By Preston Smith
For the last 10 years I’ve bought rental properties on a regular basis. I’ve made a small business out of my efforts, formed an LLC and hired my wife to manage the properties. I’m a regular Donald Trump, or at least I like to think so. Like any small business, I have to keep leads flowing to my funnel or homes sit empty, mortgage payments come out of my profits and ultimately I can’t grow my business by purchasing more properties. Amazingly enough, lead generation tactics that I employ in my rental business are the same that help me in my daily work at Infusionsoft. These lead generation strategies have helped me grow my business and they can help you grow yours, too.
1. Calculate what you're willing to spend
You’ve got to start with some idea of what you are willing to spend to get a customer. Without going into the details of customer acquisition costs and how it correlates with customer lifetime value, I do want to emphasize that understanding acquisition cost and lifetime value will give you the confidence you need to go out and spend money in an intentional way. Or it will help you understand when you can’t spend. An easy way to calculate the lifetime value of your customers is to multiply the amount spent one month by the number of months they are customer; do this for five random customers, then take the average of those five customers. Caution: this is as basic formula to get you started, there are far more sophisticated methods for calculating CLV. Here is an excel sheet for easy calculation (you will not be able to edit this Google doc, but you can download the file or make a copy of it in the file drop down). What you are willing to spend should be in relation to your customer lifetime value. For Saas companies, customer lifetime value should be three to five times cost per customer. I average $6,000 per renter, so I should have been willing to spend $1,200 to $2,000 per renter.
2. Try to prove everything
This can be one of the most challenging parts of lead generation for small business. The software that tracks your lead generating efforts can be expensive and is often designed for midsize companies. Google Analytics is a good place to start with online lead generation, but what about inbound calls? I never take a call without asking the caller how they heard about my rental. Here is a simple excel file that I have used in the past to collect phone call information If you want to be even more intentional about your inbound calls, purchase multiple 800 numbers and use a different number for each lead generation activity. When you get the bills, you’ll get a better idea of where your calls are coming from.
3. Know your target market
You have to know your target market and go where they are. My homes are primarily three-bedroom, two-bath, 1,400 square foot homes and rent for around $1,000 a month. I didn’t want a ton of wear and tear on them, so I was looking for older couples or families with teenagers. Several times I posted my properties on craigslist.com and I would get dozens of calls from people who didn’t fit my target market.
4. Collect leads
I’ve shown my homes to plenty of people that the timing hasn't worked or the price isn’t right. I always get their information and let them know I will call them if I have something else open up. This has made a huge difference for me over the years because it has given me confidence in my ability to scale my business. Any company with a marketing list can have a growing business if they manage their list properly.
5. Find what works and do it
After ten years of testing different lead gen techniques for my rental business, I discovered the best way for me to generate leads was to put a sign out in front of your business. I do Internet marketing for a living, so you can imagine how hard this was for me to accept. In the end, you have to go with what works. If you can prove that the yellow pages works and creates an ROI, then don’t listen to some marketer telling you that it doesn’t work. Keep doing what you can prove works. Several Christmases ago, I had a hard time filling up some of my rentals and ended up taking the Christmas money for my kids to cover the mortgage on a property. That was the Christmas I vowed to stay ahead of my customer acquisition. Since then I’ve had one property unrented for one month. Understand what you can spend intentionally, prove and track what works, understand your target market, capture those leads and do what works for you. Doing all these things will help you create a lead generating machine.