Introduction
In today's evolving landscape of community association management, the reliance on base management fees is no longer as sustainable as it once was. Management companies are facing increasing financial pressure as these fees fail to cover the growing demands of their services. In this ever-changing environment, the question that looms large is, "Where can we find more revenue?" The need to explore innovative avenues for revenue generation has become imperative, leading management professionals on a quest to discover new and sustainable sources of income. This comprehensive guide will offer insights, strategies, and solutions to unlock fresh revenue opportunities within the realm of community association management.
Bill for What You’re Owed
Despite the fact that Schedule A charges are well defined for boards, many management company executives are wary of charging for what’s truly owed of their services. After all, turnover is high and homeowner tension is abundant in today’s socio-economic landscape. But here’s the reality: being the ‘nice guy’ can easily equate to thousands of dollars left on the table. It’s important for management companies to review their Schedule As and be diligent in charging what’s truly owed to them. These can range from several different charges, but here are the ones we see most often overlooked:
- Meeting Minutes. Almost every contract has a limit on the number of hours that a manager will sit in a meeting, which is typically one hour long. Yet far too often, these meetings go well beyond the agreed-upon hour. Schedule A will have a charge for extra hours in the meeting, and communities should be charged accordingly. In addition to obtaining what’s owed, charging for meeting minute overage will also motivate boards to stick with their agendas in their meetings. This governance will help reduce workload and burnout for community and property managers.
- Mailing Charges. Another often overlooked Schedule A pertains to mailers. Most Schedule As specify an additional charge for each mailer or piece of paper used, which for a singular moment in time only equates to a few cents. Those cents add up when left unaccounted, so even though forgoing the mailer may seem insignificant at the time, it’s paramount for the big picture.
- Automated Addendum Billing. Let’s face it - the list of Schedule A charges can be extremely long, and these charges are regularly left unaccounted for because it’s too overwhelming to consider every cent to every dollar. That’s why it’s important for executives to implement automated addendum billing features - such as CINC’s RevStream platform - to swiftly review the charges and bill accordingly.
Redefine Profit for your Business
Many management company executives equate revenue and growth with profit, but that is not necessarily true. Revenue is the top line, while Profit is the bottom line (after expenses). But growth can sometimes cost more than it brings in, such as if one needs to hire more staff to accommodate client needs. To increase profit, one’s strategy should incorporate adding efficiencies, cutting costs, increasing the value of existing contracts and growing the HOA/COA portfolio. Here are some ways to reconsider where one can cut costs to increase profit:
- Streamline Automation. One of the best things a management company can do to increase profit is to invest in technology. Think about some of the tasks that can often take up excessive time for employees. Account reconciliation, when not computed daily with the click of a button, can take an accounting team days instead of minutes. Property management tools that aren’t designed mobile-first result in managers having to schlep back and forth to their offices when they should be able to process violations and work orders directly from their phone. Executives should evaluate each employee task that creates a major time constraint and consider tools in the CAM space that eliminates such constraint.
- Increase Staff Efficiency. Management companies should review their current staff-to-client ratio for both the manager and accountant side. Is there room for improvement? Similar to what is described above, offering new tools to drive efficiency not only reduces staff count, but increases staff efficiency, meaning employees can handle more clients at a time.
- Consider Virtual Assistants. Some roles, such as community management, cannot be outsourced. But other roles, such as customer support, may not need in-house personnel. Consider where a virtual assistant can support the management company’s needs for a fraction of the cost.
Leverage Passive Revenue Streams
When reviewing new revenue opportunities in community association management, it is crucial to take a step back and consider the untapped potential within existing operations. What if some of the activities your management company is already handling could be transformed into revenue streams, or perhaps outsourced for cost-saving benefits? By reevaluating and optimizing operations, one can not only enhance available services but also uncover opportunities for sustainable income growth.
- Outsource Passive Revenue Streams. There are many services offered by management companies that, when done in house, can eat up a lot of time and costs. Executives should consider which services they are offering that can be outsourced to one of the many vendors available dedicated to the CAM space - from letter-mailing to document imaging and more. These vendors often seamlessly integrate into software solutions through a partnership or sophisticated API capabilities.
- Review Upcharging Opportunities. Frequently, the suite of services offered by management companies presents valuable opportunities to cultivate new revenue streams by up-charging for the service. Take, for instance, vendor payment management. Services such as CINC’s VendorPay streamlines the process of check runs, reducing operational costs, but also opens the door for management executives to potentially bill the boards for this invaluable service. In this way, essential services create a mutually beneficial pathway towards financial sustainability and operational efficiency.
- Project Fees. Project fees serve as a vital catalyst for overseeing capital improvements within community associations. When one engages a professional project manager to handle significant undertakings such as roof construction, it's important to recognize that the community manager still plays a pivotal role. They are responsible for tasks such as coordinating contractors, soliciting requests for proposals (RFPs), and compiling reports from the project manager to present to the board. To ensure that these additional responsibilities are adequately accounted for, management companies should consider implementing project fees, typically ranging from 1% to 3% atop the project cost. This fee structure not only compensates for the diligent efforts of the community manager but also helps sustain the financial health of the management company itself, fostering a win-win scenario for all stakeholders involved.
Increase Your Offerings
Having explored strategies for enhancing billing practices, optimizing profit generation, and capitalizing on passive revenue streams, the final step to uncovering revenue opportunities for a management company revolves around generating revenue itself. Here are just a few approaches through which management companies can expand their service repertoire, setting the stage for substantial revenue growth.
- Pricing Model Tiers. Adhering to a one-size-fits-all approach in a pricing model may inadvertently overlook the diverse needs that exist for various new clients. Management companies should consider diversifying their service contracts into distinct tiers: a basic management package, a comprehensive all-inclusive option, and a premium offering replete with white-glove services. Remarkably, even if the underlying service remains consistent, the act of labeling these tiers can make residents of high-end communities feel genuinely cherished, and the financial ledger will undeniably appreciate the enhanced compensation for the additional care and attention provided.
- Additional Services. Many management companies increase revenue opportunity by providing additional services such as financial planning, project management, and risk mitigation. Executives should consider where they have unique specialties that can enhance their offerings. These additional services not only provide more revenue, but they also help a management company stand a cut above the competition.
- Revenue Share. There also may be opportunities for management companies to monetize third party integrations through revenue-sharing. Revenue sharing is a win-win for small businesses, as all stakeholders earn a share of the profits and the losses.
Conclusion
As the reliance on base management fees has become less sustainable, our journey to discover new income streams has revealed a myriad of opportunities. We've delved into the importance of billing for services rendered, redefining profit by maximizing efficiency and exploring passive revenue streams, finding ways in which management companies can increase their offerings while also creating a new unique value proposition.
As we conclude this exploration of the Revenue Revolution in community association management, it becomes evident that the path to financial sustainability is paved with innovation and adaptability. The strategies unveiled here empower management professionals to navigate this ever-changing landscape with confidence, offering not only new income streams but also enhanced services that benefit both their clients and their own bottom line. In the evolving realm of community association management, the future is bright for those willing to seize these opportunities and redefine their approach to revenue generation.