6 Reasons Multifamily Leasing/Sales Process Drag NOI Performance
by Donald Davidoff | Feb 26, 2016 12:00:00 AM
For the last three years, we’ve been working with multifamily operators helping them to modernize their leasing/sales process. I have to admit the experience is far more intriguing than I would have anticipated.
It’s a unique challenge getting executives to recognize that their sales approach is broken, and then further to act upon that realization when revenues, rents and occupancies are at record highs in markets across the country. How can sales be broken when you’re making more money than ever?
Record revenues aside, the reality is that the leasing/sales process is broken; and even in markets as strong as we’re in today, it’s costing you money. In my estimate for most operators, their leasing/sales process is costing them 50-200 bps of RPU (Revenue Per Unit). For a 10,000-unit portfolio, that represents roughly $750 thousand to $3 million of lost net operating income (NOI), and $12-48 million of portfolio value.
When the economy turns and we don’t have such a tailwind, the impact will be even bigger. We have a great opportunity today to update and refine our approaches while times are good, to drive even better results (with less negative impact caused by change) and position our portfolios to perform better in all market conditions.
Over our three years working with operators on sales performance, I’ve identified six primary reasons why your leasing/sales process is dragging performance. If any of these issues apply to your approach, you can bet it’s costing you NOI.
1. The Process Is Linear
I’ve yet to meet an operator or leasing associate who doesn’t insist that they put the customer at the center of their process. I’ve seen hundreds of thousands to millions of dollars spent on service training to ensure that residents are treated and managed as they should.
Unfortunately, when I look at the actual selling process being implemented, it’s totally process centered and linear. Meet the prospect, fill out guest card, tour, ask for the lease, overcome objections, ask again, sign lease.
The problem, especially today, is that customers don’t behave linearly. As a result, the process breaks down and effectiveness diminishes. Your selling approach must be built in a fashion that is truly dynamic and ensures that the prospect is always at the center of the process.
2. The Process Is Not Aligned With Your Prospect
If Rip Van Winkle woke up today and walked into the front office of an apartment community, he’d wonder where he is. Just about everything has changed. From instantaneous, online credit checks, to cloud based property management and resident portals … not to mention how we generate leads and utilize ILSs.
But there would be one area where good ole Rip would feel comfortable. Yup, the way the leasing associate sells to him would be almost exactly the way it was when he went to sleep.
One of the biggest frustrations I see when analyzing operators approaches to sales is that they’re working really hard to improve a system designed to win sales in 1993. Our residents don’t shop, learn or engage the way they did in 1993, and it’s time that the multifamily sales approach entered the 21st century as well.
3. The Process Lacks Context
When a prospect finally contacts a leasing associate, the prospect is often in the home stretch of their decision process while the leasing associate is still in their starting blocks. Since so many prospects do substantial research before walking through your doors while some still do only a little, leasing associates need to know how to recognize how far along the prospect is and then synchronize up quickly.
Most multifamily sales approaches have no means to deal with such variance and as a result, leasing associates treat everyone the same (see point 1). An effective sales approach creates clear context so the leasing associate can quickly and accurately assess where the prospect is in their journey, and with that knowledge know what they should be doing.
This ensures that the associate and the prospect are in alignment, that a real relationship is formed and the sales cycle is shortened and the likelihood of a successful sales increases.
4. You View Sales Through the Prism of Training
Selling is a complex process (even in the simplest situations). While training is certainly an important component of enhancing sales performance, selling is not a training issue; it’s much more than that.
How you sell impacts, and is impacted by, everything else your operation does. Improving sales performance is not done by merely introducing better slides, philosophies and training. It requires that all aspects of demand management work together to produce a consistent, positive result.
This by no means requires wholesale changes. We’ve yet to implement a sales performance improvement process where the operator wasn’t surprised by something that wasn’t perceived to be a part of “selling” causing some of the problem. The fix typically requires a small tweak that actually improves other operational issues as well. The issue isn’t the size of the adjustment, but the need for alignment.
5. You Are Measuring & Judging The Wrong Things
The truth is that training isn’t even the most important component of improving sales performance. You can implement the greatest sales training program in the history of multifamily, and if the rewards (compensation and review) don’t change, neither will the behavior.
For example, if your secret shop process awards points for “asking for the lease,” you can bet the associate will ask for the lease even when they shouldn’t. If you judge associates on the tour path to highlight specific amenities, they’ll highlight them even when it’s not appropriate for the prospect.
6. You Are Not Coaching Your Leasing Associates
Lastly, when you’re talking about anything that is going to materially influence the overall financial performance of an operator, it’s not going to happen with one event. Far too often, operators introduce sales training (typically while they are onboarding and overwhelming the new associate with a myriad of issues) and then expect the associate to perform.
An important, and far too often lacking, component of effective sales/leasing performance is an effective coaching and support process. Selling is a skill. Like any other skill it requires practice and ongoing reinforcement to improve. If the best baseball player in the world stops practicing (and being coached), and only plays in games (the equivalent to how we manage most of our associates), their skills would deteriorate and they would soon be out of the league.
Community and regional managers must be taught effective coaching skills and the keys to successful sales performance so that we can stop “teaching by event” and start down the road of continuous performance improvement.
 Using a national average of $1,244 monthly rent
 Using a 6% cap rate (more if you use a lower cap rate)