As an ambitious property manager, we know you’re always looking for ways to improve your business. One way to do this is to prioritize client retention and reduce your churn rate.
So, what exactly is client churn, and why does it happen? How can your property management company continue to keep your clients happy and improve your long-term retention?
Reducing owner churn is all about closing the gaps…
You have to close the gap between price and value. Do your clients view your services as an expense or a value-add?
You also have to close the gap between your objectives and your client’s objectives. Do your business interests align with your client’s business interests?
In this blog post, we’ll cover everything you need to know about your company’s churn rate and how to reduce client turnover.
You’ll learn what your churn rate is and why it’s important to track, how to accurately calculate your company’s churn rate, and how your company operations can cause a higher churn rate. We’ll also give you our top tips on how to better retain your clients in the long run.
So, if you want to know more about retaining clients and improving your property management company’s overall success, keep reading!
What Is Client Churn and Why Does It Matter?
Your property management company’s churn rate refers to your client turnover rate. It is a metric that indicates how many of your clients choose to leave your company in a given period.
It’s easy to focus on generating leads and increasing your door count. However, those aren’t the only contributors to your property management company’s success. You also need to learn how to keep your clients long-term, as your long-term clients will ensure that you always have reliable revenue.
Owner Churn can be solved in two ways:
- Close the leak (eliminate churn)
- Keep “pouring” new doors into your portfolio
We believe both should be part of your growth strategy.
Let’s imagine a bottle of water. Let’s say the bottle of water is leaking. The water is the properties that you have.
So to keep the same level of water in the bottle, you can either close the leak, which is to eliminate the churn, or you can always keep pouring more water in it.
Later on, we will go over the different ways in which you can do just that, but for now, let’s talk about the basics.
Client Churn Rate: How to Calculate It
To accurately evaluate your company’s client churn rate, you’ll need to take the time to calculate it. You should be doing this calculation regularly. We recommend doing monthly, quarterly, and annual calculations.
To calculate your churn rate, you will need to take the number of customers you have lost, divide it by the total number of clients that you had at the start of the period, and then multiply that number by 100.
For example, let’s say that you began the quarter with a total of 120 clients, and you currently have 110.
This means that you lost 10 clients since the quarter began. To determine what your churn rate is, you would divide the amount of lost clients you have (10) by the amount that you started with (120). Then, multiply it by 100 to have your churn rate expressed in a percentage. Here is the formula:
10 / 120 = 0.083
0.083 x 100 = 8.3%
While having any client turnover is not ideal, it is unfortunately just part of running a business. While you can do your best to retain clients, you will inevitably lose some along the way.
In 2020, the average churn rate for property management companies in the United States was 25%. Your goal should be to make sure that your gains outweigh your losses, as client retention is the primary way that you can succeed long-term.
So, what do you do when a client decides to leave? The best thing that you can do is to try and learn from the experience. Pay attention to clients who choose to leave your company and keep track of their name, the amount of time they spent with your company, the amount of money you charged them, and the date that they left.
Most importantly, try to find out why they left. Understanding the reason behind this decision may be able to prevent you from losing more clients for the same reason down the road.
Ask yourself, could we have prevented losing this client? Why did they choose to leave? Finding the answers to these questions will help you find positive adjustments that you can make to your client experience in the future and reduce client turnover.
Why Do Property Management Companies Lose Clients?
There are a wide variety of reasons why a client could choose to leave your property management company. Sometimes you may not be able to prevent it. However, these are often the most common reasons a client will stop working with your company:
1. Cost of Services
The cost of your services can be an extremely common reason for client turnover. If your client can find similar services of the same quality as yours for a lower cost, they will most likely take the opportunity to save some money without sacrificing the benefits.
This is one of the many reasons why it is crucial to make sure that you are providing your clients with services that are worth the price tag.
2. Client Experience
Client experience is another reason why a property owner may decide to find another property management company to do business with. If a client found that they had a hard time getting a hold of your team, or your company seemed unorganized, this could easily result in a lost client.
At the end of the day, owners are paying you to help them, and if they do not feel valued, many will jump ship and seek out services elsewhere.
3. Competition
Speaking of seeking the same services elsewhere, competitor intervention is yet another reason that you may be experiencing client churn. In any industry, you’ll have to face competition, and there’s always a chance that a client will be won over by another company that offers the same services at a higher quality or a cheaper rate.
While we do not believe that you should spend your time worrying too much about your competition, it is important to be aware of them. If your clients are frequently leaving your property management company for your competition, it is worth analyzing what they offer that you do not.
4. Low-Quality Services
When it comes to property owners, over half of them will expect their services to be personalized. So, if you are not able to offer them a specific set of services that are tailored to their unique needs, they may not see the value in continuing to pay for your work.
This is one of the many reasons why it is important to have a thorough onboarding process with your clients. Make sure that as you bring on a new client, you are clear about what their expectations are and whether or not you will be able to meet them.
At the end of the day, it’s important to remember that every client will be unique in their reason for leaving, so make sure to implement a thorough offboarding process so that you can have more context for their departure and determine whether or not there is something you can do in the future to prevent more client turnover.
5. Owners Selling Their Property
The biggest driver of churn is owners selling their properties, and most property managers don’t capture those sales.
Even if your clients are happy working with you, sometimes they may want to sell their property anyway.
There are many reasons why an owner may want to sell their property (or worse, manage it by themselves) and, unfortunately, there isn’t much you can do about it.
But is there a way to “recycle” these properties back under your management?
Below, we will discuss a win-win solution to this problem. Keep reading to learn how!
How Can You Retain Clients?
Now that we know some of the reasons why a client may leave your property management company, let’s talk about how you can work to have stronger client retention.
1. Create Owner Profiles
When rental property owners are searching for a new property manager, they want someone who will be a good fit for their unique set of needs. As the property manager, you should be doing the same. After all, you will be far more likely to get a client to stay with your company if you are a good fit.
This is known as “forced attrition” and can have a counterintuitively positive impact on your business.
The idea is that some owners just aren’t a good fit for your business model:
- They might ask for more time and energy than you can give them.
- Their needs might require deviation from your standard practices.
- They might like things done in unscalable ways that cost you more money.
When you end a relationship with a problematic client, you reclaim time and energy that can then be devoted to other owners who appreciate the way you do business.
You might lose a few bucks at first. But it’ll make your business more stable for you, your employees, and your other clients.
We recommend asking yourself this crucial question: who is your ideal owner? In order to find this out, you need one main thing: owner profiles.
To determine who your ideal owner is, you need to ask yourself a few important questions about what your company does best. For example, what kind of property do you specialize in?
If you tend to work best with single-family homes, then a client who primarily owns multi-family complexes probably will not be the most ideal fit for you, and bringing them on will not set you up for a positive long-term client relationship.
Take a moment to consider your specific list of services that you offer clients. Who would benefit the most from them? Finding the right property owners to work with will help you to build strong, positive relationships with your clients from the very start.
2. Prioritize Your Client’s Unique Goals
Every client that you work with will have their own list of goals that they want to achieve, and they are most likely looking to your property management company to help them get there. For that reason, it is crucial that you know your client’s goals in order to better serve them.
For example, a client who invests in multiple properties will ultimately have very different goals from an accidental landlord, and it is important to make sure that you know which goals you are best equipped to meet.
When you are onboarding a new client, make sure that you both really understand what their goals are. Determine what their biggest challenges and opportunities are so that you can come up with the most effective strategy for handling their investments.
Then, make a game plan for how you can deliver the best services possible to this specific client and help them reach their goals.
3. Improve Your Communication
Now that you have set goals with your clients and come up with a strategy to help reach them, it is important to be in the habit of communicating clearly and transparently with them. Schedule regular meetings where you can report back to your clients with the results of your work.
Having frequent communication and meetings with your clients is the best way to ensure that your strategies are continuing to align and that your services are helping them reach their goals.
With our Owners Investment Dashboard, you can facilitate owner communications by giving them a complete overview of their properties, including returns, home values, expenses, and overall performance.
This helps them to make informed decisions and stay happy with you!
A crucial part of retaining clients long-term is making sure that they are always kept in the loop with their investments, and that you are responding well to any feedback they may have.
4. Allow Your Clients to Easily See Their ROI
When you make an owner’s ROI accessible to them, you will increase the likelihood of keeping them as a long-term client. This is because they will be able to tangibly see the value in your services.
We recommend providing clients with updates on their investments on a monthly, quarterly, and annual basis, clearly outlining how their properties are performing financially. Take the time to break down the ROI and show them all the ways in which your services are helping to increase their income.
For example, in your reports, provide insights regarding how you were able to reliably choose high-quality tenants with your thorough screening process. High-quality tenants lead to less property damage and more reliable rent payments, resulting in a higher ROI.
If you show your clients exactly how your services are benefitting them financially, they will be more likely to see the value in hiring you, and less likely to leave.
5. Sell Your Owners’ Properties for Them
One strategy that we’ve found can help reduce your churn rate is facilitating sales between your owners.
When a client wants to sell, you can list the property on your website, and another current client with access to the marketplace can buy it!
By acting as a middle-man, you can keep those doors under management AND collect a brokerage fee!
That’s exactly what Blanket is all about.
Blanket’s platform enables internal sales so properties stay in the PM’s portfolio.
By using key metrics and mountains of data, Blanket’s Property Retention Platform helps you identify which owners want to sell and which owners might want to leave.
No churn + brokerage commission = pretty sweet deal.
Client Churn: Bottom Line
As a property manager, it can be difficult to keep your client churn as low as possible. However, it is crucial for maintaining long-term success. To keep your clients happy, you will need to make sure that all of them feel individually seen and valued when they work with you and your team.
By choosing owners who are a good fit for your company, prioritizing excellent communication, paying attention to your clients’ unique goals, and proving your value to them through their ROI, you will be able to significantly reduce the likelihood of clients searching elsewhere for property management services.
If you have any further questions about how to retain your clients and reduce client churn, contact our team at Blanket today!
