5 financial figures you should know in your business
It can be hard knowing which financial figures you should measure, monitor and manage in your property management business. But, as the business owner, you have a responsibility to know your agency’s numbers so you can keep your business on track. Here are five financial figures you should know in your property management business.
1. Average weekly or monthly rent
You should always know your market area’s average weekly or monthly rent. That’s because you should aim to achieve at or above this figure. Knowing this figure then allows you to measure and monitor your profitability per door. If you manage property in several different locations, combine the rental averages to find the sum total average. This figure should be your benchmark for knowing if you are achieving your financial target.
2. Revenue per door
You should always know your revenue earned per managed door. Doing this not only helps you keep track of this financial figure but shows when doors may be costing you money. Many business owners prefer to hold onto doors at any cost so they can eventually sell them and earn a commission. However, your business would be far more viable if you set a revenue per door target and only kept doors which can achieve this figure.
3. Cost per new doors
You must know how much doors cost to convert to new business. To do this, calculate the annual expenses incurred by your Growth Manager or BDM. Include their salary, bonuses, vehicle and any other associated costs. Next, subtract their total annual expenses from their revenue earned for the year to determine how viable this role is to your business. Knowing your cost for gaining new doors helps you decide whether your Growth Manager or BDM is helping or hindering your business.
4. Revenue per portfolio
Your revenue per portfolio is another important financial figure. That’s because knowing this figure helps ensure that each Portfolio Manager’s salary and expenses are in line with the revenue generated from their portfolio. If a Portfolio Manager’s salary and associated expenses, such as their vehicle and overheads, are more than the revenue earned from their assigned portfolio, your business will not be financially viable. Knowing this figure allows you to ensure that revenue per portfolio always outweighs expenses per portfolio.
You must always know how much profit your business is making. Profit may vary slightly as your business grows, and this variance must be managed. For example, to retain new business means extra costs such as salary and resources needed to achieve the next level of growth. This means that your profits may dip in preparation for the next leap. This is referred to as growth tacking and tracking- having a managed zigzagged line of expected dips in order to achieve a quantum leap in profit. As such, knowing how much profit your business is making allows you to not just better manage your business but make strategic plans to grow it.Jo-Anne Oliveri, CIPS, TRC, Founder and Managing Director of property management business solutions company ireviloution is an international real estate identity who has trained over 500 agencies and thousands of agency owners and property managers worldwide. With almost 30 years’ real estate experience, she is seen as a leading authority on all things property management and regularly speaks at the industry’s top Australian and North American conferences. As well, she was selected as an Industry Thought Leader of the Year finalist for the 2015, 2016 and 2017 and 2019 Real Estate Business Awards and Industry Influencer for the 2017 Elite Agent Awards.