Myth #3: Gaining more properties leads to growth
12 February 2019
Most growth strategies in property management start with a big goal.
Ailo Myth #3: You can only grow by signing more managements
The business owner will say, “In two years I’d like the company to grow from 300 to 700 properties managed.” This goal is often an “ambitious” goal with little understanding of how to get there.
There’s a lot of frameworks and ideas for setting growth goals. In the past few years, we have developed new data capabilities to look much deeper into the growth dynamics of businesses that help bring a lot more understanding of how aggressive growth plans impact a business.
One of the things Ailo has looked at is how growth efforts affect the operations of the core property management business.
We had always known anecdotally new business created pain in an organisation, but we couldn’t really capture the impact as data.
So we researched hundreds of businesses and our data science team captured the data we needed.
We were interested in how the number of new managements signed in a year affected the business. To do this we excluded from the data small rent rolls and businesses that had purchased rent rolls. We wanted to remove as much bias as possible.
We took that data and compared each business’ new management growth with client churn as can be seen in the graph.
The results were not what you’d expect.
In short, the research showed the more managements a company signs, the more it loses. We thought this may have been because large businesses grow more and would naturally have a high number of customers leaving. However, after we accounted for that, the trend still held.
The data proved - in most cases, growth causes losses. What a terrible dynamic! For all the work you put into the getting new managements, there is a very good chance you will end up treading water because you’ll lose as many as you gain.
The root cause of this is how we manage and design teams. There are so many constraints on how teams are run when a new management is added to a portfolio that is already at capacity, another drops out to restore equilibrium.
The good news is this can be changed. It starts with understanding that growth requires a cultural change, not just a new website and a BDM. You need to rethink the services you offer and how you create value. It is a whole-of-team, whole-of-culture approach.
Our argument is the biggest change you need to embrace is moving from an inward-facing culture of efficiency to a customer-facing culture of customer intimacy. This change creates a high performing empowered culture that is the key to retention and growth.