The struggle is real.
You’ve pushed and pushed to beat the growth curve. You’re taking every property you can get because at the end of the day, you’re a small company trying to survive – any rentable property is more money to the bottom line, so of course you take it.
Then you start to grow and hours available in a day seem to be rapidly shrinking. Between guest services, bookings, margins, maintenance, and other operational headaches – sometimes it feels like you’re barely keeping your head on straight let alone actually making great headway in any of these areas.
The more you grow, the more you start realizing that every area of your business has to start performing to carry it’s own weight. You’re spread so thin you can’t waste time anywhere.
So what do you do when you realize that an Owner of a property has unfortunately fallen in to both high maintenance and low profits?
How do I know if it’s time to break up?
A while back, I put together a graphic to help Property Managers visually determine when a current Owner should be on the chopping block. Here it is in all of it’s glory:
In general, when any owner falls in to the ‘High Effort – Low Profit’ quadrant, you should really cut them loose either immediately or in the next down season so that it’s not unnecessarily harmful to their financial income.
While it seems clean cut, I know it’s not that simple in actuality for the average Property Manager.
Most Property Managers I’ve spoken to who are struggling to know how to cut certain Owners from their program can’t afford to lose the money to the bottom line that the property is generating.
Or maybe more realistically, you’ve grown a company to somewhere between 50-70 units and you have 5-10 properties that are really a lot of work and not much (if any) money to you at the end of the day individually, but together all make at least some money. So while losing 1 or 2 wouldn’t kill you, cutting all 10 seems really painful.
You should probably cut them all, but if you can’t, make a list of the top 2-3 least profitable and highest effort and fire them. Realistically, while it can be fearful to lose the revenue to the bottom-line, you are wasting valuable time/effort/resources on your least profitable properties and neglecting the rest of your business.
My experience has been that when you cut lose the problem properties/owners (or maybe they’re not a problem at all just terribly unprofitable!) you inevitably make more money with the more profitable ones by devoting more attention/focus to them.
Think about it: Wouldn’t you rather have that lunch meeting you really don’t have time for with an owner making you a lot of money and firming up that relationship rather than with an owner who is very much not profitable? Or how about not having time for a really valuable owner because you’re already in a meeting with an unreasonable owner whose property makes little to no money comparatively?
How to break-up, professionally.
If you’ve never fired an owner before, it can definitely be anxiety inducing for a number of reasons. Here are a few bullet points to help guide you on the path and eventual discussion:
- Make a firm decision yes or no before the discussion happens. Depending on the nature of the relationship it’s easy to get emotional during the discussion – make an objective decision beforehand.
- Don’t do it in person unless absolutely necessary. This isn’t about being cowardly. You’ve made the decision to fire them because giving time to the relationship is non-profitable for the business. This should be over the phone and done by you (company owner).
- Keep the conversation short and to the point.
- State the facts. (E.g. – “We’ve enjoyed providing services for you but your property is unfortunately in the bottom 5% of all properties in terms of profitability and it no longer makes sense to manage your property.”)
- DO NOT under any circumstances get down in the weeds with more explanation. Some unprofessional owners may attack you – don’t respond in kind. Some owners may want to bullet you with questions. Do not feel the need to get down in the weeds and explain – for the sake of your business, stick to the facts you’ve already covered – thank them for being a customer – get off the phone.
- Have your maintenance team promptly and professionally remove belongings, put the Owner’s lock back on, etc.
- Walk away.
Some will accuse me of being cold or “all business”. Maybe. Or Maybe by trying to “make the situation better” you’ll actually find yourself in a worst position than you started off with. I’m certainly not insinuating someone be rude – but I am clearly suggesting you communicate directly, professionally, and objectively and rip the bandaid off as quickly as possible.
If you’re firing an Owner, it’s because they/their-property are bleeding the business dry of valuable resources and you have to stop the bleeding for the sake of your other Owners, Employees, Vendors, and yourself.
What if they want to get back together?
Some Owners will unfortunately try to convince you that they’re going to change. Heck, some Owners are actually really great people they just either through lack of means or motivation will never fix up their property to make it a performing property. Or maybe no matter the amount of ‘fixing up’, the property will never rent well.
In any case, this is a business. You have to think about your Owner relationships in terms of Real Time Value. What I mean is that as a business owner you should always think about your time in terms of a dollar amount:
That’s it – that’s the formula you should use to value your time. 2048 roughly works out to a 40 hour work week. You may very well work more than 40 hours a week, but this is generally a solid foundation to think about your time-value. So whatever your total compensation from your company is, run it through that formula, and that’s roughly what an hour of your time is worth.
Now that you’re armed with this very vital information, remember why you decided to fire them in the first place. Owners will be very convincing – breakups are always hard – but you have to stay objective and make the decision to do what is actually best for the bottom line.
What about my bills, payroll, linens, hard expenses, etc.?
Every great business person I’ve ever experienced personally or read about has had one common trait: Extreme focus and the ability to remove distractions.
At the end of the day, you have to make decisive decisions to put your time, energy, and focus where it will reap the highest returns for your brand. If you do that effectively, you will generally see higher returns, higher profits, stronger growth, and the bills will take care of themselves.
Breakups are hard, but sometimes very necessary. If you have properties that are stealing profitability from other areas of the business, I encourage you to make a list, take a deep breath, and start the process of removing distractions for the sake of greater profitability and sustainable long-term business success.