Bob and Jim both started a property management company in hopes it would someday pay off big for their financial future. They both decided to start a residential property management company in Chicago, but both owners view running a property management company differently and lead very different lives.
| BOB | JIM |
| Bob deals with phone calls all day and night. | Jim receives a few phone calls here and there, but always during business hours. |
| Bob is often up late, dreading all the work that needs to be done tomorrow. | Jim sleeps like a baby, completely de-stressed. |
| Bob has to constantly follow up with owners, chase rent, and deal with difficult evictions. | Jim has enough demand that he gets to chose which owners he works with, rarely has trouble collecting rent, and when issues happen, the problems tend to get taken care of through the processes he created. |
| Bob forgets to follow up with leads, struggles to keep proper records, and often feels overwhelmed. | Jim always follows up with leads because he has a system that handles this. |
| Bob is wondering why he decided to start a property management company. | Jim is excited to wake up every morning and loves the company he’s built. |
Which owner do YOU want to be? Bob or Jim?
I’m guessing you’ll choose Jim.
Wonder what the difference is between Bob and Jim?
Jim learned to run a property management company like a scalable business.
Bob treated it like being a landlord.
Understandably, that concept might seem a little confusing to a lot of people.
What’s the difference? What does a scalable business owner do that a landlord doesn’t?
As a scalable business owner:
- you have free time to do what you love
- you’re more financially stable
- you constantly experience growth but know exactly how to manage the demand without sacrificing more of your time.
If you treat your property management company like a landlord:
- you struggle to grow your business past a certain capacity,
- you aren’t making the type of money you know you’re capable of,
- you’re constantly overwhelmed.
How do you create a scalable property management business?
You Implement Standard Operating Procedures and Repeatable Processes
Have you ever noticed how every McDonalds you walk into looks and feels the same?
Whether you’re in Dubai or Florida they have the same colors, the same font on the display board, the same Coca-Cola machines.
You know that when you order a BigMac in any location you’re going to get the same burger. This is what allows McDonald’s to serve 68 million customers each day. They have standard operating procedures, ingredients, and recipes that everyone in their organization is trained to follow.
Successful property management companies create standard operating procedures that explain how every situation should be handled.
Standard operating procedures (SOPs) are repeatable processes that guide how your business should run at all times. It allows you to provide great service consistently to a large number of property owners and tenants.
Your SOPs should be created so that if you decide to move to Hawaii tomorrow and a complete stranger were to come in to manage your business, they could do it in the exact same way as you.
The Benefits of Having SOPS
Standard operating procedures allow you to work on your business, rather than in your business.
If you can free up your time from your company’s operations, you’ll have more time to focus on growing your company.
Creating standard operating procedures in your property management company will help in various ways:
1) Reduces The Need for Decision Making
When you implement SOPs around every process in your property management company, decision making becomes much easier.
Now…
Let’s apply this to your business.
If you have specific instructions on exactly how you handle the Security Deposit, your employees don’t need to think too long and hard about how to collect the deposit, how much to collect, and what to do with the security deposit.
By reading your policies, the employee would know that you always collect the security deposit before the tenant moves in. They would know that the total amount should be one Month’s rent. They would also know that the check should be deposited into your Savings account.
Your employees have a much smaller chance of messing up and they don’t have to make any decisions. They know that if the security deposit isn’t collected and cashed, they can’t give the tenant keys to the property. Most importantly, you can rest peacefully at night knowing the security deposit is sitting in your Savings account without you needing to physically collect it and deposit it in the account.
When you have processes that make decision making simpler, there’s a higher probability that your operations will run smoothly.
If you don’t have strict policies and processes in place you’ll be forced to make decisions on the fly, which may not be the best for your company.
Instead, if your standard operating procedures covers potential questions and directs your employees how to deal with them, the potentially stressful situation becomes a routine answer.
2) It Frees Up Management’s Time
Once your property management company is running on the processes and policies you’ve put in place, management needs to contribute much less to the day-to-day operations. Your team will be able to follow the procedures you’ve put in place and will bother you less often with questions.
They’ll no longer need to ask you how to handle a tenant who’s late paying rent. They’ll know exactly what your company’s policies are and how to implement them. All this information will be documented and available for them to read and follow.
3) Allows You To Hire Cheaper Labor
It’s much easier to reduce your expenses than to increase your revenues. One of the quickest ways to increase your property management company’s profitability is to find ways to reduce costs.
If every step of what is required to complete a task is documented, it allows you to hire labor with less experience.
Let’s look at McDonald’s once again. They’re able to hire 16-year-olds to flip burgers at a cheap rate because of the fact their operations are standardized. If their employees had to use their judgment and make decisions for each meal that’s ordered, they would need to hire much more experienced cooks.
If it’s easy for someone to walk into your business and know exactly what’s required without having previous experience in property management, you’ll be able to hire cheaper labor. Certain jobs you may even be able to offshore by hiring a virtual assistant.
4) Makes Employee Turnover Much Less of an Issue
Let’s face it, training employees takes a lot of time. Your time is costly. You could be spending that time finding new real estate investors to work with.
Every time you bring on a new employee they’ll be able to learn what’s expected of them through your SOPs. Whenever a situation comes up, they can easily access your policies and processes for that situation. They won’t need to disturb management for answers to their questions.
5) It Helps Financial Planning
When your rental management company is run through standard procedures and policies, you’ll have a much more predictable income. SOPs reduce the risk of unpredictable events occurring that can hurt your bottom line.
SOPs allow your company to stay consistent throughout the year.
When you or your employees need to make decisions on the fly, it’s easy to exceed your budget and say “yes” to things where you probably should have said “no.”
Having standard operating procedures for handling late rent, advertising, maintenance issues, evictions, and more, will allow you to maintain a fairly steady cash flow and profit margin.
6) Makes Employee Turnover Much Less of an Issue
Let’s face it, training employees takes a lot of time. Your time is costly. You could be spending that time finding new real estate investors to work with.
Every time you bring on a new employee they’ll be able to learn what’s expected of them through your SOPs. Whenever a situation comes up, they can easily access your policies and processes for that situation. They won’t need to disturb management for answers to their questions.
What Type of Standard Operating Procedures Should You Create?
Truthfully, you should have standard operating procedures for every aspect of your company. You can figure this out by documenting what you do every day. Taking note of the exact steps you take to complete a task will allow you to write out thorough SOPs.
As a business owner, you should never be doing the same task repetitively.
Your standard operating procedures are a collection of documents that provide thorough explanations on how you do everything. It will include instructions, checklists, videos, and details for every aspect of your property management business.
To help you get started, here are some recommendations for standard operating procedures and policies to create:
- The Tenant Application Process
- Tenant Screening Process
- Minimum Criteria for Tenant Approval
- Late Fee Policy
- Security Deposit Process
- Sales Process
- On-Boarding a New Property Process
- Pet Policy
- Tenant Eviction Process
- Advertising Vacant Property Process
- Smoking Policy
- Paint Policy
This is by no means all-inclusive but it should get you on the right track. Once a standard operating procedure is created that doesn’t mean it’s finished. As a smart and efficient business, you’ll constantly be improving your processes as your company progresses.
Where to Store Your SOPs
You’ll want to make your Standard Operating Procedures easily accessible to everyone in your company. At our company, we use Google Drive to store all our standard operating procedures.
Google Drive is a great resource you can use for your company. Not only will your processes be accessible from anywhere but multiple people can access them at the same time.
So, if you have a property manager who’s out at a property and comes across an issue, they can easily access your policies and procedures from their phone.
If you have two employees who need to look up your policy on how to deal with late rent payments, they’ll both be able to access the file.
Google Drive is completely free to use and will allow you to store checklists, Excel files, Word documents, and videos. You can even limit what certain employees have access to if you’d like.
Wrapping It Up
If you’ve got any benefits or recommendations you would like me to add, leave a comment in the section below. If you’d like help scaling your property management business don’t hesitate to contact us!
