EOS, Maintenance Math, and Why RPU Beats Door Count with Matthew Tringali

But if you're really disciplined about asking yourself every day, like, what am I tolerating in my life right now that I don't need to be tolerating? And that's true in your personal life, your family life, your spiritual life, your business life, whatever category you would apply it to. But in business, there's all sorts of things we tolerate all the time, especially from staff people, that once you start to level up and you see like, oh wow, that's what an A-player looks like. Like, why am I not, why am I accepting anything less than that? We accept a level of despair we're willing to tolerate. We call it happiness.

Mm. Oh God, that's brutal. Friends, welcome back to Peter Lohmann's podcast. I'm here with a rare repeat guest, Matt Tringali. Matt, welcome back to the show.

It's so good to be back with you, Peter.

Yeah, it's exciting to have you back on the show, Matthew. You've been a property management operator. You grew a PM business, you sold a PM business, and you've been coaching and consulting in the space and being a thought leader and a speaker around the industry for years now. And I always enjoy our conversations. We have a similar enough take on a lot of things, but we differ in a lot of areas as well. And it's kind of an iron sharpens iron situation. I always come away from kind of our deeper conversations with some new perspectives. So I thought I might share some of that with the audience today. So it's gonna be more of an informal discussion debate. We're just gonna get into, it's kind of as if, as if we ran into each other at a conference and grabbed a cup of coffee and we're just catching up. So why don't we start by jumping into a big buzzword around the industry, and I want to hear your latest thinking on this, which is EOS. A recent Crane survey found that 40% of EOS members run on Krane. I'm sorry, 40% of Krane members run on EOS. It'd be more fun if it was the other way. Um, which surprised me in a couple different ways. At first I was thinking, wow, it's, I'm surprised it's not more. But then on the other hand, I was thinking, wow, what a testament to the success and penetration of EOS that 40% of this group of property managers is running on this one specific system. Do you, you, you work with tons of property managers in, in a coaching and consulting basis. What are you seeing these days? Do you, do you preach EOS? Do you like it? Did you riff on it? What are your latest thoughts?

Yeah, this is a great topic, one that I love talking about, and so I'm glad we're kicking off with this. So I don't know if you knew this, but, you know, I, I hired an EOS implementer just like you did for my property management business. And I was sitting there watching what he was doing and I just thought, man, that is right up my alley. Like, he is speaking my love languages. I would be good at this. I would love doing this. And so, and you know, as soon as I got it dialed in in my own property management company, I went through the training and started being a US implementer for other property management companies while I was doing that.

You actually did the US training? I didn't know that.

Yeah, I mean, I did all the online stuff. It's different now. Now they're much more brand protective over how they do that. And so, like, your guy—

They got some private equity, didn't they?

—is not officially a US implementer now either. Yeah, that's true. He doesn't like when I call him that either, because he's like, well, because you, you, you can't, like, he needs to be careful about that. Right.

Because they got sold to private equity. Right.

I don't know about that part, but they definitely became much more brand protective. Yeah. And they make it now. So basically you have to be a full-time drink the Kool-Aid EOS person to be official. But back then it was a little different. You can kind of do the online training. And as long as you had a certain number of clients, you could do that. And so that's what I did. And that was really fun for me. My take on it, I'm not a like EOS drink the Kool-Aid person. My take on it is, is that it is important to have a system, right? And whether you pick, you know, EOS or Profit First or something else, just picking something and committing to it, having a common language that your company speaks You know, together they all know what things mean. Like, that's where the magic happens. And you know, the elements that exist in EOS, you know, no surprise here, it's not magical. I mean, they, the same elements exist in any system, right? They just have packaged it in a really helpful way. And so after I did the EOS implementations for a while, in order to keep doing those, you had to do sort of quote, pure EOS. You really couldn't. Veer off the reservation, which I understand why, totally get it. But for me, it became a little too constrained and I realized as an operator, as a property management operator and as a lifelong student, just like you are, you know, reading all of the other books and things out there, I knew that there was more that I could bring to the table than just having to stick in the strict boundaries of the EOS ecosystem. And so the consulting work that we do now at BetterWho, the way I always describe it is It has the backbone of EOS built into it. And so there'll be a lot of common language and common ideas that you'll find there. But we also have packaged on other things that are very unique and helpful to property management companies. So that's kind of my take on EOS.

Okay. And what, where do you see that property management business owners are, like, what would you say is the number one error? Or mistake that they're making when it comes to running on EOS? Like, what are they not doing or overlooking that is actually really important to being successful with it? Because to be honest, real talk, there's a bunch of people running on EOS who aren't doing good. Like, they're not growing that much. They're not that profitable. So like you said, it's not a magic bullet. So what, what's the missing component that, that, that isn't given enough attention?

Well, gosh, there's a few— I, I, 3 things come to mind, so I'll talk about all 3. One, which is, in my opinion, the foundation to every business, that if you only do this one thing, you've tackled half the battle, and that is right people, right seats. Right? Like, if you get proper alignment where people are spending 80% of their time in their unique abilities, they love what they're doing, they're really good at what they do, If that's all you do and you just are meticulous in, you know, one-on-ones are really an important component of that. And to me, there's one important question that I ask in every one-on-one, which is, what do you love doing right now? And what do you not like doing right now? Right? Like, I just want to know, like, where are they happy? Where are they not happy? And constantly tweaking those roles, job descriptions, and dialing that in. So, I find that people aren't probably as meticulous about that as they could be, and maybe they fluff over that a little bit. You think they're not as meticulous? And you only got one thing right, like that's important.

Do you think they're not as meticulous about constructing the roles properly, or do you think they're not as meticulous at holding a high bar for talent and bringing the right people in and letting people go when they need to?

Yeah, all of the above, but the roles are important because what happens is, is, you know, if you start talking to a company that say they have, 10 people on their team already, they can't, you know, when I talk to somebody, I'm like, listen, you're gonna have to do the best you can right now to forget about who works for you right now. Like, that's, I don't care who works for you right now. That's not the question. I just want to know if you were just starting from scratch, blank slate, what are the roles that need to exist in your company that are going to work right for the way your brain works, the way the workflows need to work, etc.? And the problem is, is, is that's really hard for people. They're like, well, but I have Susie on my team and Susie's really good. I'm like, I don't care right now about Susie. We'll get to Susie later, you know? And so if you're really disciplined about defining the roles, then I always tell people, I mean, I'll tell you this, Peter, and I didn't realize this until we've been doing it for a few years, but in all the consulting work, I now warn people up front of like, there's probably somebody on your team that's not gonna make it through this process, and you probably already know who they are. And usually that kind of shocks a little bit. They're like, yeah, Cindy, right?

Like, oh, Cindy, I'm sorry. Right.

But the, but the gumption to make that decision is really hard for most people, right? They're like, but I know Cindy, I see her at the Christmas parties and I've met her children and, you know, all of that. Right. And so once you get the roles right, like there are things you have to be aware of. Number one, you have to be open to surprises. You have to be open to somebody saying, hey, you know what? I know I don't know anything about bookkeeping right now, but I've always been really intrigued by bookkeeping. Like, I'd like to learn more about that. And you have to be open-minded to hearing that, right? And exploring that. So that's kind of one thing. And then number two, you have to be open to the idea that somebody might not have a seat on the bus after you go through that process. So, and then yes, to your point, there, there's a quote that I learned several years ago now, and I repeat it to myself almost daily. And it's a quote by this existentialist named Søren Kierkegaard, and it's paraphrased, but he basically says, "We accept a level of despair we're willing to tolerate and call it happiness." Hmm. Oh God, that's brutal. It's brutal, right? But if you ask yourself that every day, and it's hard when you're in the fishbowl, right? Because you don't know what you're tolerating. You don't know what you don't know. But if you're really disciplined about asking yourself every day, like, what am I tolerating in my life right now that I don't need to be tolerating? And that's true in your personal life, your family life, your spiritual life, your business life, whatever category you wanna apply it to. But in business, there's all sorts of things we tolerate all the time, especially from staff people, that once you start to level up and you see like, oh wow, that's what an A-player looks like. Like, why am I not, why am I accepting anything less than that?

I, I've reflected often on the show and elsewhere about how I didn't realize how good employees could get or be, if that makes any sense at all. Basically, my bar for talent was nowhere near as high as it needed to be because I just hadn't been around high-performing people before. Like, you know, I spent a limited amount of time in corporate America, you know, working a real job. And in that time I was not around superstars. And so I didn't realize how the, how big the dynamic range is between good and excellent and superstar. Like, it's way bigger than you think, especially when you— I mean, it's hard to talk about in abstracts, but when you're getting there, when you're narrowing on a specific role like a marketer or a salesperson or an ops manager, like, there exist people out there who would blow your mind at how effective they are in that role, But you don't know that if you're just an average small business owner like I was, I, I had no idea. And so I was accepting mediocrity without even knowing it, which that's been the scary part because I continue, that glass ceiling gets broken every year as I discover new talent and people level up and I run into other business owners and I meet their team members and things like that. So pretty interesting stuff. You know, the role, the role question is interesting, like when you're designing the roadmap, right? You know, I'm picturing like classic EOS visionary integrator and then it breaks out and you have all these different roles and you, you spend a lot of time kind of filling in these roles. You know, you mentioned, you know, the roadmap for like a 10-person company, 10-person property management company. I mean, couldn't we just, couldn't you and I right now just create that and say, guess what? I'm handing you your roadmap. 10-person property management company. Here it is. Like, we don't need to reinvent this wheel 100 times. I don't need to have a 4-hour dialogue with you to figure out your roadmap. I'm gonna hand you your roadmap because there's a certain way that a 10-person, you know, 200-door management company, 400-door management company should be organized. I'm gonna specify it. I'm gonna prescribe it. What do you think about that? And then like say, you know, you could create a whole series of these for all the way from 100 to 2,000 doors and I don't know, like I, I just, I don't like this idea that we're all kind of trying these different arrangements. It feels like surely there's some of these that have been figured out that work really well.

Well, it's interesting, you know, right, right now the, the date that we're recording this is April 8th and, and I'm getting ready to lead a panel at NAR from Broker Owner coming up. Probably this podcast will hit after that, but I'm, the panel is, is I'm, I'm bringing 4 operators on stage with me that operate on the 4 different of classic org charts, departmental, pod, hybrid, and portfolio. And I've had a couple of meetings with them ahead of time and we just went over sort of the pros and cons of each one. And, you know, I do think it's interesting that the model that you might pick, while it's easy to say like, oh, there's a right model, right? And this is going to be part of the debate, right? Like, oh, it's departmental or it's pods or it's portfolio, right? But it's actually a reflection of what the ownership wants and how, what, what kind of manager they are. Right. And so like, if you were just somebody that's more of an engineer and you're like, I'm just really good at building out super tight processes that don't break, then, you know, departmental might be the right thing for you. If you're somebody that's like, hey, I want a bunch of mini entrepreneurs here that's kind of more set it and forget it. And like, I don't really have to think about it that much. Then, you know, portfolio might be better for you. Right. So I think that like, depending on what you want, there are different options of the right sort of rollup. I've tried it before because I have, probably have a personal bias towards pods, and I know that's how you're operating now. And in our consulting work, we used to kind of show up and really try to talk people into that and shoehorn them into pods. And there's probably an element to which we still encourage that, but I've done that before in a way that was not helpful. Yeah. And, and the company tried it and then was like, that's not us. It doesn't work for us. And then they went back to departmental and that worked better for them. And so I think it, it varies. It, it depends on the operator. Yeah.

I mean, I can see how as a consultant you probably wouldn't wanna prescribe because then if it doesn't work, they, they blame you basically and say you didn't do a good job. But like, as a, as someone who doesn't do consulting anymore, you know, I could just say, listen, Here's how you should do it. This is free advice. I don't care if you take it or not, but I'm just telling you, if you're at 800 doors, this is how you should set up your company or whatever. Yeah, I don't know. It's an interesting idea. This episode is sponsored by Haven AI. I've been hearing a lot of great things about Haven AI recently. A couple weeks ago, I was on a webinar panel about AI and property management, and Evernest talked about how Haven's AI agent transformed their leasing operation, handling most of their top-of-funnel leasing interactions across text and email. And you might have heard Haven mentioned on a recent episode of my podcast where one of their customers, Matt Luke, told me about how he's managing 350 doors with no W-2 employees. That's not a typo or a misspeak. Zero W-2s. He's using Haven's AI agents for maintenance and leasing to make that work. There's no shortage of AI hype in property management right now. Everybody's got an AI something. But what caught my attention with Haven is that it's not just a chatbot bolted onto your website. It's a platform of configurable AI agents that plugs into your existing software and actually takes action. We're talking creating work orders, dispatching vendors from your preferred vendor list, triaging emergencies, qualifying leads, scheduling tours, and following up with prospects across phone, text, and email around the clock. They're Y Combinator-backed and were just named one of the top 50 AI startups in real estate. The operators I've talked to who are using it seem genuinely impressed, which in our industry is not easy to earn. If you want to see what the buzz is about, book a demo at usehaven.ai. And thanks again to Haven AI for sponsoring this episode. Maybe one last thing on EOS before we move on is I love, I do love the, the accountability chart and you know, the roadmap that they have you put together. One area I've found that they're weak on though is you really want to be planning ahead for your next couple hires. So you actually need to— in my experience, you need two versions of the roadmap or of the accountability chart. You need as it is today and you need where we're going over the next 6 to 12 months. What are the next dashed line box on the chart hires that we need to make. And I find that's kind of absent from Traction. Maybe I need to reread it, but—

No, I 100% agree. When we're doing consulting, we always, we call it 6 months. We say, when we're designing your org chart, we're designing the org chart you want to have, we want you to have 6 months from now. And then we'll, don't worry, because then it stresses them out a little bit. They're like, oh, because it sounds scary. Like, how am I going to get there? Like, don't worry, we'll figure out how we're going to get from point A to point B. But let's just hit the, that's what we want it to look like. Before we move off of EOS, let me just briefly mention the other two things I was going to hit on of where people, because you mentioned, hey, a lot of people are quote unquote doing it, but they're, it's not successful. Why? The two other things I see is sometimes people, when they have their quote unquote level 10 meetings, they get the habit of sort of having a meeting, but they're not really running it that structured way. And one of the key things that they miss is what I call solving circumstances instead of solving issues, right? So like if the circumstance is like, hey, we have this one property, it's been on the market for 3 months and it's not leased yet, like we really gotta solve this. And so they solve the whole problem of like, all right, what do we need to do about this property? Well, that's fine, but all you've done is solve the circumstance. The issue is, well, why were you in this situation in the first place? How do you make sure that doesn't happen again? And not enough companies actually solve the issue.

Love that differentiation. Yeah.

And then, and then the number 3 thing I'll touch on is, is core values, mission, and vision. Too many companies still, they, they pick fluff language, put it on a plaque, stick it on a wall, like, okay, cool, we did it. But it's, it's a language, right? Like when you do it right, it's like, it's how you talk to each other. And you, and every day you are talking about your core values and, and honoring each other and how you exhibited those core values. And I, I find that to be really important. Yep. Love that.

Very good. Okay, let's move on to talking a little bit about revenue and profitability. So, you know, there's a couple ways into this conversation. I think what I'm interested in exploring is When you're looking at the bottom line and you're not liking what you're seeing, which happens to me about every other year, is, you know, does it make more sense to focus on revenue per unit, driving up your revenue, adding doors? I guess those are two separate ideas, right? You can drive up your revenue per unit or you can try and add more doors. Or do you think that getting operationally leaner, cutting expenses, looking at SaaS costs and things like that is important? What do you— what, what— I mean, obviously the answer is like, it depends and we need to do both, but what's your instinct say here?

Well, I mean, historically for me it's been RPU, RPU, RPU. I just think, you know, if you can really, really dial in your unit economics, both RPU by the way, and expense per unit. And when you do your expense per unit, it's important to understand your fixed versus variable expenses and bifurcate those. But if you could get really, really focused on your unit economics, I just find that that clarity is really helpful in all the other decisions you're going to want to make. That said, I am really passionate about the fact that like, when you're an entrepreneur, when you're a business owner, you shouldn't just be creating a job for yourself. You should be building an asset for yourself. And one of the things that's very clear is that the value of your business goes up exponentially as it gets bigger, not just linearly, right? So even if you fix your revenue per unit and it's this great thing and you're a 200-unit company, well, the multiplier on your EBITDA is only going to be a certain thing versus if those same unit economics were true and you're at 800 units, well, your multiplier on your EBITDA is also going to go up. So I do think it's important to strike that right balance. I think it's, I, I personally, I tell people, I think every company should try to get to at least 250 units bare minimum because you build some resiliency in at that point that you don't have before then. And then I really think it's a good target to get to 600. You know, when the NARFU did their last benchmarking study with Profit Coach a few years ago, one of the things we learned was that profit margin really kind of peaks at about 600 to 800 units, or maybe it's 800 to 1,000, somewhere around 800, give or take. And then it starts to go down. Not to say your total profit dollars doesn't continue to go up, but your profit percentage starts to go down. So I just think there is something, and I know that's the size you are now. So I mean, I think there's something really nice about, you know, around 800 units, give or take. You have tons of resiliency. You can invest a lot more things in your business, do a lot cooler things. With software, you know, that kind of thing.

Let me say a word about that profitability multiple because, you know, I did an M&A report last year. I'm actually starting to think about updating it. We looked at 90 transactions that were submitted by readers and folks in my network, transactions meaning property management companies that sold over the last 5 years. So this is— I've never seen a dataset like this before. This is made up of 90 real-world property management company sales. And I got what did it sell for, what was their profit, what was the date, how many doors, you know, all of those details submitted through mostly through readers of my newsletter. And you know, what I did was like, hey, if you submit this data, you get a copy of the report for free, right? That was kind of my carrot. So listen to this. Transactions involving companies with more than 350 doors had an average profit multiple that was about almost 2x the profit multiple. I'm not going to give away these numbers because you should get the report, but basically the profit multiple doubled once you got over 350 doors, almost doubled. So yeah, that 200, 250 to 350, if you are angling for a sale, highly recommend getting over that because buyers look very favorably, just like you were saying, on larger companies in terms of profit multiple. There wasn't as much of a bump on the, like, gross revenue multiple, but there was a very noticeable bump on the profitability multiple. So pretty interesting. That is interesting. Yeah. When you go into a company, you start chatting with them, looking at numbers, how do you decide if their RPU is high enough?

Well, I mean, At this point, I've seen so many companies, so many numbers, I kind of just know pretty quickly. I'm sure you feel the same way, but it also requires a little bit of market research. It's easy to understand on a national scale what we think these national averages need to look like, but there's a big difference if you, you know, I've worked with some companies that are in some pretty small rural markets who have competitors that are basically willing to work for free. And that's really hard to compete against, right? Like, you're— it's not to say you can't get your revenue per unit at these sort of extreme numbers, but you're not going to get very big with that in that market. And you better be the absolute best in town objectively in order to do that, right? So it does take some nuance to take some time to understand what their market conditions are. Okay.

And then on the expense side, What do you see as like, where do, let's say we, let's say we're happy with the revenue per unit for a given company. What are you looking at on their expenses? Where do you see fat that can be trimmed most often, I guess?

Well, I mean, the biggest one of course always is labor, right? Yeah. I mean, and so we always start by trying to understand what their DLR is. I try to get every one of our clients to, at a minimum, have a DLR of at least a 3, 3.5 as quickly as we can. And then kind of reanalyze from there and see if we can start shooting for 4 or 5 plus. But, you know, there are a lot of companies I talk to that their DLR is at like a 2 when we're getting started or something. And it's really hard to be profitable and make money if that's what your DLR is going to be.

So DLR, just if anyone's listening, not familiar with that, take your total revenue and divide by employee wages. So if your revenue for a given month was $100K and you spent $25K on wages for employees doing property management, wages and salaries, then that would be a DLR of 4, which would be pretty good. I think I tend to think anything over 3 is halfway decent. Yeah, I agree.

Yeah. If you're not familiar with DLR, the inverse can be a little easier to understand, right? Like, are you spending half of your revenue on labor or 25% of your revenue? You know, if you're at half, you're struggling. If you're at 25%, you're doing really well. Yeah. So yeah, so we always start there. And then now, you know, in this day and age, as, as you are starting to experience yourself as an operator, there's more and more opportunities to start to cut out some of the software expenses that you've had. You know, I have this one client, he's a little smaller right now, but he's basically built, he's, he's built out his own showing software. His own, like everything. And he does it all basically just through Google LM Notebook and Airtable. Like, wow. You know, and you know, a few other tools, but he's just using the Google ecosystem and building out everything to kind of replace all these softwares that, and so all these softwares that, especially the ones that charge on a per unit cost, that, that gets really expensive, right? When you're charging per unit and, and that can start to add up. And so those are expenses you have to start to look at and figure out, you know, what your options are.

Yeah. I mean, most of these companies are charging $1 to $2 a unit. And so you feel like that should, when you look at, you know, RPU of $250 for a pretty healthy management company, you feel like there should be room for that though, you know?

Depends, right? You start adding up, like, are you using, you know, a maintenance call center and, you know, all these things. And so some of those, base prices might be $1 to $2, then you start adding all the little extras on and the new AI stuff on and, you know, then some of them start to be $2, $3, $4 a unit sometimes. Yeah. So, and then, and then you just stack 10 of 'em together if that's what you're doing. Right. And it starts to add up pretty quickly.

Right. Yeah. Okay. Let's jump into maintenance. And I think this is an area where we may disagree, so it could get interesting. And I know we sub— I think you submitted for a broker-owner talk. I don't think we got selected, so we'll just, We'll just have it out right here.

Yeah, we'll keep it here. Yeah. Yeah.

Let's talk about, you know, when's the right time to bring, you know, should we, should, do you recommend in-house maintenance? And if so, when's the right time to launch that? And just for background, I think most people are familiar with me, but I run a management company here in Columbus, Ohio. We just hit 750 doors yesterday, so we're feeling pretty good over here. Nice. Big milestone for us. And we do have in-house maintenance and we have almost from the beginning. We have 9 technicians that work for our director of maintenance, and it's part of our company. I think that's another thing I remember you and I differ on is whether it should be the same company, same entity or not. So share, share your thoughts on that.

Well, I don't have strong opinions on the if it should be part of your same entity or not. I do have strong opinions that you at least need to have kind of separate visibility on the books, you know, in that your maintenance company deserves to stay in, whether, whether it's a business unit or a company, deserves to stand on its own two feet financially. And so, because, you know, what we find, and I'm sure you've seen this, you know, a lot of property management companies who do both, one or the other is profitable and the other is sort of propping the other up and they don't even know it. Yeah. Right. And it can go in either direction, right? So you owe it to yourself to have that clarity at least. I, one thing that started to change my opinion actually on this issue, and I now am a little more in favor of having in-house maintenance, at least at a certain size. And that again goes to the building of an asset. Your company— and I don't know if you looked at this when you did your study, but your company actually is far more valuable if you do in-house maintenance versus if you don't. Now, of course, you have to do it profitably, but if you're doing it successfully and profitably, you can potentially double the value of your company.

Now, so it used to be that these acquirers like wouldn't pay for that revenue because it was non-recurring or, you know, we actually didn't get too much into those details in the study. So I'd be curious to hear from you on if you're finding that acquirers are happy to pay for maintenance divisions. Well, it depends, right?

Like if your acquirer is one of the national rollups and they basically want nothing more than to buy your property management contracts, then yeah, of course they don't necessarily care. But one of the, one of the reasons why your multiplier goes up is because if you could build a business that doesn't count on you and you're truly selling a business and not just selling your contracts, then that can be really valuable to a certain type of buyer, right? That actually wants to truly buy your business, not just buy your contracts and, and absorb them. But this is something I learned and started to get into more with Jordan Collin over at Live Oak Bank. And when they are looking at businesses and helping buyers buy businesses, they absolutely will place a value on the maintenance side of those businesses. Even though it's not technically MRR, it's just as predictable and reliable because it's tied to an MRR business. So that definitely started to change my mind. But what I'll say, two things. One is aside from the asset value building, just from a cash flow perspective, I think you can do just as well properly monetizing your outsourced maintenance and make pretty much just as much money doing that as you can doing in-house maintenance. So I, I'm a believer in that. So I'll start there. I'll pause.

You think, you think you can make just as much money doing it in-house? Sorry, outsourcing it? Yeah, depending on the size.

And again, the scale starts to matter, right? So 750 units, certainly not if you're doing it right, you have the right billable hours, you know, all that type of thing. But in the beginning when scale isn't as much of an issue, if you're properly doing maintenance coordination fees, project management fees, you know, things of this nature, which there aren't many fees that I sort of get on a soapbox about, but that's actually one of them. I do, I am a believer that every property management company should be charging a maintenance coordination fee and I agree. I kind of have my reasons for that. But yeah, if you're doing that the right way and charging vendor marketing fees, Right? If you're doing all three of those things, maintenance coordination, project management, vendor marketing fees, then you can have a really healthy profit center around maintenance.

Okay, let's unpack that a little bit, 'cause we, I may have discovered a problem in your beliefs. Okay, let's do it. So, okay, first help me understand the difference between pro— what'd you say? Project management? What was, what was the first two you said?

Maintenance coordination, project management, vendor marketing.

So those first two, the first two that you mentioned, for me, they're all grouped together. I think the, the way we think of them, we charge, I think it's 15% these days. We charge, uh, on, and we do have a ceiling on it. So, you know, if you get a $40,000 roof, we're not making, you know, 6 grand or whatever. But, um, how do you, how, what's, how do you distinguish between those two?

So the way I recommend it is to charge a flat fee maintenance coordination fee on all of your routine maintenance. And the reason I like flat fee is because it removes the, at least perceived, if not real conflict of interest between you and your client. Where they don't get to say like, well, what the heck? You char— you hired an expensive plumber. Now you get to make more money because you hired an expensive plumber. Like, so if you have a flat fee on your maintenance coordination, it removes that discussion completely. And I think it's very simple, straightforward, easy for the client to understand. And then the project management fee, I think you do charge a percentage, and that's more like what a GC would do. And this is where things— there's a level of complexity, maybe site visits, so on and so forth.

So like turns.

Turns, roof installs, insurance claims, you know, code violations, you know, things of that. Anything with either a certain dollar threshold or multiple moving pieces, things like that.

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The vendor marketing fee. So this, this is what I did at my property management company is I reached out to all of my preferred vendors, the ones that I was giving, you know, a healthy amount of business to. And I said, hey, listen, here's the deal. I'm going to have a page on my website for preferred local vendors. I get X tens of thousands of traffic to my website every month, people looking at this. And in exchange for me listing you on our website as a preferred vendor in our community, you're going to pay me a marketing fee. And the marketing fee is going to be a separate transaction from the transactions that we do for the work that you're doing on the properties that I manage, but it can be reflective of that volume of work, right? And so I may pick a certain percentage or whatever the case may be, but what's going to happen is at the end of every month, I'm going to send you an invoice and you are going to send me a check. And that transaction is going to happen completely separate from the other transactions that happen when you service one of the properties that I manage. And you know, that can add up really quickly. I mean, at 750 units, you can easily be making an extra $10,000, $20,000 a month or more on a vendor marketing fee.

Wow. Okay. Yeah, I've never, I mean, that's not what I thought you were going to say. I thought you were going to say that the vendor, you, you talk to these vendors and you tell them that because you're giving them such a high volume of work, you're offsetting some of their marketing costs. And so they should cut you back a check for 5% of the volume of work they did for you that month as like a marketing thing, which to me is just a straight up kickback. It's right, which is not allowed in a fiduciary agreement because now you're influenced to select that vendor because you know you're going to get a kickback from them, even if it may not be the right and the best for the owner of the property.

But what you're describing— That's correct. That's why I structured it the way I did. Yeah. And so I talked to my attorney about it and I was like, hey, this is what I'm doing. And I know in our industry, right, it's always disclose, disclose, disclose. And she was like, you don't have to disclose that. Like, that is a separate relationship transaction that you're setting up with that person that is not a kickback. So, yeah, that's why I structured it that way.

So what, what's your pitch to these vendors? You're like, hey, I'm gonna put you on my website. I want you to send me a check for $1,000 a month.

Well, I mean, I'll look back at the history of, hey, this is what we did together last year. So, you know, based on what we did together last year, this is what I would propose that this would look like. We can reevaluate it every quarter, you know, whatever the case may be. And, you know, I'll tell you, when I first started doing it, and I started doing this back around 2016, 2016. So, I mean, you know, 8 years ago, or was that, no, 10 years ago now. Even then, I will tell you, I had some, like, one vendor that was like, I was surprised it took you this long to ask me for this. Yeah.

It's, and so what if they just say, mm, we're good. We get plenty of work. We don't need to be on your website.

Yeah. Then I would say, okay, I understand. I may be looking for some other relationships, like, or I'm, maybe I'm not going to say that right out of the gate, but I would be looking for other relationships at that point that maybe do value that type of relationship.

Okay. So it's, it's kind of, it's kind of the other thing. It's just like a little bit, it's just a little bit distanced from it.

Well, I mean, it depends, right? Like if they, if this one person I'm looking at is so good that bar none, there are no competitors that are as good as them, then sure, I should be using them. I happen to be in a pretty major metropolitan area where I have a lot of choices, and so I have a lot of good choices, right? And so, sure, that, you know, that wouldn't be as true for me. If you're in a smaller market where you're like, man, that guy Joe the plumber, like, he's the best plumber in town, and you know that's the right thing for your clients, then yeah, maybe it's a different situation for you.

I mean, to put on my owner fiduciary hat for a minute, I'm not necessarily saying that this is what I think, but if I was to be a lawyer arguing for property owner clients, I would say, hey dude, that's actually money that belongs to your owners because you are taking advantage of your principal and leveraging the work that's flowing through you to enrich yourself. That's actually— you should amortize those funds, assuming you can get them across the properties or across the owners where that vendor's doing work, because clearly you could get the work done for that price.

Could be. I mean, the attorney that I used when I consulted to that was, is somebody that used to work for the real estate commission in my state as an investigator. And so she was the one stating those types of things. Mm-hmm. And I felt really good about the fact that she looked over this and was like, This is clean. I have no problem with this.

But how do you feel about it?

Well, again, because I'm in a market where I have lots of choices and at any given time, like, look, at the end of the day, like, if I have a vendor relationship that's not getting the job done and isn't doing quality work at, you know, fair prices, then I'm going to find another vendor regardless of those relationships, because at the end of the day, Like that would be a reason a client would stop working for me. I always say that short of sending our clients a check every month, the most important thing we do for them is maintenance. Mm-hmm. Right? Like it's a very, very trusted relationship that they have with us that we're taking good care of their property. Mm-hmm. And so you can't screw that up, right? Like I can't rescrew that up just because I also have this, you know, marketing relationship with this one vendor. If they're not doing good work on my property, then guess what? I don't want to recommend them anyway. Yeah. So I'm going to find somebody else that I feel good about recommending that I want to use and want to use on my client's properties. Sure. Okay.

Sticking with maintenance, when do you think is the right time to bring it in-house?

Yeah. So what— here's what I've seen, some mistakes that get made. Number one, I talk to a lot of companies that they're charging like half as much on an hourly rate that they should be charging. Oh, for sure. Yeah. Yeah. I'm like, I don't even know that I can go to Craigslist to get somebody right now. Is Craigslist even still a thing? I don't even know if I get somebody to do it for that price.

Yeah, you got to be charging like at least 3, closer to 4x the hourly rate of like the W-2 employee technician. So if you're paying a technician $25 an hour, you need to be billing $75 minimum, in my opinion, having run a maintenance department for 10 years with many employees. You got to be charging 3x if you're going to make any money at all.

Totally agree. 3x is always the bare minimum number that I use as well. And in broad strokes, the way I describe it is 1x goes to labor, 1x goes to overhead, and 1x goes to profit and company. Right. And, you know, those, those are big broad buckets, but that's kind of the idea of how to think about it. I mean, again, in my market, like, I can't get anybody to show up in my driveway for less than like $95. So that's just total their tires in my driveway, right? Yeah. You know, and so I talked to a lot of people, they're like, oh yeah, my hourly rate is $30 an hour, $45 an hour, like something. And I'm just like, insane. You're losing money, right? So like, so that's sort of the nonstarter, I guess.

Like what I say to people is I tell them you're paying your owner to do work on their property. If you're charging, if you're charging $30 an hour, you are paying the owner for the privilege of doing work on their property because you are literally losing money on every job, guaranteed. Yes.

Yeah, yeah. And I've gotten into those numbers with some company where after we put all the numbers in a spreadsheet together, I'm like, you literally are losing $10,000 a month on maintenance right now. Yeah. Like, you know, and, and some people will say, by the way, they're like, I just, have to, like I'm in a market where I have to have that level of control over maintenance. And, and I don't know if that's true or not, but still you at least can't be losing money doing it. So there's that. And I would say that like in the beginning, what's tricky is, and I don't know if you can still, you said you've been doing it pretty much since the beginning. And I don't know if you can think back to those days, but you know, even if you're just going to have sort of your one technician, somebody's got to manage that guy because You know, in my experience, technicians kind of have a shelf life. Like, it's hard to find somebody really good that lasts a really long time because usually either you got them because they should be charging more and they eventually realize that they could be making more and they go do it on their own, or you just realize they weren't that good. Yeah. You know? And so, you know, I've, have seen nice sweet spots where you find that guy that's maybe in his 50s or something. He's wanting to kind of slow down. He's already done the hustle and bustle and now he just wants something a little—

Those guys are the best. Yeah. They're the guys that are the best.

Right. But so you find that, like, it can work. But the problem is, is like, it's really hard to find somebody that's good at swinging a hammer and likes holding the clipboard. Right. Like they want one or the other. Then generally they're not going to have like great admin or attention to detail. And so you're going to have to have somebody else on your team that actively manages that. And so if you're a really small company still at 150 units or less and you have that guy, it's like, how much do you have to pay somebody else just to manage that guy?

Yeah, definitely agree with the gist of what you're saying. I will say we did get— we did hire our first tech around 100 to 150 doors. And when you're that small, it's basically just what you said. You only need one technician. So go find that guy we were talking about. Go find the 55-year-old guy who's done it and is ready for a steady paycheck, but previously ran his own contracting business or whatever. So really knows what they're doing and is comfortable with the clipboard and the hammer. That's a great little analogy, by the way. I'm going to steal that. I think you can, you can be that picky when you only need to find one person. It may take you a couple months of interviewing, but you kind of just like you're saying, you need that one guy when you only have one technician because you don't, you can't afford a director of maintenance or you can't even afford a maintenance manager. So you need someone who's gonna be very independent and self-sufficient and can figure out how to use PropertyMeld or whatever. But when you do get bigger, like we have a director of maintenance who's overseeing these 9 technicians, that billing rate that we charge covers his salary cuz it has to. Right. And that's the thing where people are losing money and they don't realize it because They just do the math of like, well, I'm paying him $25, I'm charging $40. Like, of course I'm making money. And you're like, it's a lot different than in-office team members. And it's, yeah.

Especially when you think about inventory management, right? Like all the slippage that happens there too. Yeah. So all that to say, yeah, I don't know that we're that far apart. And look, I, I'll admit my own bias here. When I did it, when I was that small, I got burned a number of times with a number of hires and I eventually decided I'm not smart enough to figure this out. And I went, you know, I personally went, you know, all outsourced and just made sure I highly monetized my outsource. But yeah, I've seen it done really well, but those are the pitfalls when you try to do it too early. And like you said, there's so many hidden costs that if you're not really thoughtful about them, you're losing money and you don't even realize it.

Yeah. Yeah. I, I look forward to having more tools. I'm sure you, you have some tools at BetterWho to help analyze this for property managers. There's a couple, like, there's a couple spreadsheets we've built over the years that I continue to use all the time that I think are insanely valuable that I never hear other people talking about. One of them is what you just described, which is analyzing your maintenance, your in-house maintenance profitability by putting in all the numbers. We have an awesome spreadsheet for that. And then another one is, you mentioned it earlier, it's basically like a budget or a forecast, but broken out between your fixed and your variable costs. Yeah. And so you, certain things aren't going to change your office rent and your electric bill and like some of those things aren't going to change when you add 100 doors, but other things are your AppFolio bill, your LeadSimple bill, You're going to have to hire, you know, your, you know, insurance, right? These things go up and scale pretty much linearly with units. And so we built this really sophisticated forecasting spreadsheet where you can enter in a number of doors and it will tell you to the dollar what's going to be my profit at that door count, given these expenses are going to stay flat and these expenses are priced, they're like backed into a per unit cost, even if they're not charged that way. Like our E&O insurance, of course they don't charge us per unit, but they charge us, like it goes up, it scales with units. And so you just divide it out to figure out, oh, well it turns out it's about 70 cents per unit per month or whatever it is. And you use that to forecast out.

Yeah, I have the exact same spreadsheet. I have, you know, kind of income on one tab, fixed expenses on one tab, variable expenses on one tab, payroll on one tab, and forecast on the fifth tab. And it does exactly the same thing and it breaks out between PM and maintenance in case both those things exist. It's funny, I was just thinking about this earlier today, actually talking to one client. It's amazing with all of the like awesome tools that are out there, spreadsheets will never get replaced.

It's, yeah. Yeah. It's the ultimate fallback. It's like, yes. When you can't like mess, you're, you're just like, no, pull up a spreadsheet. We're gonna figure this out right now. Yeah. Right. Well, if you're a customer of BetterWho, you should get a copy of his. And if you're a CRANE member, you should message me and I'll post it in CRANE if I haven't already on these spreadsheets we've been talking about. So that'll be fun. Yeah, absolutely. I wanted to ask you, tell me what actually is the difference between coaching and consulting? Because I see you have both on your website.

Yeah, for us, here's one of the things, go back, circle back right to our start here with EOS. When I was doing EOS implementations, to be perfectly honest, at the time, it was like a 50-50 success rate with my clients, right? Because at the end of the day, it just depended on them if they were going to do the thing or not. And so one of the things that we realized is that, you know, if somebody's coming to us and asking for help, the number one problem that all of them have is capacity across the board, right? And so one of the things that we decided was, okay, Anything we can do for you, we're going to do for you. And so the consulting side of the business is that. The consulting side of the business is we interview and get to know everybody on your team. We're showing up to team meetings with you and running them. We're building the tools for you as much as possible. So it's more of a done-for-you, holistic, whole-team approach on the consulting side. Versus Coachay is more of a one-on-one with the business owner or some other executive leader in the business. And generally it falls into one of three categories where we're helping them with just leadership, growth, or high-stakes problem solving, right? And it's just more kind of getting into the weeds and giving them, you know, clarity in their thought and how to go back and for them to coach their team with the same things that we're doing the coaching with, with them.

Yeah, that makes sense. That's similar to how I've heard it described. Which do you prefer?

Well, as a company, I mean, I definitely love the consulting side of our business. It's like, it's where we just get into the weeds and just tackle anything and everything. We get to know everybody in the company. So that's, that's really, really fun for us. So I've gotten it now to where we have a full team of consultants. So I don't do really much of that anymore. And We, I do a little bit of the coaching, but I personally am not doing a lot of that stuff myself. I really enjoy coaching my team now. And, and one of the things I always say to business owners, by the way, is that your clients are your staff. Their clients are the business's clients, you know? And so, and that really is, I think, a great way to think about it.

I like that. Yeah. As we wrap up on time here, what else are we Anything else that you and I have chatted about over the years? Anything on your mind right now with the industry trends, broker-owner, any of your customers or clients? Anything come up that could be fun to wrestle with a little bit?

Let's circle back around, Peter, to one of the comments you made, which is, you know, how the glass ceiling is constantly being broken. Mm-hmm. And let's talk about that specifically with respect to remote team members. Because when people, you know, 10 years ago, even just 3 years ago, and even today still, I talk to people and their mindset around remote team members is like, oh yeah, I get back office admin support. And it's like, yeah, that's a true statement, I guess. Although AI is starting to replace a lot of that. But the reality is, as I like to put it, is the US hasn't cornered the market on HR. Right? Mm-hmm. So like the reality is, is like you and I could be replaced by remote team members if that's what we wanted, right? I mean, anybody can be. And so just continuing to change the mindset in the industry of how to level up your game with the remote team members at the highest level in your business is really exciting. So I'm curious, like what that has looked like for you. I mean, I know we've done some placements for you in the past and now you do a bunch of other things. Like what, what are you using the highest level remote team members for your business?

Yeah. So we, we're along the same lines. I mean, people live other places than the US, just in case anyone didn't know that. And those people are the same distribution of intelligence and capability as Americans, right? I don't know if you've met Americans, but they are not the smartest, hardworking people on the whole planet. Love America. Love it to death. Born here. No plans to leave. But we don't have a monopoly. You said you don't have a monopoly on HR. We don't have a monopoly on talent, you know? So we, like recently we just did a reorg and we moved from pure departmental to, to like a single person pod basically where we created 3 new positions. Well, we created 1 new position with 3 people in it called Property Manager, which we've actually never had anyone with that job title before. Which is crazy to think about. But so we have 3 new property managers and those property managers are the owner support, owner communication. So basically the owner's single point of contact at the company. So it's a very important role because it's owner-facing, it's owner communications, it's the escalation path for complex tenant issues. They over— they, they don't do the leasing or the turns, but they oversee them and help coordinate them. So it's, it's in my opinion, one of the most important functions at the company now post reorg outside of the leadership team. And one of those 3 roles is a remote team member and she's doing amazing. We're getting fantastic feedback from owners and even from tenants. So yeah, I mean, you know, if you look at major companies, many of them are made up of international team members. We just, You don't think of it that way, cuz you're, you're stuck in that call center VA mindset. You, you're like, oh wait, yeah, of course big international companies have executives all over the world. Like clearly. So the, the talent is out there. It's just a matter of changing your mindset. And then also it does require a higher level of capability internally to interview, onboard, train, and manage somebody who's not physically in your office. So. You know, we have international team members, but we also have remote American team members for certain roles as well. And both of those require providing an extra amount of context, extra amount of coordination and information sharing and training, because they're not going to just have those water cooler conversations where they overhear things and pick stuff up. So yeah, generally in agreement and, you know, I look forward to continuing to hire who makes sense regardless of where they happen to be born.

You mentioned earlier about, you know, if you're thinking about the EOS org chart, you kind of have visionary integrator at the top. And I actually find, by the way, that integrator is one of the most misunderstood positions that are out there. Most people, they think integrator, they think ops director. And you can have somebody that happens to sit in both the seat of the ops director and the integrator, of course, depending on the size of your company. But integrator is fundamentally a different position. And in, in EOS terms, but this is true every business, there's 3 main functions of a business, and that is sales and marketing growth is one of them, and then you have ops and finance. And the job of the integrator is actually to integrate all 3 of those things to make sure that they're working seamlessly, cohesively together, right? You think about things like owner onboarding, right? That, that touches all 3 departments, right? Like finance, ops, and the sales and marketing team. And so on the remote team member side, it's been really fun for me. I mean, we here at BetterWho, our integrator is a remote team member. She's been with me for 10 years now. And when we're starting to place that level of talent now for folks, and it's really exciting to see, 'cause when you stop and think about it and you're like, yeah, I mean, like I always say, right? It's like a remote team member can do anything for your company other than driving to a property or things that a licensed requires. Sure. And so for an integrator, they're sitting behind a desk, they can manage your local people, your other remote team members, your, your processes, you know, they can do all of that. And so it's just really exciting to me to see that type of mentality start to be adopted in the industry.

Very much agreed. Well, this has been great, Matthew. Thanks for coming back on the show. Always enjoy riffing with you. For people who want to follow along with you, or better, who, where's the best place for them to do that?

Yeah, of course, they go to our website, betterwho.com. Happy to put my email address out there. Anybody's welcome to shoot me an email with any questions they have, matthew@betterwho.com. All right, great.

Thanks again, Matthew. Thanks, Peter. I hope you have enjoyed this episode. If you like the show and want to get connected to the community, you can follow me on Twitter @PSLohmann and subscribe to my email newsletter on my website, peterlohmann.com. I try to share as much valuable property management content as I can on a regular basis. Thanks again for listening and have a great week.