Top-Line Growth and Profit in Your Property Management Business: How to Navigate the Black Holes

In this episode of The Property Management Show, we’re talking about top-line growth versus bottom line performance in your property management company. There’s a belief that’s accepted among business owners that you suffocate without profit. However, it’s also possible that you can suffocate without healthy top-line growth. Profit may be achievable, but top-line growth is possibly more meaningful for a company, even though profit is what indicates what a company is worth and how much you’re taking home as its owner.  Two guests are exploring this idea with us today. Jordan Muela is the co-founder and CEO of LeadSimple. He’s also the co-founder of PM Grow Summit and the co-founder of The Profit Coach. With him is Danny Craig, who digs into numbers like nobody else. He partners with Jordan at The Profit Coach.  True or False: Growth Solves Nearly All Problems In the discussion of top-line growth versus profit, there’s an idea that growth solves nearly all problems. You could be operationally efficient and really good at what you do, but you have no clue how to grow your business or use sales and marketing to achieve bigger outcomes. Or, maybe you provide an average service but you’re great with sales and marketing. The company with the grasp on sales and marketing will probably out-perform that company with outstanding services but no way to sell them.    Also, there is no point in scaling something that doesn’t work. If a business is hemorrhaging cash and losing money or underperforming even without the sales and marketing budget factored in, nothing good will necessarily come from trying to grow.  Another thing to consider – what does your end state look like? In other words, why are you in the business? If you want to maximize your cash flow from month to month, that’s one outcome. If you want to accumulate a bunch of doors, scale up, and then sell, you have to measure whether you can feed the business enough cash to get the growth you want before you sell. That’s a different path. Depending on your end game, you’ll know how concerned to be with scaling and profitably. Growth won’t solve all issues if you can’t at some point optimize that growth. Growth is great. But, if you cannot get profitable, you’ve got an issue. Remember this: When you strip out the sales and marketing expenses of an organization and that company is still consistently losing money, it’s pointless to scale. That business needs a lot of help, and top-line growth isn’t necessarily the answer. Falling into the Black Hole: Where and How this Happens A business can grow to the point that nothing seems to work anymore. As the organization scales, it doesn’t matter how efficient you were before. You cannot continue to deliver the same output at the point where everything seems to be breaking because you’ve reached a new level. Even with the best processes and systems, it seems that nothing is in place to support the growing machine. This can happen to property management companies at two stages: First Black Hole: Between 200 and 300 doors are under management, and the owner wants to transition from being a property manager handling the day-to-day work to being a true owner who is spending time bringing in new business and strategizing for the future. Second Black Hole: Between 700 and 1,000 doors are under management, and processes suddenly aren’t sufficient to handle the growth.