Make Money Managing HOAs

www.HOAProfitGurus.com

noreply@blogger.com (J Small) — Wed, 31 Dec 2008 18:58:00 +0000

Well it took me longer than anticipated to get all the content right, but my new on-line consulting business exclusively for owners of HOA management companies is now LIVE . . .

www.HOAProfitGurus.com

Check it out and get a FREE eBook of forms and templates that can be used in your HOA management company today!

The site also gives you The Secrets I used to make MORE money (from your existing business) while working LESS . . . it's true - I USED ALL THIS INFORMATION MYSELF.

Happy New Year!!!

Bonjour from France

noreply@blogger.com (J Small) — Sun, 30 Nov 2008 12:19:00 +0000

Hi there! Please excuse my typos in this post as I`m using a French keyboard in an internet cafe in France . . .

One of the great things about owning a business today (particularly one like an HOA management conpany) is that there are very few reasons for you to be "in the office."

In fact, this week I'll be working from France using a laptop with remote access to my office systems, a webcam for my regular weekly meetings, and a VoIP phone for free calls to the US.

The even more exciting news is that I'll be launching the new internet site from HOA Profit Gurus before I leave France so check out my posts later this week to get early access to the new site.

Au revoir for now.

NEW: Growth & Profitability Service for HOA Mgmt Co's

noreply@blogger.com (J Small) — Thu, 06 Nov 2008 00:23:00 +0000

So, after many months of planning (preceded by many years of "learning lessons") I am super excited to announce that . . . I am launching a consulting business exclusively for HOA management company owners!

Yep, that's right. I will use this new company (by the way, it's called "HOA Profit Gurus") to provide Growth & Profitability Coaching to existing HOA management companies across the US.

We are ramping up now for a public launch of our new web site, which will provide FREE resources to owners of HOA management companies as well as video blogs, training programs, coaching sessions and more!

Check back next week as I announce my new company's web site . . . .

Free time . . . and more money

noreply@blogger.com (J Small) — Fri, 31 Oct 2008 15:40:00 +0000

Hi All,

Sorry for the delay between postings, but I've been taking some time to relax and travel recently. My last couple trips to San Diego and Los Angeles were a blast!

The systems I put in place in my HOA management company are really yielding some great results. In fact, my accountant just told me that this month will produce the most profits in my company's history.

This fact is still hard for me to grasp as I've worked the *least* amount of time this month in the history of my company.

Several HOA management company owners have asked if I offer consulting services or coaching to help them achieve the great lifestyle I've got. Well, I've got some good news . . . .

Check back next week as I announce a revolutionary service specifically for HOA management company owners!!!

Profit suggestions from the Carribean

noreply@blogger.com (J Small) — Mon, 08 Sep 2008 21:14:00 +0000

Customer Service is Dead

noreply@blogger.com (J Small) — Mon, 18 Aug 2008 04:16:00 +0000

It still shocks me how our industry as a whole provides such poor customer service.

It seems to me that if a customer asks for something easy to provide and that would make them feel great about your company, then you should happily fulfill their request. Don't bother the customer with boring details about your company's business processes or your firm's detailed procedures. Just give them what they want (and if you do it with a smile they'll love you for it!). You can even automate this process like I did (http://www.parkerfinch.com/forms/formDisplay.asp?frm_id=6776&assn_id=10879)

I was in an airline that was wowing me with quality of their plane, a straight forward boarding process, they even gave out breakfast muffins to the entire coach class of the plane (yes this was on a US airline in 2008! http://www.reuters.com/article/pressRelease/idUS142730+14-Jul-2008+PRN20080714). Then it happened. I stopped a flight attendant that was walking down the aisle and asked for a drink (I had been sleeping a bit, but based on the fact that no one else in my row had a drink I figured they accidentally skipped my row). The busied flight attendant quickly responded to my request with a "we'll be back through with drinks in a bit" as she continued walking passed me.

Don't let yourself be so busy that you don't take a second to fulfill a customer's simple but meaningful request. If you and your team can deliver on this aspect of Customer Relationship Management (CRM tips - http://www.inc.com/guides/cust_service/), you'll out perform the competition 9 times out of ten. Mainly because your competition is 'too busy' to read my blog!

Business relationships are same as dating

noreply@blogger.com (J Small) — Fri, 08 Aug 2008 00:39:00 +0000

So I was in a bar (really I was!) and I witnessed a horrendous event. A decent looking guy was sitting at a nearby table (and talking really loudly as you'll see from the level of details I know about him) with 2 women.

Unfortunately for him, he was killing his chances of coming off as attractive to these members of the opposite sex. He detailed his woes of self misery, despair, bad luck and just generally demonstrated diarrhea of the mouth.

Here's an example of what happened . . . Woman comments "these are the best days of our lives." Guy says, "Really!? I have tough times, life's hard . . . " and then he continued to outline the details of his divorce, his lost money in the real estate market, his bad health, etc, etc.

Not surprisingly, the women shortly thereafter just stop communicating with him in any meaningful way (i.e., both verbally and non verbally).

Business relationship are the same . . . actually all people are the same - it's about THEM, not YOU.

No matter if you're selling your services to a new customer or you're talking with an existing client, the conversation NEEDS to be about the other person the majority of the time. If you keep telling others all about you, you're not taking advantage of one of nature's best gifts - your 2 ears! See http://www.businesslistening.com/listening_skills.php for some great tips.

As one of my colleagues says, you have 2 ears and 1 mouth. Use them in that ratio.

Systems = value

noreply@blogger.com (J Small) — Sun, 27 Jul 2008 18:36:00 +0000

I was recently approached by an owner of an HOA management company whom wants to sell his business.

He has a pretty sizable operation - 14,000 units under management. He wanted $2.2M for the business. Here's why it's NOT worth that price.

1. The owner says he's intimately involved in every aspect of the business (but wants to disappear the day after the sale's complete!). Not good.
2. His Director of Operations (who's supposed to be running the business) is underpaid and has only been around for a few months. He'll bolt when the new owner takes over.
3. Employees are underdeveloped. The staff has very few continuing education designations. Significatn time & money will be required to develop the staff.
4. The company's price per unit is well beneath the market average (think $4.00 vs. $7.50). This is bad for several reasons, mostly because owning a business that loses money sucks!
5. Huge chunks of revenue aren't profitable - e.g., they do $800,000 a year in payroll services for their customers and stated that they don't make a dime from it. Yikes!
6. Systems are outdated. Their accounting software isn't even being maintained by the manufacturer any longer and their web site presence is straight out of 1998. Ouch!

In summary, here's what makes HOA management companies valuable -

1. Systems
2. People
3. Recurring revenue (with appropriate profits)

What a great industry we're in!

noreply@blogger.com (J Small) — Sat, 19 Jul 2008 20:41:00 +0000

I spoke with an owner of a real estate company the other day. She called to ask about getting into HOA management because her mortgage business, her brokerage business, her property management business, and her maintenance business were all facing tough times.

Yep, that's one of the coolest things about HOA management - the industry NEVER shrinks.

CAI (www.caionline.org) reports that there are 304,000 HOAs in the US today. That's UP from just under 300,000 HOAs last year, which was UP from 286,000 HOAs the year before.

Maybe the commerce department (http://www.commerce.gov/) forgot to tell our industry that times are tough and that we're facing lots of recessionary pressures.

Oh well, let's keep our little (read: $12 billion) industry niche quiet for now why we all keep making money. :-)

Another revenue item

noreply@blogger.com (J Small) — Wed, 09 Jul 2008 22:44:00 +0000

I just remembered another item many HOA management companies overlook - 1099's.

Yep, every HOA has to issue 1099's to vendors at year end and smart companies charge for this service!

Here's the IRS' tutorial on 1099's - http://www.irs.gov/efile/article/0,,id=98114,00.html

Don't think for a second that CPAs or independent bookkeepers wouldn't charge a customer to create federally mandated tax documents.

Profits require creativity

noreply@blogger.com (J Small) — Mon, 07 Jul 2008 03:24:00 +0000

After hearing the great revenue enhancement ideas being implemented across the country at this year's CEO-MC (http://www.caionline.org/events/ceoretreat/index.cfm), I thought I was pretty well educated on the topic of making money on ancillary fees in our industry . . . I was wrong.

It never ceases to amaze me that HOA management companies continue to slug it out when competing for new management contracts on the basis of the lowest monthly cost per door just to spend countless hours creating other ways to bring in revenue. While the range of monthly base management fees is pretty wide (from $4.00 per single family home to above $20.00 per condo in heavily populated areas), the fact remains that base management fees have NOT increased in 20+ years!

Ok, ok enough ranting here are some of the more creative add-on fees being charged out there, which you can implement today to make more money:

Collections administration fee (to send info back & forth to collection firms)

Statutory agent fee (annual fee to be official HOA legal document handler)

Tax return preparation (actual work subcontracted to a CPA or bookkeeper)

Insurance claim administration fee (% fee added on to any insurance claim)

Electronic communications fee (fee per email sent/received)

Master insurance program (this one takes more work, but is well worth the effort)

Outsourcing boosts profitability

noreply@blogger.com (J Small) — Mon, 30 Jun 2008 02:07:00 +0000

I just returned from a great trip visiting some wonderful HOA management companies in the South Eastern US. These companies have experienced explosive growth and have smart people leading their firms.

Unfortunately, all the growth and constant focus on superior customer service has left the executives of these firms exhausted as they continue to try and keep juggling the demands of running a 'successful' company.

The sad news is that I hear this story repeated again and again as I talk with management companies throughout our industry. You see in other industries a concept of specialization is the norm and companies quickly determine their 'core competency' and outsource the rest. This model is now a tried and true approach to efficient operations in nearly every Fortune 500 company.

These big successful Fortune 500 firms outsource things like human resources (see www.hewittassociates.com), payroll processing (see www.adp.com), entire IT operations (see www.accenture.com, www.bearingpoint.com), even manufacturing (http://en.wikipedia.org/wiki/Contract_manufacturer). Not surprisingly, these firms analyze what they do that is really valuable and difficult for competitors to replicate, then they start outsourcing the rest!

Take Nike, a global brand with amazing brand awareness. Did you know that they don't manufacture ANY of their shoes - http://www.google.com/search?hl=en&q=nike+outsources! How about American Express, they spotted having an IT department over a decade ago!

You see, when you are great at winning HOA management contracts and providing superior customer service, you need to dump the other work you do that isn't helping you differentiate yourself.

Take HOA accounting. I have yet to see an HOA management firm that is great because of it has superior HOA accounting. In truth, it's just accounting. Either you do it right or you don't. No one can differentiate on this piece of the business.

If you can't differentiate yourself from your competitors with acounting, then you need to ensure you 1) do it correctly and 2) do it at the lowest possible cost. You can trim costs by outsourcing.

If you're successful in HOA management but haven't started analyzing what really makes you great, I suggest you start doing so now (tip: ask your clients why the do business with you to get the answer!). Then, start outsourcing the rest.

The lower cost and less work will make you more profitable and give you more time to enjoy all your well deserved success!

Pricing Strategies to Make More Profits

noreply@blogger.com (J Small) — Sun, 15 Jun 2008 18:40:00 +0000

It continues to surprise me how many people are managing home owners associations across the US that don’t know how to determine what they should charge for their services.

Historically, business owners used one of a few basic pricing techniques to determine their asking price and HOA management companies can use this information to make themselves more profitable.

The 3 pricing techniques:

1) Cost plus
2) Market based
3) Value based

1) Cost plus. Cost plus is probably the most well known of the three methods as it is simple and therefore easy to use. The process works like this: first, you determine the total cost of your product or service (this is really easy if you don’t create the product yourself such as the case in a distribution or retail business). You take the cost that you paid the product and simply add a “mark up.” Grocery stores are notorious for doing this at just 2-3% mark up rates. For example, if a grocer pays $10 for a piece of meat, they sell that meat at $10.20. You have to sell a ton of product at 2-3% mark ups to make enough money to stay in business!

2) Market based. Market based pricing is what most HOA management companies use (not that they should be). This pricing technique involves finding out what your competitors are charging and then matching their price. For many reasons, this method is horrible for business owners (and eventually for the customers as well!).

This technique is also the default method for commoditized businesses, such as gasoline, rice, pasta, gravel, etc. If customers cannot tell the difference between your gasoline and that of the competitor across the street, the gas station owner is left to pricing his gas based solely on what his competitors are charging. One of the many problems with this technique is that if the gas is superior at one station or another, the consumer doesn’t know it and thus makes his buying decision exclusively on price. Similarly if the gas buying experience is better at one station versus another, the owner of the superior station isn’t able to charge a premium for the better service.

3) Value based. Value based pricing is the business owner’s Holy Grail. In this technique, the buyer doesn’t ask you what you paid and simply give you a few percentage points more for delivering it to him (i.e., cost plus) nor does he look around at what your competitors are charging and expect to pay you the same price even though you do 2 times the work and add 3 times the value. Yes, the value based pricing let’s you set a price regardless of cost or competition and simply becomes an untainted negotiation between you and the customer.

I know an accounting firm that recently went from market based to value based pricing and nearly doubled its profits without increasing its workload! It was able to differentiate itself enough from its competitors that the buyer’s simply couldn’t compare the service delivered by the value based firm to the ones delivering services and charging market based rates. Most importantly, the value based firm’s customers evaluated its services and determined that the *value* was skewed in their favor even at the higher price and they happily paid the bill.

There is such as vast difference between decent HOA management companies and great HOA management companies that it’s truly staggering. Sadly, the great HOA management companies are often so busy delivering high quality service for their clients that they don’t take the time to communicate the value that they’re providing and as a result are stuck being compared to their lesser competitors on the only criteria that their customers can determine – price (i.e., market based).

If you want to make more money, let your customers know what you’re doing different than your competitors and then charge higher rates accordingly.

Profit from Paying Community Managers (the right way)

noreply@blogger.com (J Small) — Wed, 11 Jun 2008 16:54:00 +0000

Since up to 70% of an HOA management company’s total expenses can be in payroll, it’s critical that you know how to manage this line item to ensure your business’ profitability.

There are basically 3 compensation models for community managers.

1) Straight salary
2) Straight commission
3) Hybrid salary/commission

Let’s explore all three.

1) Straight salary

In the straight salary model, the owner of the business knows exactly what the payroll expense will be for salaries. Similarly, the community manager knows exactly what he or she will be making (regardless of productivity or results). Average salaries for community managers vary depending on years of experience in the industry, cost of living in their market, and industry designations. That said the average salary is about $42,000 a year with the high end being about $75,000 a year.

2) Straight commission

In the straight commission model, the owner creates a completely variable compensation expense (note to owners: variable expenses are good, fixed expenses are bad!). The community manager doesn’t know how much he or she will be making but the do know that the more they bring into their company (with through more effort or by working smarter) they more money they make. Most entrepreneurs love the all commission model, but it makes recruiting difficult and most folks that are looking for a $42,000 a year job aren’t really into risk taking, especially with their income.

The straight commission model also creates potential issue with complying with the Federal Standards and Labor Act (FLSA). This issue alone makes this model a bad idea for most HOA management companies.

3) Hybrid salary/commission

The newest model of compensation in the HOA management industry is the hybrid model. In this approach, the company avoids any potential problems with FSLA compliance while creating a compensation cost that is as variable as possible. Moreover, most employees are more comfortable knowing that they’ll receive at least a base income regardless of how much money they bring into the company and yet are often excited by the upside if they are more productive (read: bring in more money to the company) than their peers.

Here’s an example of how the hybrid model works:

Base salary: $XX,000 per year, PLUS
Commission bonus: X% of all revenue brought into the HOA management company

The community manager can make more money by encouraging his clients to buy additional services from the HOA management company. I’ve seen community managers make a lot more money per year on this model and the company loved them for it!

HOA Management Company's Real Financial Numbers

noreply@blogger.com (J Small) — Sat, 07 Jun 2008 17:25:00 +0000

Traveling around the country talking with groups of folks interested in getting into the HOA management industry, I frequently get asked "how does anyone make money in this industry?"

For several years, it seemed that the more I explained the process (especially to people outside the little $12 Billion niche of the HOA management industry), the more excited I got giving detail after detail, the more glazed over their eyes became. Well, hopefully I've got a bit better at the explanation these days, but just in case I haven't I'll illustrate the scenario using numbers for those of you analytical types out there!

There are a few basic facts that you need to know first.

1) HOA management companies charge a monthly "management fee" to do the basic management functions (like going to Board meetings) and accounting (like receiving HOA dues and cutting checks to the HOA's vendors). These fees typically equate to 50% of the management company's revenue.
2) An HOA management company's monthly "management fee" can be easily broken down to a revenue "per door" basis.
3) HOA management companies have numerous ancillary (read: extra) charges for additional work performed. These ancillary charges equate to the remaining 50% of the management company's revenue.

So now that you have the basics, let's take a look at how much an average HOA pays to its management company:

Average HOA units (i.e., number of homes in the HOA): 150
Type of unit (for this example): condominiums
HOA Amenities: Clubhouse, pool, automatic gate, covered parking, playground, and BBQ areas
Number of HOA Board meetings: 7 times per year (Board meetings every other month & 1 annual owner's meeting)

Base Management Fee: $3,000 (note: $20 "per door")

Ancillary Fees:

Office supplies: $ 450

Postage: $ 100

Collection Services (i.e., to chase up delinquent home owners to pay the HOA): $1,000

Escrow processing: $ 1,250

HOA Web site: $ 50

Compliance inspections: $ 150

Total Ancillary Fees: $3,000

Total Amount Paid to HOA Management Company: $6,000.

Interestingly, I recently reviewed some HOA budgets created in the mid 1980's and their "management fee" has not increased at all in the past 20 years! Due to basic inflation, HOA management companies have had to find new ways to bring in revenue to stay in business so the proliferation of ancillary fees is now a standard practice.

HOA Managers need Call Centers

noreply@blogger.com (J Small) — Fri, 16 May 2008 19:01:00 +0000

It continues to surprise me that HOA management companies have still failed to adopt call center technology to help serve their customers.

I can't tell you how often our sales team gets calls from Board members saying that their existing community manager is "never available to take their calls and that the community manager is unresponsive to the home owners in the community." Trying not to ridicule the other HOA management company, the Parker Finch's (www.ParkerFinch.com) sales folks explain that without a call center function no HOA management company can provide immediate communication to the hundreds (or thousands) of home owners that a single manager is responsible for.

Imagine for a minute the typical staffing model of HOA management companies. They have community managers that are responsible for communicating with the Board, ensuring that each association's vendors are doing their work, that the financials of the association are correct, that the association has insurance, that architecture/design change requests are processed in a timely manner, and the the association is inspected regularly for compliance issues. Nine times out of ten all these responsibilities fall on the shoulders of an assigned community manager (did I mention most community managers have 8-12 associations assigned to them at any one time!).

Now let's consider the Parker Finch Management model (not to say that we're really smart, we just look at what the rest of the world does and copy it).

Home owners call a toll free number and speak with a live client services rep who's trained to handle basic inquiries such as accounting questions, web site log in problems, and sending out forms.

If the caller has a more complex question that the client services rep is trained to handle, the call is transferred to one of our community specialists in the office where the home owner lives (e.g., PFM-Las Vegas, PFM-Tucson, PFM-Denver, etc). See www.ParkerFinch.com/franchise for a complete list.

At the same time, our PFM offices use a compliance inspector to ensure that all communities look their best at all times.

This model frees up the community managers to handle the most important aspects of association management: 1) coaching the Board, 2) overseeing the association's vendors, & 3) proactively working to increase property values and sense of community in the association.

Of course, without the call center this entire process wouldn't work. Thus, I'm surprised that HOA management companies have a cold voicemail answering the phones at their offices and then forward all calls to the Community Manager!

HOA Management Industry

noreply@blogger.com (J Small) — Fri, 09 May 2008 16:43:00 +0000

I just returned from CAI's annual conference in Orlando, Florida (www.caionline.org) and I am happy to report that the industry seems to be maturing in a very positive way!

After seeing nearly every other industry in the western world benefit from current business philosophy, the HOA management industry is finally catching up by using strategic modeling (think SWOT analysis), outstourcing, customer relationship management, and web technology in its service offerings.

This positive evolution will inevitably bring a new level of customer service to home owners associations and the people living in these communities (think: Satisfaction Guaranteed for people living in HOAs!)

HOA Management

noreply@blogger.com (J Small) — Thu, 08 May 2008 01:22:00 +0000

As CEO of Parker Finch Management, my responsibility is to ensure that our franchise partners make money managing home owners associations (commonly referred to as HOAs).

Having started, built, operated, and owned an HOA management company (using Parker Finch's franchise concept), I know own a profitable company in Phoenix, Arizona that continually provides me with an income stream with very little work from me - I've hired great people to run and work in this company.

Now, I'm free to help other aspiring entrepreneurs build wealth by managing HOAs across the USA and I'm having a blast doing just that!