Business Numbers that Talk: Metrics and Measures Steve Urie Jake Beeson 1

How do we measure? Profitability? Company Health? Success? 2

How do you measure performance in a property management company? 3

What measures work? What measures don’t work? 4

EXAMPLE: GIPD: Gross Income per Door Total Income (Mgt Fees, Late Fees, App Fees, Understandification fees) Number of Doors GIPD 5 =

GIPD: Gross Income per Door Total Income (Mgt Fees, Late Fees, App Fees, Understandification fees) Income Units 6

Example: 2002 GIPD $40. Example: 2003 (downsized) GIPD $54 This is your baseline! NEVER Manage below GIPD $54 Cuz: That’s workin’ harder not smarter! 7

Steve’s “Ah-ha” Moment 1 Door at $108 GIPD = 2 Doors at $54 GIPD Which would you choose?? 8 Today 60% fewer doors & 225% increase in GIPD

Big company with LOW GIPD You are the market Small company with HIGH GIPD Pick & Choose Steve’s 2 nd “Ah-ha” $21,000 Loss And The Decision to Downsize 9

NIPD Net Income per Door Net Income Number of Doors 10

NIPD: Net Income per Door Net Income $6,000 Number of Doors: NIPD = $60

Net Income per Door (NIPD) Example Net Income for Month: $6,000 Number of Doors Under Management: 100 $60 Net Income per Door (NIPD) 12

What will it cost you to bring on properties? Examples: Steve: Patio Homes NIPD/GIPD ($60/$108)= 5.6% Jake: Small Commercial You are MORE competitive because you know what your bottom line is! *Don’t give it away* Net Income per Door: How low can you go? 13

2 More Measures for PM companies Net Income Ratio Acid Test Ratio (sometimes called quick ratio or liquid ratio) 14

Net Income Ratio Net Income (Money after paying all the bills) Gross Income (All the money) 15

Net Income Ratio Example Net Income $6,000 Gross Income $10,000 60% Profit 16

Sample Net Income Ratios Profit Margins by Head Count (Number of Employee) 1-2 Employees (small) % 3-5 Employees (medium) 15-35% 6-9 (Medium-Large) 8 -15% 10-Up (Large) 4 - 7% 17

Questions answered by your Income Ratios: Can I hire an additional employee? SALARY / NIPD/12mos = NEW UNITS $40,000 / 60/12 = units Can I open another office? TOTAL OFFICE EXPENSES / GIPD = NEW UNITS 168,000/108/12 = units Should I get bigger? smaller? PERSONAL CHOICE: BOUTIQUE VS ASSEMBLY LINE 18

Acid Test Ratio Cash on Hand 19

Monthly Expenses 20

Business Interruption 21

22 $54,000 COH / $14,000 = 3.86 months or 115 Days With the money you have now, Can you Survive & for How Long?

Break Even Analysis per Door 23 How many doors do you need to cover monthly expenses? 14,000/108= 129 – 130 Doors ARE YOU THERE? CAN YOU GET THERE? Monthly Expenses

Break Even in Days How many days you work for expenses! (Expense Freedom Day!) 24 Expense Percentage (1-.60) =.40 x 30= 12 days (1-.07)=.93 x 30 = 27.9 days

Questions? 25