How much are your acquisition costs?

Growth comes at a cost. Salaries, lead generation, marketing costs and referral fees just to name a few. To keep an eye out on how much we are spending on growth we would normally add all these together and express them as a percentage of the business asset. e.g. if a property was worth $3,500 to us as an asset and it costs us $1,000 in expenses to acquire it, our acquisition cost is 28.5%. Every business has a ceiling on what this figure might be. I know some owners are prepared to push this to 50% as it is still half the price of buying a rentroll.

In business, it is crucial to know how much our new business is costing us per property. How much are your acquisition costs?

I love this topic, it always gets heated :slight_smile:

In our business, if we pay out a finders fee for the business (to an agent from another agency, or developer etc) then it costs us 25% of annual. BDM is a similar costs, but we are prepared to go as high as 50% of first years income for larger deals.

I look at it from a point of view, to buy were looking at between 2.8 - 3 times annual revenue, so it the case above one property (worth $3,500 a year to us) would cost us $10k to buy… So if I have to pay out $1,500 to get that business either to a BDM Team / referral team then its cheap buying.

Obviously, the lower you can get that cost of acquisition the better off you are, which is why on average we aim for 25% of first years income. We will pay that to a BDM, and or a PM who brings this contract on. If its an external source, it will be a combination of this or in some cases simply a thank you (which works out a lot cheaper helping us to keep our average down)

Lastly worth noting that we have zero advertising, so there are no costs of generating the leads which do need to be taken into consideration in many businesses.

I would love to know what other offices are doing here.

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That’s a great summary @ashley.giles and I don’t think there is any right or wrong answer here. There has to be a balance between spending some money and keeping the acquisition costs low. I have unofficially found that those businesses with high acquisition costs are generally giving away a high referral fee to a partner business like a wealth creator or investment coach.

The one part I always find interesting, (and its something we have tried to curb in our business) is that Principles are willing to pay BDM’s far more for brining on new clients than they do for their Property Managers.

In many cases PM’s get a flat $200 or perhaps a gift voucher for a new client, and a BDM will get between 20 - 50% of annual income which can equate anywhere up to $3,000… This has always been interesting to me.

I do understand the logic, (BDM’s need to cultivate a network etc, they are colder leads etc) in our business we could not really stomach this kind of discrepancy, so we put in an Across the Board New Business Bonus. It is un capped, and not limited to position. So if the accounts person, or the receptionist brings in new clients, they are rewarded as such… We also layer a team goal (both quarterly and an over arching number of 850) so when achieved we all celebrate together. When the team hit the 850 target, they are all off to Hawaii.

I agree, the costs of acquisition do need to be managed. In a PM only business, I cannot justify the costs of 3x revenue to buy a book if the new business is coming in naturally at 25% of annual…

Anyway, like I said it can get heated so love to hear some differing thoughts on this…