What Factors Affect Owner Churn? with Ray Hespen



On The Property Management Show today, we’re talking with Ray Hespen, who has been here before to talk about maintenance, data, his company PropertyMeld, and the dangers of ghost maintenance requests.

Today, we asked him to discuss what some of his recent data has been telling him about customer churn in the property management industry.

How Can We Describe Owner Churn?

When we think about churn, we typically think about losing a customer.

The property management space includes more third parties than it did 10 or 15 years ago. You’re working hard to hold onto the customers who are trusting you with their property and paying your property management fees.

How good are you at hanging onto those customers?

How many of them do you lose?

Understanding your churn rate is not complicated math. Let’s say you sign up 100 owners this year. At the end of the year, you have 80 of those owners still with you. This means you have a 20 percent churn rate.

Mastering Your Churn Number

Forget growing your business by 200 doors this year. That’s a big, bold, and brave statement. But, it doesn’t matter how many doors you add if you cannot hold onto your current customers.

This has a much bigger impact on growth than a lot of people realize.

Customer retention impacts your earnings in a potentially huge way.

* Let’s say it costs you $750 to gain an owner. That’s inclusive of your BDM costs, your marketing budget, etc.

* Let’s say you earn a 40 percent margin on that customer and earn about $2,200 a year in revenue.

For an average or small company, the difference in hanging onto that customer for five years instead of three years is pretty meaningful. But, if you’re a company with 500 doors, the difference in three-year customers versus five-year customers can add up to a million dollars in profit. The difference over 10 years is actually $4.9 million in revenue (5-year customers) versus $2.8 million (3-year customers).

Your acquisition cost is the same, whether you hold that customer for one year, three years, five years, or longer. But when you hang onto that customer for longer, you earn higher revenues. This has not been a talking point for property managers the way it should be.

Everyone knows losing a customer is bad. But, if you do the math on how much money you’ll make when you keep those customers – those retention goals take on a new urgency.

This needs to be a key metric. It’s potentially more important than acquiring new clients. You can spend a lot of time on conversation rates and leads per month. But, you have to think about your churn rate, too.

What to Assess When Evaluating Churn

Why are owners churning?

You need to spend time understanding why customers leave and then trying to make things better whenever possible.

Ray stresses the importance of collecting qualitative and quantitative data. Quantitative is hard data. It involves numbers, and it’s critically important. Qualitative data requires conversations that are sometimes difficult to dig into.

Customers won’t always tell you the real reason they’re leaving. How can you uncover it yourself?

In America, we’re less direct than people are in other cultures. You have to get to the real reason an owner is leaving.

Here’s a great story that delivers a good analogy:

A woman goes to a grocery store and says she’s looking for potatoes.

The salesperson takes her to that section and asks why she nee...