5 minute read
The Executive Corner: Don't Leave Money on the Table
How To Maximize Your Schedule A Revenue
By Adam Balkcom
The key to remaining profitable in this next era of community management is maximizing the revenue that you make outside of your base management fee.
Data-Driven Insight: Successful Companies Fully Utilize Their Schedule A
At CAM Leadership Institute we now have over 100 member companies, giving us a large enough sample size to start doing our own industry benchmarking. In one of our initial benchmark reports, our members submitted their 2022 total revenue broken out by base management fee, schedule A, and ancillary/other revenue streams (those that fall outside of schedule A and base management fees).
The data painted a clear picture: companies that diversify their income streams and find additional ways to monetize their portfolio are more profitable.
• Companies generating less than $10,000,000 in gross annual revenue saw around 67% of their revenue directly attributable to their base management fee.
• Companies generating over $10,000,000 in gross annual revenue saw only 55% of that revenue coming from their base management fee. Some were as low as 40%!
The data showed that as companies grow, they find more and more ways to monetize their portfolio outside of base management fees. Don’t leave money on the table.
The first place to start in growing this extra revenue is with your Schedule A revenue.
Schedule A Strategy: Focus on High-Margin Items First
Companies that are thriving in this new era of community management are those moving away from “all-inclusive pricing.” They are drawing a line in the sand clearly defining what is included in their base management fee and what is not. Anything not included in the base management fee falls on their schedule A. Things that are consistently predictable should be in your contracted scope of work and base management fee. This means getting clear on the number of meetings, site visits, and time spent managing the communities’ finances.
Unpredictable tasks, such as additional board meetings, supplementary site visits, special assessments, managing large capital projects, and coordinating insurance claims, should have fees clearly outlined in your Schedule A. Having a well-defined Schedule A brings clarity to both the community manager and the community.
A Word of Caution: Keep It Simple
Be careful not to make your Schedule A too long or complicated. Your competitors will use this against you. It is best to keep your Schedule A to one page and pick out the highest revenue items that your managers will feel empowered to bill for.
The most common high-margin Schedule A items we see are:
• Project Coordination Fees
• Insurance Claims Management
• Loan Administration Fees
• Lease and Short-term Rental Tracking
How to Empower Your Managers to Bill for Schedule A Items
It doesn’t matter how strong your Schedule A is if your managers are not empowered to actually bill the boards for the items on it. The companies that are most successful at billing for Schedule A items have these three things in place:
- Confidence
Empower managers by educating them on your Schedule A through an internal “contract college” seminar or lunch and learn. This will help your managers understand the contract, including what is included in the base management fee and what isn’t. It also gives them the space to ask questions and get clear on how to respond if faced with pushback or questions from their boards.
- Make it Easy
You have to make it easy for your managers to submit Schedule A items. The leading software platforms in our industry now have modules that can make this billing automatic. If your software does not do this, you can set up a DIY solution while you look for a platform that does. Try setting up a Google form or similar shared document that has all of your communities listed and your Schedule A items listed in a selectable drop-down. From here, all your manager has to do is select the community, select the schedule A items, add some notes, and then press submit. Important Note: Don’t fall into the trap of regularly declining manager submissions to bill for Schedule A services. Doing so sets an unhealthy precedent for the customer, weakens the strength of your contracted billing terms, and makes managers feel that submitting requests is a waste of time.
- Revenue Share
More and more companies are incentivizing managers to submit Schedule A items by offering them a percentage of the total amount billed. This additional income can be substantial depending on the Schedule A items billed. Your company will earn additional income, and your managers will be rewarded for their extra effort, that’s a win-win.
Boards do not want to feel they are getting nickel-and-dimed by extra fees and tangled in red tape every time they reach out to their manager. You have to be smart in what you put on your Schedule A. If you build it out right, train and empower your managers, are consistent in billing according to it, and make it easy for all involved parties, this can be a quick way to drive up your revenue and embrace the future of our industry.
ABOUT THE EXECUTIVE CORNER
This is a new column for Vision Magazine that will be included in every issue. It is written by staff at CAM Leadership Institute, an organization that focuses on community management company owner and executive leadership development. CAM Leadership Institute hosts mastermind groups attended by almost 100 management companies from across the country every month, which gives them unique insight into the industry. In each edition, the staff at CAM Leadership Institute will provide a column specific to management company owners and executive leadership teams.
