DGS 340: Breaking the Cycle of Suck in Property Management

Recently, one of our clients, Derek Morton, shared an incredible story from a networking event where he transformed his booth into a blackjack table to illustrate that property owners shouldn't "gamble" with their rentals.
When a prospect tried to pressure Derek into matching a competitor's price by a mere half-percent, Derek firmly refused, explaining that he refuses to build a portfolio around owners willing to jump ship over such tiny margins.12 In this episode of the #DoorGrowShow, property management growth experts Jason and Sarah Hull discuss the vital importance of being selective about who you serve and why taking on "bad" owners creates a "cycle of suck" that destroys profitability and personal happiness. 

Jason and Sarah explore the foundational mistake of targeting everyone, explaining that identifying exactly who you want to serve is the first step in building a business. They apply the "Pumpkin Plan" principle of clearing rot from a business to prevent bad clients from spreading negativity throughout an entire operation.345
The discussion also highlights how poor client filtering leads to a "cycle of suck" featuring bad properties, bad tenants, and bad reviews, which ultimately traps owners in a "race to the bottom" on price. By being picky, business owners can significantly lower operational costs and achieve elite profit margins, sometimes reaching 60% to 90%. Finally, the hosts introduce a three-day initiative designed to help entrepreneurs diagnose why their growth has stalled and how to pivot toward attracting "good" clients rather than just "any" clients.

You’ll Learn

[01:08] - The Blackjack Table Lesson: A story about a client using a blackjack-themed booth to teach owners not to "gamble" with rentals and why he refuses price-shoppers.
[05:50] - The Pumpkin Plan & The Cycle of Suck: Applying Mike Michalowicz's "Pumpkin Plan" to clear out "rot" and avoid the downward spiral of bad properties and tenants.
[07:46] - Maximizing Profit Margins through Selectivity: How being picky lowers operational costs and enables elite profit margins between 50% and 90%.4 08:30 - Diagnosing Stagnant Growth: Introducing a new three-day team-led initiative to help stalled businesses identify why they are stuck and create a fix.
[11:34] - Avoiding the "Property Management" Product Trap: Why selling "property management" is the wrong approach and the importance of a unique offer for your target audience.

Quotables

“If we took on every owner and if we took on the wrong owners, we would no longer be happy, and we would no longer love what we do. And this would become a real pain in the ass."

"If you target everyone, you are guaranteed to be miserable in your own business."

“You can only have a ridiculously good margin in your business if you're picky about your clients."

Resources

DoorGrow and Scale Mastermind

DoorGrow Academy

DoorGrow on YouTube

DoorGrowClub

DoorGrowLive

Transcript

Jason Hull (00:00)

Alright, five, four, three, two, Alright.

 

What was that? Something broke. Five, four, three, two, one. Hans goes, smash. All right, Hans, out of here. We have a dog in, two dogs in here. All right, we're going to try that over again. Five, four, three, two, one. All right, I'm Jason Hull, the founder and CEO of DoorGrow. This is Sarah Hull, the COO of DoorGrow, co-owner. And we're the world's leading and most comprehensive coaching and consulting firm for long-term residential.

 

property management entrepreneurs on the planet. We're the best on the planet. So for over a decade and a half, we have brought innovative strategies and optimization to the property management industry. At DoorGrow, we are on a mission to transform property management business owners and their businesses. We want to build the industry, transform it. There's a dog walking around on my feet right now. Change perception, expand the market, and help the best property management.

 

entrepreneurs when now let's get into the show. is awesome. I love when she brings the dogs in right before the show. He's like running into stuff like cables are falling down. I don't even know what I I'm gonna have to find what he did and try to fix it. I don't even know. Good times. All right. So what are we chatting about today? Sarah? I was going to share some good news that one of our clients

 

was messaging back and forth with me on the weekend. Derek Morton, he's out in Utah and he was at an event over this weekend and it was a really cool event. I wish I could have been there, but he, like everybody gets their booth, right? You get your booth and you have your setup and everybody hopefully comes over and you get some leads. That's not how Derek does things.

 

at all. So Derek gets a booth and turns it into, I think it was Blackjack. And there, I mean, he had the the dice and the table set up and he got a, ⁓ a, a card dealer and he had the chips, but the chips were like customized with his brand name. And the whole thing looks amazing. It was, it was really awesome.

 

And the theme was, don't gamble with your rentals. Right? So obviously... Very cute, very clever. Yeah. One of the way more interesting booths at an event. Yeah. Come play blackjack. Now, it's not gambling. That's not legal, but they did have blackjack, so you can come play hand, but it wasn't gambling. And there was a lot of interest at the booth. There was a lot of excitement at the booth, which is great.

 

And there was a property owner that was at their booth, Derek was there, and the guy was saying, yeah, you know, I've got five units and I work with this other property manager now. Derek said, yeah, that's great. It's awesome. Like, how are things going? And he's like, yeah, things are going well. Like, I like the property manager. That's great. And I guess he was expecting to be sold too, because then he was kind of like, and so, you know, what would you do for me then? And Derek said, well,

 

Like, you know, this is kind of what we do. This is what we offer. And the guy was like, all right, well, how much do you charge? And he, you know, was telling him, hey, you know, we've got some plans you can kind of choose from. And the guy said, well, you know, my current property manager, they charge, I think it was like 7%, whatever it was, who knows. Let's call it 10 % because that's really common in the industry. So, all right, well, my property manager charges 10%. And essentially it was, you know, what are you going to do for me? And.

 

Derek goes, yeah, this is where we sit. And the guy goes, you're not going to try to beat it. He's like, no, no, we're not. He goes, let me ask you something. If you're at 10 % right now, if we charged, if we did like 9 and 1 percent, would you switch over to us? And the guy said, yeah, yeah, I would do that. I switch over. And he goes, for 9 and 1 half percent, yeah, I'll switch over. Yeah. And Derek said, yeah, and that's exactly the type of owner that we don't take on.

 

Okay. The guy was flabbergasted, not expecting that at all. He said, well, you know, listen, with all due respect, you know, I just met you. We're having a conversation. You're at my booth. You know, you're playing some blackjack. That's great. If you're ready and willing to dump the property manager that you work with over half of a percentage, which ends up being like five bucks in a 20 minute conversation, then where is that going to lead me?

 

So pretty much anyone that undercuts that price, you're just going to jump ship. didn't even try to do anything and you're already ready to jump ship over half of a percent. He said, yeah, we don't take on owners like that. That's not when we build our portfolio around. And that was such a cool message for me to get. I love that. ⁓ And I was really excited that that's just Derek.

 

A lot of people would be like, well, you we don't really do that. Derek is like, yeah, that's exactly the type of owner that we don't take on. He's so, he's not like, doesn't, yeah, he doesn't, he pull punches at all, which is great. That's why we like him. But really, he said to me, you know, one of the things that we've done really well, and they're a sizable company. And he said, but we, we're happy. We love what we do.

 

And really that's a testament to the owners that we work with. And if we took on every owner, and if we took on the wrong owners, we would no longer be happy and we would no longer love what we do. And this would become a real pain in the ass. And that's just not what I'm looking for. Because I love what we do. And part of that is being able to say no to the people who aren't a fit. Yeah, I love it. I mean, before you start a business, the very first thing you need to figure out is who do I actually want to work

 

Who do I want to serve? That's the foundation of the business and a lot of times people are like everyone. And if you target everyone you are guaranteed to be miserable in your own business. That means you're not going to filter out anyone. You're going to just let everybody in. Really good book on the subject is The Pumpkin Plan by Mike McCallewitz and he talks about this principle. He's been on my podcast twice. Our podcast now.

 

So, but he's been on here twice. And he's also spoken at our DoorGrowth live conference and sharing this principle is basically, you know, if you allow everything to be in your business, then your business is gonna be full of rot and rot spreads. It compares it to a pumpkin patch. You have to clear out the moldy crows pumpkins or the rot spreads. And ⁓ Derek, you know, he's smart because...

 

he probably at some point had some of that in his business, was like, this isn't worth it, this isn't the type of people I wanna deal with, they're not treating my team and my staff appropriately or kind. some people that's not the business they wanna run, if you're one of our clients, that's what we coach you, is get really clear on who you wanna serve and filter out everybody else. Because if you take on bad clients, it gets you into the cycle of suck that we teach, which means.

 

you then have bad properties, which leads to having bad tenants, which means then you have bad reviews, and then you attract more bad clients. And then you end up in this weird race to the bottom with everybody else trying to compete on price. And that's the worst place to be competing. And so you can be unique in the marketplace by being the best, being picky about the clients you take on, and your operational costs are going to be a lot lower. So...

 

Derek has much lower operational costs than most property management companies because he doesn't take on the really difficult owners. He makes sure that the owners are willing to put the work in and the money into the properties to make sure they're taken care of well, to make sure tenants are taken care of well. And that makes it a lot easier for them to do their job as a property manager. And so it doesn't matter if he could have like,

 

200 more doors if you would be making half the margins or even the same margins. I had a client with 600 doors that was on one of these podcast episodes. When he first came to me, he had 600 doors and was making zero dollars. And so if you have bad doors, bad owners, you have to have a lot more staff and then it's really easy to lose all your money and not be very profitable. And we've gotten some of our clients up to 50 % profit margin. Sarah had 60 to 90 % profit margin.

 

in her business. You can only have ridiculously good margin in your business if you're picky about your clients. You have to get rid of bad clients and bad properties. Yeah. Or just say no to them in the first place. Right. Yeah. So if you're wondering, I think this actually worked out way better. I did not plan this, but the, what are we calling it? The growth blueprint. that what we're calling it? We're calling it the PM.

 

growth audit, I believe. No, we're not calling it a audit. Well, I know that. I thought it was a blueprint. Nope, we're not calling it a blueprint. We're calling it the PM growth leak audit. It's not when we're not going to call it an audit. Well, that's what I have programmed all of our tools to talk about it as. Then we get to reprogram that because... Because blueprints are overdone. Nobody wants a blueprint anymore.

 

So people want to pay maybe for an audit. So I don't know. But whatever you want to call it, challenge, audit, blueprint. But it's to help you find the leaks in your business related to growth. All right. So where I was going with that, whatever we decide to call this thing is stay tuned, I guess. OK. TBD. But ⁓ that's going to be something that we end up launching very soon, where you'll work one-on-one with

 

someone from our team and they will take you through. It'll be a three day thing. Dogs trying to jump up on my lap. All right, why not? Come here, Hans. Come here. Come here. Okay. All right. He's all the way up here. All right. Okay. For those of you who are watching the video, this is Hans.

 

Hi, where are you going? This is awkward because I'm sitting on a ball. Whatever we call this, you'll get to work with someone on our team for three days to help you figure out why growth has been stagnant or not moving as fast as you want it to be. Because a lot of people are totally stuck and they're just stalled out and stuck at the same point and they might fluctuate.

 

gain a little, lose a little, gain a little, lose a little. And there's a lot of people that are also, they want more growth and it's just not happening exactly the way that they would like it to happen. They're getting some growth, but they're not getting the amount of growth that they are really hoping for or looking for. And we have identified a few patterns. So we've decided, hey, let's help people figure out why their growth is just...

 

stalled. Maybe the growth stalled. I don't know. We'll call it something. ⁓ stay tuned for that because I think probably by the time this airs that will be live. That will be launched. So if you're wondering why growth might be stalled or stuck in your business and how you can grow more and get more clients and the good clients, not just any clients, but the good clients because that's what's important.

 

then reach out to us because by the time you hear this episode, unless you're watching it live, if you're watching it live, we can't help you quite yet, but stay tuned for like a week. Give us like a week. And if everyone else, when you're watching the replay, when it launches, then if that is you, reach out to our team and we will walk you through it. And you'll walk away with a plan and you'll know exactly what's going wrong and what to do to fix it. Okay.

 

I'm being tongue mauled by this dog. Okay, Huns. All right, you're going down. No, Captain, you can't come up. Okay, fine. Come here. Hi. Where's the other one? the other one. Okay. Okay. He looks so sad to I don't know what else to say about this. All right, so next time we will not bring the dogs in here.

 

This is not effective. Not effective. All right. So but possibly entertaining. So if you liked if you liked seeing the dogs just like comment on this dogs and then see he'll have to do more of it. I don't know. You let me know. You'd be the judge. Yeah. All right. Well with that I think the message today then is you've got to figure out how to be unique in your market because

 

If you're the same as everybody else, they might as well just go with the cheapest company. that is, you know, nobody also, it's important to realize nobody also wakes up in the morning and goes, I want to buy property management today. Property management is the wrong product. And this is one of the things in this challenge audit, whatever we're going to call it thing is that we will help reveal to you, we'll help you expose and we'll help you make sure that you have a really good offer.

 

you have a really good understanding of your target audience because without those things really dialed in from the beginning, you're going to have a less healthy business. And so a lot of people have a blind spot around all of this and they just go out there and try and get clients, try and grow their business. And they wonder why it's so hard, but it's because you're selling the wrong thing and you've started the wrong business. And so, and this stuff is very easy to clean up and we can help you with that. Cool. All right. So.

 

If, my gosh, dogs are just bumping into me. If you have felt stuck or stagnant and you want to take your property management business to the next level, reach out to us at doorgrow.com for free training on how to get unlimited free leads. Text the word leads to 512-648-4608. Also, you can join our free Facebook community just for property management business owners at doorgrowclub.com. And if you want tips, tricks,

 

ideas and to learn about our offer subscribe to our newsletter by going to doorgrow.com slash subscribe and if you found this a little bit helpful don't forget to subscribe and leave us a review we'd really appreciate it until next time remember the slowest path to growth is to do it alone so let's grow together bye everyone

 

I can't this.

 

I don't know. We're stuck on the podcast forever.

 

How about the red end phone call button?