Speaker 1: So you're ready to grow your property management company and put together an in-depth marketing plan to help you reach your goals. Naturally, you need to figure out what your marketing budget should be in order to help you achieve those goals. In today's video, I'm going to cover exactly what you need to do to determine your marketing budget so that you can scale your business profitably. If you want a quick rule of thumb, the answer would be use roughly 10% of your gross revenues to set aside for your marketing budget. Meaning if you're doing roughly a million dollars in sales right now per year, you should allocate around 10% of that being $100,000 per year towards your marketing budget. But I'm not here to tell you a quick rule of thumb. I'm going to explain to you why you actually shouldn't be using a quick rule of thumb and what you should be doing is determining a what your goals are in terms of growth, b how much a client is worth to your business, and c what it costs to acquire a client in order to reach your growth goals profitably. Once you're able to dial in on this, you can spend an unlimited amount of resources on marketing because you know it'll bring be bringing you a positive return on investment. So let's get into it. So the first thing you need to do is figure out how much a client is worth to your property management company. This is known as your client lifetime value. And in order to figure out this number, you can use the following formula. Take your average monthly property management fee times the number of months you expect a client to remain with your business. You can do this by looking at your previous customers and seeing on average how long they stay with your business. Then multiply that by your average profit margin. Then you're going to add on any ancillary fees. So for example, if you charge a leasing fee of the first month's rent and you know generally when a client remains with you, you'll charge that leasing fee twice over the course of the relationship with that client. Add that in there as well and that will give you your client lifetime value. So quick example, let's say that I charge 10% of monthly rent and the average rent in my market is $2,000 per month. I know that my average property management fee is going to be roughly $200 per month. Now let's say that I know a client stays with our business for roughly five years. That would be 60 months. So if I do do $200 per month times 60 months and then multiply that by our profit margin, which I'll assume in this case is 30%, then I'm going to add on let's say I know that I charge a first month's leasing fee and generally I'll charge that twice over a five-year period. So that would be $2,000 the first time and then $2,000 the second time. Let's say after three years I have to renew the lease and find new tenants and I charge it again. So that would be around $4,000. So what I would have here is the $200 per month times 60 months times 30% profit margin plus the $4,000 in leasing fees. Now of course this is just an example to show you how it's done. You can use your exact numbers to get your exact client lifetime value but just using these numbers I know a client is worth around $7,600 to my business in this example of course. So now that I know that client is worth $7,600 to my business, I also know I can afford to spend technically up to $7,600 to break even. Obviously in marketing you want to get a return on investment so you want to be able to bring in a client for much less than the $7,600 but it gives you a good starting point of knowing how much you can afford to spend without going into the negative. So basically while still remaining positive on your investment in marketing. So now that you know how much a client is worth to your business, the next thing you need to do is determine how much you can acquire a client for and what your goals are in terms of growth. Once we have those numbers dialed in we'll be able to figure out our exact marketing budget. So that brings us to our second point which is our cost of acquisition. We need to figure out how much we can acquire a new property to manage for. What I suggest doing is using historical numbers. So let's say that over the last three years I've spent $50,000 in marketing and it's led to me bringing on 100 new properties. That means I'm able to bring on a property for a cost of acquisition of roughly $500. How I got that? Take the $50,000 I spent divided by the 100 new doors that that $50,000 generated. That brings me to $500 per new door acquired. Now that I know that I can acquire a new door for roughly $500, I now need to figure out what my goals are in terms of growth and that's where the third number that we need to calculate comes in. So now we've reached the last number we need to calculate or figure out in order to determine our marketing budget and that is a personal number. It comes down to how many new doors you'd like to add on. So let's say that I personally set a goal of I want to add on 200 new doors under management over the next three years. I know that in order to acquire 200 doors it cost me roughly $500 per door. So if I take 200 new doors times $500 that brings me to a marketing budget of around $100,000. If I say I want to acquire those 200 doors over three years if I take the $100,000 and divide it by three that will give roughly an estimate for the marketing budget I should have per year which is roughly around $33,000 per year. Of course this is just using an example and arbitrary numbers that I'm making up for the point of this example but you get the idea of how you can kind of reverse engineer what your marketing budget should be in order to determine in order to hit the goals that you're looking to accomplish for your property management company. I know I can comfortably spend $100,000 to acquire 200 new doors because I know a client is worth around $7,600 to my business. If you do the math that's an incredible return on investment. I'm going to spend roughly $500 to acquire $7,600. I would do that all day and I'd basically make you a wager you can't find much in terms of real estate investment that would give you a better return on investment for your dollars. So yeah I would happily even spend double that to acquire a door because I know I'm going to be able to get a really good return on investment with my marketing dollars and grow my business and ultimately that's going to lead me to a profitable business that's really going to be able to scale because I now know my numbers and I know how much I can afford to spend to acquire a client and how much I need to spend to acquire a client therefore knowing how much I need to spend to hit my growth goals. So if you've gotten any value from this video please hit the like button hit the subscribe it means a lot to us and if you're looking to grow your property management company I encourage you to reach out to us at Upkeep Media. We have a free growth marketing session that's going to give you a very good base in terms of what you need to accomplish in order to grow your property management company. During that call we'll take a look at your current market show you what some of your competitors are doing to bring on new properties to manage we will take a look at your business show you where currently positioned from an online standpoint and give you recommendations you can walk away with regardless of whether or not we work together so no matter what you walk away with some value from that call. Thanks so much I'll see you in the next video.