KJOLHEDE: Our water rebilling company also guarantees no late charges. If you look back, you pay a boatload of late charges, because they give you seven to 10 days to pay the bill. That’s almost worth the price of admission right there, let alone the vacancy recovery and being able to track and rank the cost per vacant day.
What about purchasing programs? HEIMLER: As we’ve grown, we’ve established some national relationships. We’re a third-party [management] shop, and our clients clearly could not get the pricing levels we’re getting. … We’ve tried to do some bulk purchasing in other areas [such as pest control]. We’re not necessarily trying to save money [through the controls that purchasing contracts bring], but through the buying power.
LYND: Most people are trying to take advantage of bulk purchasing.
HEIMLER: Have either of you found that establishing a carpet vendor relationship has translated into savings?
KJOLHEDE: No. I have tried that, and it gives me egg all over my face. Any service—landscaping, carpet, housekeeping—leave it to the locals. I just measure and rank what the cost is in those categories and say, “Yours is awful high. How many Maverick tickets are you getting a month?” … We have 70 properties in 23 states. There’s just too much diversity there [for many purchasing initiatives] … so we just try to teach the ownership mentality of spending money as if it were your own.
Where do you refuse to cut costs? HEIMLER: When I sign up a new account, I always tell them there are two places where I’m not going to save them money: payroll and landscaping. I may try to redeploy the dollars that are allocated more efficiently, but I find that these are two areas where, if you try to save money, you’re going to hurt your revenue more than you’re going help your expenses. This industry is a top-line value business. If you save $10,000 a year on payroll, but it costs you $10,000 on revenue, your loss is the capitalized value of that money, which is significantly more than $10,000.
LYND: Those are two areas where you just cannot cut costs, especially now when the market’s so competitive. The quality of the people on-site is what drives this business, and cutting payroll costs will lead to long-term disaster. Landscaping translates into the appearance of the property and the curb appeal, which is the first thing a resident sees.
KJOLHEDE: As much as I won’t compromise what it takes to get a good employee, I do measure overtime. I also measure full-time employees per unit. And I rank [the properties] 1 to 70. You’ll see high numbers and low numbers, and it just creates additional questions. … We always pay overtime if employees incur it; we just want to manage when they have it and why they have it.
What cost-cutting initiatives are not worth the effort? LYND: There are vendors pitching us all the time. If you’re always getting into bed with someone new because they can save you a buck, eventually you’re going to make a bad decision.