

to delay that, and we had this thing pop up. Oh, ideally we wouldn't have done that. Oh, but then that money had to be put over here, and well, we invested in this one this once-in-a-lifetime opportunity to buy something else. The balance is this if you've got your LVR at a level of around 35 to 40%, don't worry about it. It's when you buy and you extend yourself close to 70%, and that's absolutely valid. You need to get your LVR down to 50% as fast as you can for your own sanity.

SPEAKER_04 16:03

I think that's was our problem, actually.

SPEAKER_00 16:05

Just want to get down to 50%. If you feel like you've got to get to zero, you're putting a lot of pressure on yourself, and you're probably eating baked beans and the wheat bricks for breakfast. Great, you're gonna get the benefit of having an unencumbered asset later. But that may not have had to have been the case for you unless you just didn't like having debt at all. So look, for me, the that this whole idea of acquisition and paying things off is understand what a balanced sort of level of debt is, what's easily serviced by a business that that you've bought turnover, you've bought cash flow.

SPEAKER_03 16:38

Yeah.

SPEAKER_00 16:39

And then you get to the big one, which is how much growth do you have in your business? I did a drawing for someone yesterday on a I was advising doing a coaching session for a business. And I draw up there, that's what people understand. I see numbers, and my expertise is teaching people who don't know numbers. First of all, numbers are action. So I don't see numbers. If you want to change the numbers, you say, Oh, I did a million dollars and I made $200,000. Great. If I said I got another business, did a million dollars and made $400,000. Which one's better? Yeah. Now I'm gonna tell you this. The first one spent $200,000 on growth. And the other one spent zero. Now who's gonna have more turnover next year?

SPEAKER_04 17:23

It's hitting my brain right now if you're gonna have to answer it for me.

SPEAKER_00 17:26

So the first person's business made $200,000 because they spent $200,000 or their $400,000 profit on growth.

SPEAKER_01 17:32

Yeah.

SPEAKER_00 17:33

So their turnover should grow.

SPEAKER_01 17:34

Grow, yeah.

SPEAKER_00 17:35

From a median to higher.

SPEAKER_01 17:36

Yeah.

SPEAKER_00 17:36

The other business just took as much money as they could out.

SPEAKER_01 17:39

Yeah.

SPEAKER_00 17:40

They won't grow. Yeah. Now they're gonna have to find that. Did they spend that money? Did they buy better cars? Just understand business.

SPEAKER_01 17:46

Yeah.

SPEAKER_00 17:47

So don't just compare bottom lines.

SPEAKER_01 17:49

Yeah.

SPEAKER_00 17:50

You need to ask the question of growth. It's a big swing. Some people go too hard on growth.

SPEAKER_01 17:54

Yeah.

SPEAKER_00 17:55

And other people, not enough. And this is a really finesse problem because when you're comparing your PLs and you're comparing your bottom lines, a question is how much growth was in there.

SPEAKER_01 18:04

Yeah.

SPEAKER_00 18:04

Okay, because the needle's moving. Are we going to go up or down? It's these types of questions people don't really want to ask. And as I say, in tomorrow's Profit Symposium, I talk about benchmarking's not a picture, it's an animation. I'm trying to show the momentum of people's, the trajectory of people's business performance. Are they rising? Is it falling? Is it cost rising, margin squeezing? Was it revenues rising and things that are coming along with it? This is this, this is what an experienced person would talk about. Not what's the right answer? What should I be doing? Yeah. Tell me a bit more about what you want to do. And that's a big it's the business case. And I say this again: I teach people how to run their businesses. I'm not a sales trainer and I'm not a property management trainer. I'm talking about the business of property management and business of sales.

SPEAKER_04 18:53

As you're talking about that, it is exactly what property managers are doing with an annual investor audit. So I teach annual investor audits, and basically that's looking at the next next 12 months forecast for those owners. Is your property going, is it inclining? Is it going down? Do we need to look at expenses? Do we need to look at the income? And we actually do exactly that, but in for investors. And so we actually know the idea behind it. And we always say that investors are like having a little mini business. So yeah, but that's just a reminder a lot what you're doing, what we do.

SPEAKER_00 19:24

So what I'm teaching is not actually that unique. It's but it's sound business case. So I don't try to report on doing anything which is rocket science, but people talk to me about changing their business. And I go, okay, imagine if you went to a I'm in WA, let's just say it's an AFL game, and someone said so. You turn up 20 minutes late, you walk into the crowd, and you're looking around, you go, what's going on? What would people look at to find out where the game's at? Scoreboard? You look at the scoreboard. So you look at the scoreboard and you go, Great. The first thing is, can you read it? Because if I've never seen an AFL game, would I be able to read the scoreboard?

SPEAKER_04 20:04

So I can read AFL, I can't read cricket. You show me a cricket scoreboard, I wouldn't know how to read it.

SPEAKER_00 20:08

Great. So just don't underestimate if you can read the scoreboard, you've got an advantage.

SPEAKER_03 20:13

Yeah.

SPEAKER_00 20:13

The second thing people look at the scoreboard is, oh, okay, so the team I want to win is not winning. You've a s you've got to that point. Now you might understand why, too. At that point, yeah, I don't like this. So what do you do? If you don't like that, do you go change the scoreboard? What's gotta happen for the scoreboard to change?

SPEAKER_01 20:33

Players are gonna action.

SPEAKER_00 20:36

The scoreboard reflects what you're doing. So when I look at numbers, do you see numbers tell you what you're doing? It's a big part of learning how to manage a company is the numbers aren't numbers. I hate it when people say, oh, you're an accountant, you cook the books, or you're playing with the numbers. No, I'm an accountant. I know what people do because of the numbers. It tells me what you're doing. I ask questions like, huh? So it goes going really great, PM, but sales business looks like someone must be walking past listings.

SPEAKER_03 21:06

Yeah.

SPEAKER_00 21:07

Because why? Because the relationship between size and number of deals done tells me that we're not picking up every deal chance we're going for. That's the power of knowing numbers. So, how do we change that? Stop walking past those listings.

SPEAKER_04 21:21

I'm trying, I'm really trying.

SPEAKER_00 21:22

And what did you do? You you went and put a plan together to just look a little harder at that. But actually, you've changed what you did. Now, did the scoreboard change? Now we go, look, next year, oh, we did do more deals or market share-wise, we did more. That's the secret of this business planning. Do you understand the activities that change that behavior and those

Numbers Are Actions Not Opinions

SPEAKER_00 21:42

numbers? Not the numbers themselves.

SPEAKER_04 21:44

Yeah, because for us, one of the ones where we are not performing well is with the marketing and advertising. And so we're spending, we're not recovering enough marketing back, which I I knew, but it was really great to see that in the numbers. So we then went through and did an order and a new process for our whole sales department with marketing and all of that. But it was just also, for me, it was just like it was just good to have focus, something to focus on and not focus on the wrong things in business. There's lots of things we can get distracted doing because it's easy. And for me, that focus, I think it would be so beneficial for business owners to actually know that. Now, there's one benchmark on the dashboard that I always intrigues me, and I'd love to get your thoughts on. that and that's the benchmarking for the numbers of numbers of staff in a property management department. So I always say to everyone it's not how many properties your property manager handles, it's how many people in that department. And it's not moving and we've it should be getting higher and higher and it's not. And I'm really trying hard. Ours is not too bad, but we've also, I think ours got up to 134 properties per head, which was good. It's come back because we've brought in new people, trainees and all of that. It's come down again, but the intention is there to bring it up. But my members and people that I speak to are just really struggling to get that headcount over 80. Do you what's your thoughts on it?

SPEAKER_00 23:17

It's look the be tough. So this is my I call this I've got a super KPI for sales and that's productive agents. The number of individual agents that made one sale in a month that's in short. The super KPI for PM is definitely number of deals managed per total staff count.

SPEAKER_01 23:39

Yeah.

SPEAKER_00 23:40

Now it's not just the number of senior property managers. Oh the property all my property managers have got portfolios of 250. It's the VAs in the Philippines. It's the leasing experts. These are arms and legs I call arms and legs count right so how many arms and legs you got supporting this thousand rent roll. So if you had you had eight people say say you had 10 people 10 senior property managers let's change it. Say it was five senior property managers that looked like they were doing 200 each of a thousand but underneath them they had one and a half to two people each and you've got 10, 15 people looking after it, you quite quickly you're looking you're around a number of 70 or 80. Hold on but we want to have this balance everyone's got balance no you're going to have you've got to look at it like I've got superstar here they naturally run faster. These people just better it's a better portfolio. Someone who can run a five minute mile four minute miles like your legs are coming off four five minute mile you're pretty darn good. But people running eight minute miles they're busy but they're not very productive. Yeah they've never run faster in life they can't run faster. So we throw people at it to make ourselves feel better. But really the thing here is do we care about productivity? And it's the word that everyone hears but doesn't quite understand what's the software been doing see we've invested from this low-tech console and rest 20 years ago which dominated the market quite rigid. You could do about a hundred properties on your own end to end.

SPEAKER_04 25:18

The regulations got higher it's more to do more scrutiny but then we've got to invest in what how many different bits of software you got in your in your tech stack right now I have reduced it down a lot but I would probably say we've got say four or five which is good.

SPEAKER_00 25:33

I think on average people have a lot more say four or five and you've got this next thing coming out there's the AI thing coming out next and I go great for all that investment the staff costs are still running in my data at 110. 110. So we've gone from just having Betty doing all on our own but we've spent all this money on technology was going to give us all this time back and all this stuff. Yet now we've gone and we've done portfolio hubs where we've got a senior person and some juniors and specialist people doing roles but the productivity isn't still around this 110. For most people a hundred it means we just haven't picked up we we simply don't seem to be able to do the job without having one person 100 managers.

SPEAKER_01 26:17

Yeah.

SPEAKER_00 26:17

You thought the technology was going to allow us to be doing one to 200. It just hasn't occurred and it feels like people just don't want to let go of that security blanket of having someone there to look over it and no one's cracked the code and shown the way no one's really done it. And you've got run's software out there you've had the the guys came out with that whole plan to take over the world with it and it's got a new name Comeo or something now.

SPEAKER_04 26:44

Oh since I hadn't heard of Run but yeah you've got it's Comeo software.

SPEAKER_00 26:48

You've got Property Me, Property Tree you've got you had managed you had all console cloud I could go through the list of them people use them just like they use Excel. They use some of the functionality they don't take advantage of it and then waiting for the next shiny black big red button to come out which is going to help them do it. But actually they don't get the utilization they don't utilize the software well enough. I think a lot of it's got to do with enforcing standards and actually driving that behavior and discipline to don't go back to old habits. Oh I could just do this because I can no you you you it's it's been difficult. So for me I actually look at it as the industry that the people who are the clients are cottage in mind. It's a bit like they want to the the owners of property aren't looking for a cold dehumanized sort of variation of people service. They want to know there's someone there. So people try to get a bit fancy a bit specialized and a bit a bit arm's length but then these customers tend to go no that's not working for me. I didn't enjoy that and we go back to full service hands holding their hand that I just don't think we've quite got past that because people the landlords it's their biggest investment outside of their own home.

SPEAKER_04 28:05

Yeah I do think that the like while a property manager might use a system reasonably well probably think they do I find that quite often the clients aren't using the system so then it

Property Management Productivity And Tech

SPEAKER_04 28:17

comes down to owners know that they've got access to everything on their property me app for example they don't need to be calling the the property manager for that. Tenants can report maintenance through an app they don't need to be calling and then what happens is property managers go, I'll just log that maintenance they've emailed it through it's like how about you go back to them and say can you please fill this link in I think one of the things which would which comes through is no one solved the problem here.

SPEAKER_00 28:40

I just say this to you and it our business outsourcing so is property management. It's the same thing there's a proactive way to outsource which is you prevent problems. Then you get the other people that solve problems.

SPEAKER_04 28:56

Yeah I like that so preventing problems versus solving so proactive outsourcing is you don't have problems.

SPEAKER_00 29:02

So in my case my business someone says oh fix the problem someone bugged this bug up the superannuation reconciliation I go that's great the person that bugged up superannuation reconciliation is your colleague. So thanks for pointing out that your colleague someone else internally has done the problem imagine and you're in property management you go to the landlord yeah the leasing person did a terrible job it was all their problem we fixed it all up and routines we've done pretty you're the business owner what are you thinking it's not great problem solving thing. No and you go to the stuff hold on why was there a problem in the first place? Yeah we don't want problems we want systems that prevent that problem and it flags it earlier it's a known problem but it's not an unknown problem which is what we don't like I just think that there's a big part here of saying the service aspect do you do service differently so rather than ring up and say I've done your routine inspection you do your annual investor audit it's a positive thing but actually it's the touch from the senior property manager to be proactive about a whole range of things. You're changing what you do it oh we do our three compulsory routine inspections we do oh actually we miss one. It's all waiting to be told you've missed something or you haven't done something that you promised to do. And I think you can change it up a bit from what I think people sell people sell value their offering based on what they think they can say and get it and impress the person at the time.

SPEAKER_01 30:33

Yeah.

SPEAKER_00 30:34

Whether they care it's done or not doesn't really matter sometimes. Does that make does that sound right? You're selling something to get an outcome of get the management but actually do you really care about it being done? Yeah yeah no I think I think that's where we get this disconnect. So people and I see it all the time when they give great service they tend to over service. Yeah and that's why people love them but it's actually really hard to do for a lot of people so I just think it's a cottage industry where people who aren't really all systems driven and systems driven they both end up liking to do personal touch. So it's a bit of that.

SPEAKER_04 31:09

Yeah like with the annual investor audits when we do them we I call it planting the seed because what it does is for example if a we've worked out that on average contractors sorry on average investors probably have about five call outs a year that would be considered quite normal. And I've got some people that have maybe had 10 call outs per year for different trades and I would say them listen in comparison to other investors it's a bit top heavy but I need you to work together with your property manager. So next time your property manager calls you up for a plumbing item what I want you to do is just say oh actually when that plumber goes out can you get them to do a once over everything so then we hopefully we don't need them out there again. But what it does is it makes the property manager's life easier because the property manager, because that seed's already been planted, they're not going back and forth with clients. The clients are aware and you get that trust and you're filling up that client's cup so you can also get to a point where you don't even have to ask the owner for maintenance. Now we're just processing stuff we're getting things done quicker because they've got that trust what a great landlord you've got there.

SPEAKER_00 32:10

Yes. So if you get good landlords that's even better.

SPEAKER_04 32:13

Yeah but if you have that conversation and you could even potentially label them with that you could you can create those better systems.

SPEAKER_00 32:21

I th I'll bring it back we're just shooting the breeze here right so there's nothing planned to what we're saying. Immediately my head goes to okay houses and older houses a huge amount of or maintenance right there's all sorts of things going on with houses but you're in that market because you're trying to sell a valuable detached home. Then you've got the apartment sole ones much less problematic there's issues they're an issue they need to be dealt with so it is a property a bit of what market you're in is the market that you'd be your your property management would be much more difficult when you do have a lot of older tired homes that are rental properties. They don't tend to be brand new ones. Yeah. So you've got a lot of homes great but for the apartment market you've probably got an advantage so I think making sure that you're quoting the right prices and not bringing headaches in too is about saying get your pricing right. Very competitive market and I know particularly for Sydney and the East Coast there's very competitive and here in in WA it feels that you've got a bit more options around the fee that charging for things. So I'd imagine you you're able to service them a bit better because I know that there's certainly a higher average percentage charged a landlord over here than it is in the Sydney market.

SPEAKER_04 33:35

But you know the exercise I don't know if I ever told you I did an exercise last year maybe the year before and I was like I'm missing on quite a few for fees and so I want to grab that market. So I did a junior fee schedule and a senior fee schedule. Very honest owner calls me up and I and they say what are your fees well if you're fee driven I've actually got a really great option my property manager she's just done a call she's six months out she's fantastic I oversee everything. She's a really good option and it's a cheaper fee schedule for you. And out of about the 300 managements we had bought in that year about five of them only had said oh actually do you know sorry only five of them had said yes to that fee schedule. The rest of them were like oh do you know what Ash it sounds really great but I think for my first investment I'll go with a senior option. And I thought that was a really interesting exercise because it just goes to prove that fees actually isn't the issue. And I know that over they've got their own issues when it comes to fees we still have that issue here. I've got people that charge less than people that charge more it is you you're gonna have that in every single industry.

SPEAKER_00 34:39

Oh absolutely so that's correct and the thing is why the when I see the disparity in fees it's like well whatever it is but then since there's more money to be able to go around in service if you're offering more service for that fee. Or has the other fee come down because they've taken away sort of those things that are offered and it's a fee for service they charge bespoke but what Jet Star is saying today about charging people for putting their seven kilogram overhead luggage in yeah all of a sudden you're going what I'm paying for a ticket but then I don't get any luggage and nothing's free. So look for me the the whole thing about pricing business model knowing your business models it's critical but the big part here is are you looking at it from a service point of view and the value yeah yeah great be passionate about your service your value but that doesn't mean the business case has to be just wishy washy you need to make sure you're making money and the biggest area of opportunity for that is productivity is demanding the right output from staff and I think one thing I'd take from you and other operators who are very good at their job when you talk about hearing people talk in theory they don't really do the job they give the theory you can hear from me I I don't know the I I probably know more than I give off

Proactive Systems Over Problem Solving

SPEAKER_00 36:02

but when it comes to that I'd go oh well but when I'm coming in from a business case point of view people are very easy to say they're busy hate that word and you go no I can't do anything more you go yeah but there's something not right here. Something's not right are you busy but you're just running on the spot spinning plates you're not going we're not getting an out we're not moving the needle you need to always deal with the productivity and you've got to say to people this is what good looks like and you've got to be able to show them it's possible but you must have a good level this is good. And they go when or no I'm gonna be able to go to a higher package when you can do a full day's work like the senior property manager. Yeah and you define what that is I think that's the the example is that's what a busy load is. Yeah anyone doing less than that we can't say you're the equal that person because what it causes a lot of dis dissatisfaction amongst your staff culturally if they see someone getting paid the same as them that does half as well that why am I doing all this culturally you can hurt yourself if you don't make and enforce standards of productivity and you get caught up with the troublemakers and you're just exhausted. Yeah. But and it's tough but as I say good leadership has a huge part to making sure businesses operate well.

SPEAKER_04 37:20

Oh I was actually just going to bring up one of the biggest factors with creating capacity hands down comes down to the longevity of that property manager. And so would I put a property manager who does 180 but she refuses any support as in there's no VAs on her portfolio. Everything's done from her start to end but she's been with me for a long time would I expect a new person to be able to do that? No she knows her clients really well she just gets shit done. So it's I think longevity plays a big part. So then therefore when you can pay reasonable I'm not saying you have to pay over just pay reasonable and offer a good environment people stay and that's when you're going to get that capacity but I don't know whether people are going to get that capacity and that benchmark increasing if they keep on having a turnover of stuff.

SPEAKER_00 38:09

Yeah the big thing there is a big life lesson is if you can get people to be as 70% as good as you not as good as you 70% as good as you then have three of them they're 2.1 of you and capacity is a huge part of the problem of business. So even if you are an excellent person unrepeatable fine but if you can get three people the bigger you get the slightly more average you've got to become that's okay out of that maybe somebody comes as good and if not better than you. But what's the level of acceptance what can we get that's acceptable because at some point people go if you give me another property manager I'm gonna walk out this door.

SPEAKER_01 38:49

Yeah.

SPEAKER_00 38:50

And the new BDM comes oh 10 new manager who wants it no not me what and so you get this countercultural push to what you're trying to do. So everyone's been through that you're laughing because you know what I'm saying I did my job I hate you what there's innocence to it. But look it's the real estate sector and the business owners who are all enjoying the competitive nature of sales and all the TV shows making property most people seeing what TV stars. Uh-huh okay we're out of the cave the reality is this property management has never been more important to even those people selling property and it's no longer the sort of the secret in the corner it's a really powerful sector that has now got more and more business minded people that are seeing this is worth chasing up and it's only going to get more attention and it will be more and more competitive but people that have got a passion and can handle the logistics and the detail because different skill set and sales you've got a great eye for detail and flair for the negotiation over here it's discipline it's calm it's more there's lots of negativity issues with actually it's about process. Yeah and you can finish your day and know you've done your job so certainly for me it's a it's an area for people the different sort of this call natural skill set natural personality types can be very very successful.

SPEAKER_04 40:11

So I'm going to take full advantage of you being here and ask two personal questions for business that can be asking you later. My first question is on the dashboard you've got your the the the benchmark which is the average I always try to exceed that however just listening to you before should are they do you think a benchmark is the goal should be to meet that benchmark or to actually exceed it because exceed exceed it good because I was doing that but I was just thinking oh make up for that average for every so if there's 20 people in a number 10 people are above it and 10 people are below it.

SPEAKER_00 40:45

That's average yeah so we do actually put out there and we haven't look we're about to release our membership portal which I'm going to show off tomorrow and that's to allow people to start to get access to some of the data the proper data packs we do we do data packs. It's and I've called them trend tracker you may have not may not have seen them we've got our top 20 percentile that's our top 20 percentile that means this is our top 20 this is the best of the best and they're another level up and you'll see those numbers and you go right that's good. They're much higher than the average for the segments large and small so we do have a what I call a an optimal top 20 percentile that would show you what that's what 20 good businesses are doing. That's a different average and that's much

Scaling To 2000 With Churn Math

SPEAKER_00 41:32

more high achievers. So there's one for you. So yes aim for the aim for above I can't vote okay we'll show you that tomorrow.

SPEAKER_04 41:40

Excellent my last question for you today again just is just a selfish one for me. So if our business I want to double it or we're at 1200 I want to get to 2000 is it naive to think that I can hold the same profit margin or should I be expecting that profit margin to change as I get bigger?

SPEAKER_00 41:58

What would you tell me as advice at a point in time your margin will drop because of the amount of money you want to spend on growth there's two ways one's interest payments and the other one is a lot of salary okay you won't grow faster than you people don't grow by accident. People think oh I grew by accident no there's no accident you've got a great story in the market but you've got to have the capacity and the the manpower to outpace churn. Right? So as you get bigger at 2,000 you're gonna churn 300 managements a year. At 1000 you're churning 150. So if you grow by 200 a year at a thousand you're beating 1500 15% by 50 so you grow by 50. But if you only grew by 200 and you had the 2000 three you would lose 100 managements. You'd be at 1900.

SPEAKER_04 42:50

Yeah so it's some of that space in your mind yeah so and and actually I remember you telling me that and I was like I actually walked away feeling so dumb because I was like of course that makes so much sense but I actually had never thought about it like that. So that was a huge eye opener.

SPEAKER_00 43:07

Yeah so so the numbers don't change yeah because it's about people shifting in and out this just the universal numbers typically people got 80% property management fees 20% other income fees I struggle sometimes to get that because it's captured it a little differently on like to really poke some holes in these charges sometimes. I haven't done that yet but tomorrow when I get everyone do you want Christmas and rent dashboard to tear your industry apart and take away all the bullshit yes we do WA so I'll do that but I need a bit of time to really go now what is this number here? Yeah this thing's saying it's management fees is it really just management fees or is it a bit of everything? But if we just get to it the churn factor is 15%. So if you go from here to 2000 I'll tell you this it's the rate at which you get to 2000 that matters yeah because if you go from 1200 to 2000 over 12 years or if you go from 1200 to 2000 in one year which one did you pay more rent to get there? Yeah every single year you're turning that yeah so the sunk cost to get to it is a lot longer. These are the things which you learn so you've got to say so acquisition can speed it up and actually while it's more interest more capital outlay it gets you there now. Yeah whereas if I put all the staff on and built their capacity for the extra 800 took me I go actually that extra capacity of getting Yourself to fill up, gee, you haven't filled it up. It's taking you two years, three, four. That's a higher cost to you to do it. You'd feel that your profit margins dropped. So you say there's a bit of a tortoise in the hair.

SPEAKER_01 44:41

Yeah.

SPEAKER_00 44:42

But you don't want to buy businesses without being ready to run a bigger business.

SPEAKER_01 44:46

Yeah.

SPEAKER_00 44:47

Okay. The idea of just keep banging on more managements. I would never say to anyone, just go buy more managements. I've got a secret, I can't tell you, because I'd have to kill you. People have to pay to learn those finesses.

SPEAKER_02 44:59

Yeah.

SPEAKER_00 44:59

I don't ever say you just go buy managements. You never hear me say that. Someone will say to me, Chris, this is what the business case is I'm buying. It's like this and this. I go, okay. And they go, okay. And I said, Do I sound excited about it? He goes, No, so there's a reason. And then they go, this one. Okay, yeah, do that tomorrow. Oh, what's different? Totally different. They go, I don't see the difference. I go, I do. That's a goer. Buy that this afternoon. That one, I don't I wouldn't care.

SPEAKER_01 45:30

Yeah.

SPEAKER_00 45:31

So you have to ring me, talk to me, and put my expert hat on and become a client for us to share those insights. Because that is the answer. There's two different things going on here. People look at acquisition for that. And then you've got the organic thing. I always say to people, grow organically as fast as you can. Have that growth and discipline in your business. Have a sales division, feeding listings. That helps as well. And then the second thing is acquisitions are opportunistic beast. If it pops up and it suits your needs, it fits your market. And I go, yeah, buy this afternoon. That's a no-brainer. So your profit will be better the quicker you grow as long as you can hold that growth and not just churn it away.

SPEAKER_04 46:11

Yeah. Yeah, no, that's really good to know. Because I actually just did a recording for inside my membership and I was talking about goals and talking about how I've got pretty good goals, probably better than most people. But lately I've been thinking to myself, why am I just trying to double in 10 years? Why am I not trying to double in five years or three years? And that actually has just really enforced more strategically why I would want to be pushing that because the risk involved in not bringing that goal forward is going to cost a lot the longer I have it.

SPEAKER_00 46:43

I'm going to throw one right out here for all the listeners. You're an independent.

AI Leverage Bigger Ambition And Contact

SPEAKER_01 46:47

Yeah.

SPEAKER_00 46:48

So I've got franchise people, they can't grow.

SPEAKER_01 46:50

Yeah.

SPEAKER_00 46:51

The market doesn't allow them to grow. They're tucked into a franchise area. They'll do the best they can in their market. You can be selling, you can be doing property management in Melbourne.

SPEAKER_01 46:59

Yeah.

SPEAKER_00 46:59

You can be doing it in Adelaide. You can be doing it in Sydney.

SPEAKER_01 47:01

Yeah.

SPEAKER_00 47:02

Nothing's stopping you. Except your imagination.

SPEAKER_04 47:07

Don't plant seeds like that in my head because tonight thinking.

SPEAKER_00 47:10

You're just sitting here going, I'm going to run a really big real estate agency. And it has to be in the neighbouring suburb.

SPEAKER_04 47:15

Yeah. Yeah.

SPEAKER_00 47:16

So when you see businesses that have grown past that, this is a part of life cycle. So I I'm listening to people who are going, I run the I I my market's the whole country.

SPEAKER_01 47:25

Yeah.

SPEAKER_00 47:26

And they go, oh, but we're really big here. I go, okay. And you're making probably more money than most businesses in Australia. But you're still not a business that's operating in Australia. And so often people put limits on what they do.

SPEAKER_01 47:40

We do.

SPEAKER_00 47:40

And I go, you can easily grow past doubling your business, but do it wise, do it smart. They just go roll the dice and double down for no reason. I wouldn't make light of that. You've got to do it properly.

SPEAKER_04 47:53

Yeah. For me, the reason why my goal was only to double or to get to the 2,000 is because I do believe I can do that with existing labour. I feel like we've got a lot, we just had an AI strategist come in, like we're doing a lot of work in the back end. Yeah. So I do, so it's a bit of a challenge as well that I do believe that we can get to that 2,000 with existing labour. That's why I've capped that amount. Because if I went any higher, I would have to restructure staff.

SPEAKER_00 48:21

So you know the number on the dashboard that's going to change and tell me that your AI strategy just worked.

SPEAKER_04 48:26

I think it'll be the benchmarking in the department.

SPEAKER_00 48:29

It will be simply that you're doing 200 to 250 properties per total staff member. Yes. And then I'll go with your existing number of staff. You've doubled your actual number of managements. That's the number that changes. The only one, by the way.

SPEAKER_04 48:43

Yeah.

SPEAKER_00 48:43

The only one that changes is that you're not.

SPEAKER_04 48:45

Yeah. But that's the one that I just seem to be quite focused on that one benchmark of the dust.

SPEAKER_00 48:50

AI strategy will work. AI, non-labour service and functionality and capability is what will allow you to get to that number. So you'll be spending on a different line item, not wages and salaries. Yeah. It will be technology costs or whatever they charge.

SPEAKER_04 49:06

Yeah, so I'll be putting it under the technology. Yeah.

SPEAKER_00 49:09

And so we go, oh, that figure's gone up now.

SPEAKER_04 49:11

Yeah, yeah. That's I've I've got a good buffer on the rest of this.

SPEAKER_00 49:15

Yeah, great.

SPEAKER_04 49:15

Amazing. It is always such a privilege to speak to you. So thank you for coming in and chatting to me. I am very much looking forward to tomorrow to the Profit Symposium. You do these all around. Do you do them each year?

SPEAKER_00 49:26

Yeah, so we do them every year. This is the first year we've gone and done the regional city, capital city profit symposiums.

SPEAKER_01 49:32

Yeah.

SPEAKER_00 49:32

Because it's been seven years now. I've got seven years' data of everyone's PLs, the same group of officers.

SPEAKER_01 49:38

Yeah.

SPEAKER_00 49:38

So no one's had this longevity of data. I've curated it, I care about it, and I know it's right. So people want to go, oh, but I that's they can pour holes in it. There's nothing better in the country than this data. Yes, it it is it's limited to the people I've selected, but now the capability and the the power of it's been revealed. People like yourself and others, let's take advantage of this and get we don't need a thousand businesses, we need a good 50 businesses in WA, and you'll be able to make all sorts of assessments of what's happening. So the regional footprint coming out is because we've now got this great story, a lot of case studies, and very good insights to share with people and prove it to them with not my opinion but the data.

SPEAKER_04 50:20

Yeah, 100%. So if anyone is interested in finding out more, I use it in my business, I love it. So you can reach out to Christmas or you can reach out to me and I'll put you in touch with them as well. Where is the best way to get hold of you?

SPEAKER_00 50:33

So reapdashboard.com.au is uh actual website, but Chris at thelivegroup.com.au is the email address. Send it there and I'll make sure the right people get in touch with you. Amazing. But thank you so much, Ashley.

SPEAKER_04 50:48

Excellent. Thank you for the time.