How do we avoid making fatal cuts in our businesses?

With all the talk of drastic cutbacks in government, how do we avoid making fatal cuts in our businesses? So many management companies have taken "scale it back" to a new, and dangerous, level.

Back last summer, I asked whether you and your property management company had, in fact, profited from the recession by upgrading your team and choosing people who may not have looked to your company for a job in the better times, but who’s current financial predicament opened them up to a new way of thinking. Smart and savvy management companies have jumped on the bandwagon. I see more and more on-site professionals these days who have successful sales careers under their belt, or who have worked in real estate in some other capacity, or have PR and marketing backgrounds. The reason this topic is dear to me is that this is one reason why I have felt that Texas has led the multifamily industry since the 1980’s. Let me take some of you back to that time. The 1980’s recession in Texas made this last national recession look like a cake walk. If you listened to pundits and real estate sages circa 1983, you would fully believe that Texas would soon have 30 million people. Apartment development firms in Houston and Dallas apparently believed that about 28 million of these folks would need apartments. And Freeways. The state was drastically overbuilt by the time the oil price collapse of the mid to late 1980’s occurred. But as Texas is famous for doing, it didn’t just give up, like say- Michigan. It took a couple of years, okay maybe 8 years, but property management firms that were left standing were transformed. They contained the best and the brightest minds, amazing marketeers, savvy trainers, inspiring leaders. The new properties they added to the mix starting about 1994 were cutting-edge too. Exciting developments and construction first took “ luxury apartment homes” to a level previously unheard of – actual luxury. Sure, this trend was also happening in the Atlanta market, Southeast Florida, around DC and to some extent in Chicago and the West Coast, but it was everywhere in the major Texas metro areas. The companies that survived the massive downturn of the 80’s had learned how to do more with less, how to innovate, how to create a truly aspirational product and how to sell that to the masses effectively.

Which brings me to today. Some management companies have done this again. I see exciting examples of innovative thinking all across the country. But sadly, I see more examples of the types of companies that didn’t survive the 80’s. Companies that have cut back on their marketing, lowered salaries for crucial personnel, eliminated their training teams. These companies are falling victim to a classic mistake – when things look bad, just cut. Making a property or a company "lean" doesn’t necessarily benefit the asset(s). Just as we know how fatal it can be to just drop all advertising, rather than teaching our on-site people how to use and assess its value, the same is true for the visionaries and leaders of property management companies. You have to have the idea guy, even when you don’t know if you can afford the idea. You have to have the visionary, even when the vision doesn’t seem too clear. Management companies that cut back in these areas are left managing “C” properties in third tier metros when the smoke clears. They don’t grow, they don’t expand. They cannot take advantage of the next uptick because all of their great talent has fled. They might have some good accountants, maybe a few sharp tacks  in their compliance team, but that hardly grows a business.

I have begun a few projects over the past year and purchased a few others. Because of that, I have been on the prowl for some good people in some new markets where I don't have connections. Naturally, I started by shopping competition. In most cases, I didn’t see people I wanted to snap up.  It was more like I needed to snap to get their attention. One leasing consultant who was reading a novel and eating orange slices told me she could show me some units as soon as she was back from lunch. She said this to me in person.  In the office. So where have all the talented leasing people gone? From where can I steal them? Have all management companies gotten rid of the bright stars, the leasing leaders? How about the management teams? Have we cut back on the creative supervisors, leaving corporate offices with just those adept at Peachtree?

Thankfully, not all properties and companies are in this mode. Some truly are spectacular. Especially in some of the depressing markets like Florida and Las Vegas, some management companies are still rocking because they have good, creative, talented and hard-working people from which to draw ideas, energy and inspiration. In some surprising cities, I met some amazing people who would have passed the apartment industry by back around 2006. These folks are bringing their talent, unique background and amazing energy to our industry. There properties are succeeding because, in many cases, the company took a chance on someone without that all important prerequisite of "industry experience". We should  work hard to snap these people up before they go to work at Pfizer. In addition, wise management companies are supplementing their own training departments with online webinars, touring shows like the Apartment All Stars or each and every class their local apartment association hosts. These companies are preparing for what’s next. They aren’t wallowing in the red ink and bad circumstances. They are gearing up. They are laying the groundwork for the next step in their businesses success. It wouldn’t surprise me if many of these companies are led by just another talented Texan.

Christopher Higgins is The Apartment Guy, an industry educator, consultant and Texan-in-Exile in the mountains of Montana. His 20 years of industry experience is the source of numerous seminars and articles on the business of succeeding in apartment management and marketing. For more, visit www.theapartmentguy.net.