Heroes of Traditional Industries: Part 2 Insights from Parker Cox a Property Management Entrepreneur: Navigating Challenges and Embracing Innovation

Hello champions of the traditional industries!

“Heroes of Traditional Industries” series is about stories of people who make a difference in their respective industry, share their journey and story how they got where they are now, how they use technology to create impact and share their unique perspective on how innovation can impact traditional industries and how idi it impact their business.

This is Part 2 of the discussion with our hero, Parker Cox founder of Tenant Planet, Inc., a property management company. He is in the property management business for quite some years and is sharing with us his experience of how he runs the business and how technology and innovation, including AI impacted his business and helped scale and manage the operations better.

How much do you want to scale your business?

Parker: Happy to scale it to 2500-5000 doors. You start getting too far past that and it becomes a very unruly challenge, so that's 2 to 5x basically. You know, at that level, I'm pretty comfortable with it just being a lifestyle business. To be honest, I might even sell it.

Just because when you get to 2,500, it's about the bottom level, 5,000, you're very comfortably starting to get really valued on an enterprise value basis and that's where, you know, getting out of a really hard business for a 7x multiple will be very easy. So yeah, I mean, scale is interesting, but it's a hard business.

It's a hard business to scale, it's a hard business to have at scale, et cetera.

Nice! So yeah, let's, uh, continue from where we picked up last time.

Parker: Sure.

Last time you mentioned that you have implemented a lot of digital tools in your operations, even use AI for communication with the tenants and stuff. For example, when you evaluate to implement a solution or solve a certain problem or make a certain department or business unit more efficient what factors do you influence the decision of implementing a digital tool or automated process? What do you take into account?

Parker: Good question! So there's a few points, I mean this will seem self explanatory, but at the same time I think a lot of people overlook it; Which is what is the financial cost and then what can it be like? Generally automation is exchanging, paying for software in exchange for labor. So when you think about it, like there's a few different things you can look at.

Number one is, is this cheaper? Let's imagine software costs $1,000 a month, It's like, okay, does the labor to manage that software cost $1,000 a month Right?To do that process manually is it more? Is it less? Okay, so there's one piece.

The second one is when you look at that exchange of labor to software, which one is better? So you'll see that there's certain things out there that automation is just obvious. It doesn't require a lot of human oversight, right? In the sense like you don't really need a person to do that. Your biggest risk is an error, which is anti-human, humans make errors so that becomes really easy. The challenge you have is every company is balancing a mixture of automation slash systems and like bespoke and custom outcomes for their clients.Right?

So you have to look at is this something that should be human in the way that it's built out because that bespoke custom outcome is far more important than this box getting checked, right? So there's that component of determining where those things stand in relation to each other and then the final piece is this is Some software is so good you couldn't imagine living without it, right?

But most of it, it's a trade-off between pain in the ass of utilization and adoption versus potential upside so what I mean by that is this, my property management software that we use, to use as an example, it's called AppFolio, largest company in the space, at least in the US, really good. Really good, handles pretty much everything you can think of. But let's imagine a cheaper competitor, you know, VC-backed, AI, right, comes in and says, we're going to disrupt this model, one of the challenges you have, and this is to AppFolio's credit, is they're sticky, there's a lot of stuff in there, there's a lot of muscle memory and utilization because it's so detailed and so complex, we've become experts at this and it took years.

Even if, you know, we probably all in pay five or six thousand dollars a month, let's imagine someone came in and said I'll do it for five or six hundred and I'm gonna do better, that's a lot of money, that pays for more people, etc.

But literally the two years it would take to be able to utilize a new software as well as we use AppFolio would probably prevent me from trying to save $50,000 a year. Does that make sense?

Yeah, it makes sense,

What do you think makes them such a good solution for property managers like what do you think they did very well that made them so sticky and like companies like yours even if it would be if it would be a cheaper solution it would be hard to actually leave it because like okay we got used to this and like what do you think they did right because I think you saw competitors of theirs that tried to do this and it didn't work.

What makes them actually so good?

Parker: Yeah, so Marc Andreessen, the founder of Andreessen Horowitz, he was also the founder of Netscape, he says that there's only two ways to make money in this world, bundling or unbundling. What AppFolio did is they bundled and so they offer an end-to-end solution for all of the spaces. So you can think of property management basically as five departments, accounting and bookkeeping, leasing, maintenance, tenant management and communication, etc. You put all of those together with a very good, instead of one of them being exceptional, with a very good solution and it becomes very, very difficult to switch. Add on to that, that literally just the complexity of the business that they're serving works in their favor, right? If there was only one department, it becomes a lot easier to make a transition. Does that make sense?

Because they handle everything, it's not even because they handle everything, it's literally just there's so many components, which means that over time, as we establish our expertise on their platform, switching becomes harder and harder, it self-generates a mode because all of these other platforms are complex too.

It's why people who have had an iPhone or an Android phone for five years find it nearly impossible to switch, the user interface is different and that alone is so frustrating it creates enough upfront friction that people just stick. I've been an iPhone, I'm a massive Apple person I think I had it since the second generation I literally couldn't go to Android, I'd open the phone “It's like, wait, where's this thing?, How do I do that?,What do I press?”, right? and that is a key benefit in some of these deeper softwares. Salesforce has it, HubSpot has it, anything with complexity becomes much harder to switch just because as you get better and better at it, that expertise becomes harder and harder to replicate.

But to more directly answer your question about what have they done? Well, the first thing is that when they do something, they do it well, they don't put out half-assed products. That creates a lot of faith in the company when they decide that they're going to launch something, it's good, they've thought through it.

The second part is they have a lot of connection with their customers. They do a good job of putting out surveys, of launching betas, of talking, of seeing where things aren't going well. so they have a whole mechanism in their help center where you can do a feature request, which is pretty common, but they actually follow it and they'll update people via their forum saying, hey, this is an added to our roadmap and blah, blah, blah, blah, blah.

So that I think is a key component and then the last part is they've prioritized the hardest things first. So when you look at property management, most people think maintenance is the hardest thing, It's actually the second hardest or third hardest thing. The hardest part is accounting so AppFolio started as an accounting software then each one that they added on was a little bit easier to integrate because they got the hardest thing right first.

Does that make sense?

Yes,that's very interesting, so you used AppFolio and did you implement other tools or did you build other custom solutions inside?

Parker: We did not build custom solutions beyond kind of automations that run on top of their foundation. You know, you can think of AppFolio as like our sewer system or the electrical grid or the freeways we have put additional things on top of it, but it's all dependent upon that functioning.

We have, we pulled our maintenance out we no longer run our maintenance through AppFolio, we use a different platform called PropertyMeld. The reason why, it was enough better and an easy enough transition off AppFolio that it made sense. We also supplemented AppFolio's core leasing platform with some AI scheduling.

The problem with both of those businesses is it's kind of like, you know, they exist on an active volcano. Now, Apfolio isn't the only player, but they are the largest. But if the platforms that are the core, right, if Apfolio comes to me and is like, hey, actually, we do leasing better than them now, I'd switch back. I do maintenance better than them now, I'd switch back, it's easier.

One of the things you've got to remember with adding additional software, think of it as kind of like the home screen on your phone I don't even know how many I have, but let's say I have 75 apps, how many of them get any brain space from me at all? They don't, right? I only use seven of them regularly or whatever the number is, now I don't delete them and those people will be able to say, well, I'm downloaded on 10 million iPhones.

It's like, yeah, but you only have 15,000 active users, right? So the reality is that in a perfect world, this is the attraction of bundling. If my team could only log into AppFolio every day and live in that dashboard and that platform, we'd be better because the moment you have to switch from app to app to app to app, you're creating unnecessary task switching, complexity, there's more things to become an expert at, etc.

So there's just a big challenge every time you add something new it isn't even “does it make it better or worse?” it's just like is this worth pulling my team to now have some other thing well I've got slack and we have phone and we have text message and we have our crm and we have AppFolio and we have groups.

It's like all of a sudden you hit a critical mass where I literally can't go farther than this because something will always be ignored.

How did you make sure then to not get to a point where all these solutions suddenly end up actually adding up hours of work for your team? And did you make sure that they interact between each other? Like for example, if there is data or information that needs to be in both places, how did you do that?

Parker: Yeah, so that's an essential component, things that have some sort of API integration, so that's an essential piece.

That's part of why we use a property management specific CRM instead of something like HubSpot or Salesforce. It's designed to work with things like AppFolio and other stuff within the ecosystem otherwise beyond that I mean fundamentally it's a judgment call; Is this going to be good enough?, Can I see the pathway to say within six months?, Where we're better enough to justify the time, cost, human frustration to make this happen?

So the key answer is we're very selective, as you can imagine, people hit us up constantly trying to sell a software, of course, right? You don't say yes to everything, you say no to almost everything.

How did you evaluate which tools to use? Why I'm asking this, because with the third-party tool you don't always know from the start if that will help or not. Because when building custom, you build upon your processes but I understand that many companies don't want to do that but with third-party tools, how did you make sure that it meets your requirements? What advice would you give to other property management companies when evaluating third-party tools?

Interesting, but example how would you advise other property management companies to wait before going there?

Parker: I think we all start with pain, right? When it comes to why does a marketing campaign for anything resonate, it's a pain point, right?

Why does someone buy a new bed? Because their existing bed hurts their back. Why does somebody buy new shoes? Because their existing shoes aren't cool enough or hurt their feet, right? It's like, “Oh, my 16 year old needs new shoes because some girl made fun of him, right?”, it's pain.

So the same is true for business owners. We know our segments of pain, at least good ones do, right? Hey, we are not good enough at answering the phone, we get negative feedback on that.

Okay, all of a sudden, if someone came to me with a magic wand of a solution, I'd at least hear them out. So let's say you get past pain and now you're willing to hear people out, when you're making that analysis, number one is you have to remember that it's a sales interaction, no matter how good that the salesperson is at making you feel like this is a consultation, they're trying to sell you something so they're going to talk about the benefits, not the downsides. You need to cut through the bullshit and let them know that if it's really as great as they say it is, you'll buy, if it's not, you won't and that's okay there's no harm, no foul, I own a business.

If I say it's great, I'd hope you buy, and then I have to deliver, right? Which is why one of the most important things you can do as a salesperson is say, look, I think we're a nine out of 10 in these three categories, but in these four, I think we're a five out of 10, a seven out of 10, and a six and a two and a half, right? Are those nine out of 10s worth worth the other challenges? I tend to prefer to work with either startups or super established companies because they each have pros and cons.

In the super established companies you get what there is and you'll notice that they almost never have a sales process at all. Sometimes they'll make you do a demo this that and the other but it's like really if you don't want to buy from me, don't buy from me, right?

Whereas on a startup, the reason why I like startups, not the in-between is because on a startup, I know they're not fully formed, normally their pricing is very good, you can talk to people who actually make key decisions at the organization and from there you can go ahead and influence their roadmap to a greater extent and you can get special help when required. Does that make sense?

Beyond that, the final advice that I'd give is, if you can't see the vision of how this new product is going to level up your organization, don't do it, right?

When we implemented a massive amount of process automation, which was a new feature from our CRM, Immediately I saw, okay, we have to do that, that's obvious this is going to work perfectly. It's going to be a giant pain in the ass to implement, but once we do, it's going to work.

Whereas if somebody tells me how their AI, you know, voice recording software is going to work, I look at that and I'm like, I don't have a clear vision of how this helps us level up, does that make sense?

Yeah makes sense so basically what they're saying is Property management companies should first focus on their pain points and based on that evaluate tools.

I remember last time when we talked you mentioned that in property management business everyone hates you. Like tenants hate you and at the same time the guys who own the apartment, the multifamily apartment buildings, they also hate you when you come with the requirements for repair stuff or stuff or things like that.

How do you make sure that you keep this human touch? While also implementing these digital tools and automations to help you run and manage a better business. Because in the end, everyone likes to talk to a human and how do you keep this balanced?

Parker: The first thing I would say when it comes to people hating you and you trying to solve that, it's all about expectations. Can you set appropriate expectations and meet those expectations, right? It's the classic undersell over delivery and that is not when you're just talking to a client, that's in every micro interaction that you have with someone along the way.

Hey, I'll get this to you by Monday, but actually you get it to them on Friday, right?All of those little things are really important.

When it comes to like the core of your question, balancing the human side versus automation, I think you need to remember what the ultimate goal is and that's doing the job, okay? So the first thing that you're designing is, did I do the job? Post that question, every business has to make a decision themselves around how did I do the job?

And what I mean by that is this, McDonald's and pick your favorite Michelin star restaurant have a job of feeding people. They've just picked very, very different methods to do so and when you look at that, that ends up being a personal choice about where you're going, right?

For example, would we rather have low prices, mass appeal, volume, and a pretty shitty cheeseburger, for example, Or would we rather create something that only a few, a tiny percentage of people get to experience it's much higher margin, but it's also far more technical, you got to pay your people more, all this, and then you're suddenly responsible for a massive experience that isn't necessarily the case at McDonald's, right? Because you can make a better cheeseburger than McDonald's. I can in my backyard right now, but I can't make a billion better than they can, does that make sense?

You just have to pick are you a company that says customer service is our number one most important thing? Or are you a company that says efficiency and margin protection is our most important thing? There's no right or wrong answer, but you need to be thinking deeply from outcome first, how is up to me? And I get to make that decision, I'm the owner.

But you have to make that decision because otherwise what's the worst case scenario is that you don't think about that at all and so it's not uniform, right You go into the Michelin star restaurant and one table gets a McDonald's cheeseburger, the other table gets a four thousand dollar meal, you can't do both you have to pick and stay in your lane.

Because you implemented so many tools and automations, can you give an example of an area of your business which previously struggled, but now after implementing it saved x amount of hours or it saves us x amount of dollars per month, like a real use case?

Parker: Yeah, so this is an easy one. The way that it works is this, so I'm going to tell you a key principle that you have to realize about most service businesses, about 90% of service businesses is finding the most effective way for data transfer.

Now that sounds fancy, but let's boil that down ♨️

Customer service is data transfer; somebody has a question, you have an answer, and you need to get it to them in an efficient, clear, concise manner.

Operations is data transfer; We know something, we need to get it to a vendor, we know something, we need to get it to a client, we know something, we need to get it here.

So that data transfer can be heavily automated. It's then creating the opportunity for the moments of action, not just transferring data, but creating data that has the highest outcome, right? It's, hey, now I have smart people focusing on this key component.

So in property management, one of the things you do, you post a property for rent, right? Somebody sees it online and then they inquire, that's called an inquiry. When they inquire, usually it's about questions about the property and then they want to see it, so it's scheduling, okay? All of that data transfer.

So what used to happen and what most management companies still do is that person inquires, whether it's online or a phone call or an email, and then a human being has to interact with them, answer those questions, and then pre-qualify them, make sure that they might be a fit for the property and then schedule the appointment to go see it and then show up and go see it, okay and then they have to convert that person into a tenant if they're a good fit.

So, about 90% of that is data transfer. We automated all of that using an outside vendor that handles the pre-qualification, answering base property questions, and scheduling. That used to take about 35% of my team's time. Gone! Now it’s at 5% or less if there are questions AI can’t answer. That's 30% time for those people to now be focused more on sales, getting hired, closing business that generates revenue. Okay, so massive win, massive win.

What it also allows for is they get to be entirely focused on the data generation side, which is cool, I'm at the property with this person I'm focused on the key behavior that only a human can do to be able to drive an outcome. Make sense?

Yeah, very interesting use case.

But where do you think the property management industry is at currently and where is it still facing challenges and struggling? In what areas do you think is there potential for implementing digital tools and automations to improve the business operations?

Parker: Hmm, let me chew on that for a second.

Yeah, sure.

Parker: So I'd say that it's going through a bit of a identity crisis.

Oh, really?

Parker: Yeah, because it feels like the sort of business that can be run out of software. Okay, so you look and I just said that 98% of it is data transfer and you'd think that if that's the case and we have humans doing all these random things could we just have a software solution? Why not, right?

It can't, I don't think that's possible. I think a lot of people do, but having been a property manager and a pretty forward-thinking one, I'm not saying this like the old man shouting at the sky, like, I just don't think it can. It's going to be an inherently, it's going to be a human-based business with software supplementation as far into the future as I can see.

Now, that doesn't mean that eventually there's AI agents doing it right, maybe, maybe, I don't know where the technological capacity is going.

Beyond that, though, the key point that I think is essential for us all to take away from this is once we determine where it is as a place, what are other things that can improve?

Customer service is the hardest part about property management that hasn't been solved, it is the only business I know of that has this problem.

I have 900 paying clients yet I have 3000 tenants who expect the same level of service, but they don't pay me anything, okay?

I'm not, I've racked my brain about this, I don't think there's any other businesses like that.vIt creates a monumental task because whether you're Southwest Airlines, whether you're an accounting company, whether you're Disneyland one benefit you have is the people who are paying you are the only people you need to interact with. It's not exactly true, it's probably a 1.1 to 1, but it's not a 3 to 1 and that's hard, that creates a very difficult challenge to be able to communicate at scale efficiently, especially in a low margin business.

I like how you called it, identity crisis.

Parker: It is, it is. There's a lot of tech-backed companies who think, no, no, no, we'll make this a software business with human supplementation, I don't think it's possible, I think it has to be a human business with software supplementation.

One final question; What advice would you give to property management companies on ways to keep up with the changes, innovation and technology that is always changing and coming?

Parker: So you'll notice in all industries there's hubs of information, they form, figure out what those hubs are and stay in touch with them and see what they're doing and see what they're talking about. If you do that, you can cut through 90% of the noise and focus on the signal exclusively.

If you try and just see everyone who emails you in your inbox, if you try and go and figure it out on your own and you try and go and research, you're screwed, you have to find the key beacons to be watching and then and once you watch them, you'll see what works and why they're thinking that way and that saves you all of the hard work of trying to sift through the noise.

Great advice! I really liked the discussion and I think it will be a very informative article because you also approached it also from a very philosophical way, like identity crisis and other stuff that you shared during this call so it's going to be a great article and educational material for other people.

Parker: I appreciate you taking the time my friend, don't hesitate to reach out with other stuff as it comes up. Hey man, thanks, it's been a pleasure.

🙏Thank you to Parker for sharing his valuable insights and expertise.

Here is the link to Part 1 of the discussion with Parker Cox https://notifiqation.beehiiv.com/p/property-management-insights-parker-cox 

Stay tuned for more thought-provoking discussions on the intersection of technology and traditional industries. 🌐

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