Harnessing Innovation For Profit

By Jessica Melvin, CCAM

As management companies commoditize, the profit margins are getting smaller. How you utilize technology and innovation can greatly impact your bottom line. In this article, we will explore some ways to increase profitability for managers and their companies.

MANAGEMENT FEES

Management fees are often barely covering the bottom line of what it takes to manage an association. The trend in the industry is to attract associations with a low monthly management fee and create profit from other sources like reimbursable expenses, add-on services, etc.

Often in interviews with potential new clients, the first thing I hear from them when asking why they are leaving their current management is that they felt “nickeled and dimed.” They aren’t wrong!

The low management fee model is promoting exactly that. Recently, some companies have taken a different approach: the all-inclusive management fee. While the jury is out if this approach is effective, it certainly makes it easy for the client to realize what they are truly signing up for and enables the management company to effectively price their services without the headache of tracking ancillary expenses.

ADDITIONAL CHARGES FOR ADDITIONAL VALUE

While we are talking about those fees, let us think of a larger picture and thus, a larger profit. Sure, you can have a menu of add-on expenses like parking monitoring, rental monitoring, and so on. What if what you were offering was on a larger scale and brought in larger profits?

Perhaps, you can offer a piece of technology to a client that lessens the workload on the management team but also provides faster service to the homeowners? That would be an easy sell to a client for a monthly charge.

Think about adding a percentage to all reserve projects with a percentage split to the manager. This would incentivize managers to take on those large-scale projects which in turn maintains or increases property values. It is an all-around win and can create a lot of additional profit.

For example, if you build in a 3% charge into the contract for reserve items, a $500k painting project would net $10,000 for the management company and $5,000 for the manager. The community benefits from a beautification project that adds property value and community aesthetic while the management company benefits in the form of profit and a well-maintained property.

EFFICIENCY SCHEDULING

Technology comes with a greater control over scheduling and keeping managers more satisfied in their roles. Now that Zoom and other teleconferencing applications have become normalized, meetings can be held anytime and anywhere internet is accessible.

Daytime meetings are now more accessible and have their own additional benefits:

• People are more alert and likely to stay on task.

• It also promotes a better work life balance for board members,

• And, who wants to go to a board meeting after a long day of work?

Board meeting frequency can also be adjusted. Most boards can be moved to every other month and many of them can be quarterly. Having less meetings allows time for the manager to get more items accomplished, create more robust agendas, and maximizes profits. The more often the board meets the more likely they are to be overinvolved in the operations of the association.

VENDOR INNOVATION

Do not forget to utilize your vendors. If you do not have vendors on the forefront of technology, find them. This piece can save so much time for a manager and can increase the profitability of a management company.

Apps like Buildertrend, CoConstruct, and Prommt are now starting to be used by vendors for project management. These apps allow for real time scheduling, picture and video updates, and can be accessed by management and board members. Used as an aid for your billable project management and management additional time, it is a time saver and money maker.

These innovative tools allow you to have less phone communication with your vendors and need for them to make less trips to the property. There are even options for landscape management emerging among the larger companies, like Jobber and Aspire. These apps provide remote options that are less intensive on your company, your managers, and your vendors.

Though the industry has traditionally been marked by clunky websites, paper trails, and old-fashioned tried and true methods, we are experiencing a renaissance after being forced to modernize in the age of COVID. Rather than fret, this is an excellent opportunity to harness technology in a way that can be very profitable and raise efficiency.

You can increase revenue and lower employee burnout, even in the face of stiff competition. Hopefully, this article gave some insights on how to think outside of the box. Ask your employees to get involved with innovation at your company! Everyone from your receptionist to executive management surely has valuable ideas that could help grow the industry beyond what it is today.

Jessica L. Melvin, CCAM

Jessica L. Melvin, CCAM, is the Portfolio Community Manager for The Management Trust, Nor-Cal division, serving Yolo, Solano, and Contra Costa counties since 2016.