The online chat when you are presenting a webinar on a controversial topic for a large group is enlightening. And so it was this week, when I presented for LookUpStrata on ‘how strata managers are adapting to a new business environment’. The audience was made up of strata managers and owners, just to keep things interesting.
The presentation, which you can view here, covers the big picture. Here are the headline points -
· The current business model is broken. Fee growth is stagnant in real terms, profitability is falling, and staff turnover is astronomically high at 33% pa. This compares to the national average for all industries of 7.7% pa.
· No fewer than 11 market forces are at play that are beyond strata managers’ control. This creates a challenging operating environment (and conversely, provides opportunities for advancement).
· There are mixed results of managers adapting to the new environment across the three dimensions we measure – people, pricing, and process, with some early signs of a shift to non-conflicted revenue models.
· New entrants, including private equity firms, are working to disrupt the sector, hoping to achieve scale with new technology and AI.
· To remain in the game or attract a top price on a sale, managers must align pricing, people, and process to offer a better service.
Meanwhile, the chat ensued. The resisters are always the first online. They want to keep things the way they are. They hope, magically, things will improve. They hope owners will become more compliant and pleasant to deal with, and will volunteer to pay more for their services without innovation. Good luck with that. This strategy doesn’t seem to be working that well so far.
Enter the disaffected owners to the online chat who were questioning rip-offs, kickbacks, and rising fees and levies. One said of average profitability falling to 23%, ‘cry me a river’. I suspect that contributor has never worked in strata management or owned a strata management business. It’s a tough gig - worth every bit of a 30% profit margin, provided, of course, the service is good.
That leaves the silent majority. They come in at the end with a simple thank you or a positive comment, and then off they go to do their best to implement change and prosper. We love the silent majority. A better future lies with them.
As a friend and colleague said to me after, ‘at this point in the debate, managers are in two camps: those that get it, and those that never will.’ I think that’s right. The same can be said for owners; the progressives will pay more for value, the others want more for less.
I stand with, and for, the progressives. The others should remember that the dinosaurs were the ones that didn’t see the ice age coming.
Michael Teys advises strata management businesses on improving profitability through professionalisation and streamlined operating systems.
He has more than 30 years’ experience as a strata lawyer and academic and has owned 11 strata management agencies throughout Australia. He has a Master of Philosophy (Built Environment) and Bachelor of Laws. He lectures and writes widely about strata management issues in Australia and internationally.
