After discussing the hidden costs of listing services, the next step is understanding the hidden costs of bad leads. Once again, this is an important point to understand because we often assume that it’s just normal in the multifamily industry to deal with a certain number of bad leads. But this is another example of “normal” having a ton of sneaky costs that most of us don’t notice precisely because we think those costs are unavoidable.The good news is: They aren’t unavoidable. You don’t have to keep paying them indefinitely. With better leads, you can save money and even increase revenue.
There are four ways that bad leads cost your community money.
First, let’s start at the beginning of the leasing process: when a lead calls your leasing office. Bad leads stumbled across your community in an internet listing service, print guide, or, heaven help you, a newspaper. In many cases, the call is going to be aimless, they’ll have lots of different questions, and they’ll tie up the phone asking basic questions about the property that should be available on the website: “hey, do you accept pets?” or “do you have a fitness room?” This ties up the phone lines and has a bunch of frustrating knock-down effects as well: First, depending on how your phones are set up, the line may be busy and other leads can’t get through.
Second, working tons of bad leads over the phone will eventually burn out leasing agents.
Third, it wastes leasing staff time—the time they spend on the phone with bad leads is time that can’t be spent talking to good leads over the phone or, better still, giving tours to high-quality leads. So these phone conversations with bad leads are hurting you in a bunch of different ways. It’s not just the bad calls that hurt you though. Let’s say your leasing staff works really hard. They turn a bunch of those lousy leads into tours. It’s still not a net win because they probably spent way too much time on the phone working leads, but, hey, they did it. They scheduled a bunch of tours. When those bad leads show up for their tour, three things can happen:
They can sign a lease
They don’t sign a lease.
They don’t actually show up for the tour.
Some of these leads really will sign a lease, of course. Even there, a bad lead may easily become a bad resident. So even the “best” scenario here may not actually be a good thing.
But those other two outcomes are probably going to be more frequent and they are a greater reason for concern. In the case of a bad showing, it could be something where the prospect takes one look into the apartment and knows it isn’t for them. But by then you’re pot-committed, as it were, and so most prospects will go ahead and do the full tour. But this just wastes their time and the time of your leasing agent giving the tour. The no-show possibility is also a negative outcome, of course, but at least is not as much of a time waster.
Of course, the time wasting problem can be more or less of a problem. If you have leasing staff working out of the community, then a bad tour isn’t a huge deal. They just had to walk down a hall to give it. They’re out some time, but not a lot. But if you have scattered properties or your leasing staff offers in a central location and drives to your larger communities, then the time spent on bad tours or no-show tours is a bigger problem.
You’re out a greater amount of company time and perhaps also will owe the leasing agent gas money, depending on how your company handles that issue. What this means is that even if your leasing team does occasionally convert a bad lead, it does not offset the cost of dealing with all the bad leads. They waste company time and, if a single agent has too many bad tours in a row, can demoralize your staff. These kind of bad leads aren’t worth the time or risk.
Fourth, there is one more hidden cost with bad leads. If the leasing agent spends so much time sifting through bad leads, how much time and energy will be left for helping the good ones? There are a few different questions here:
First, depending on the volume of bad leads we’re talking about, you have to ask how much time your team will have for good leads.
Second, if you keep getting told “no” over and over, it starts to wear you out mentally. How much energy will your team have left to work with good leads after tons of disappointment and hearing “no” so many times?
The danger, in short, is that your leasing team’s job would start to look a lot like busy work--field a certain number of phone calls, give a certain number of showings, but they never actually go anywhere. In such a situation, you almost expect people to get discouraged. And once that happens, your team is run down and the results will fall off even further.
Here it may help to get practical: There are, after all, many hard costs that can be affected by a burned out leasing staff.
You may have higher turnover in the position, which means costs in terms of advertising the position, conducting interviews, and training new hires. There are other costs too—you may need to employ a bigger leasing staff, which means larger wage costs for your company. And that staff may have higher costs--driving to more showings, for example. If you have a scattered portfolio and pay mileage for your leasing staff, then the costs can really move up.
On the other side of things, an efficient leasing system can save you a lot of money. Many multifamily communities we work with don’t even employ leasing agents because they just have one on-site property manager who handles leasing. The leasing efficiency is so high that that’s all they need. Thus higher quality leads can dramatically reduce costs for a community. In short, the costs of business as normal in multifamily can be huge for your multifamily business. You need a way of improving the average quality of your leads so that your team isn’t wasting time and getting burned out from fielding so many lousy calls and giving so many going-nowhere tours.