Today, I’m talking with John Laviter, the Chairman and CEO of Northpoint Asset Management, a professional Real Estate Investment & Management Company with 25 offices across the U.S.

Northpoint represents nearly $1 billion in assets and its members and partners have engaged in approximately $150 million of real estate investments.

In today’s episode, you’ll learn about how John has rapidly grown his businesses, the leadership lessons he learned along the way, and how you can use these tips to improve your property management business.

LeadSimple  (35:58) – Lead tracking software used by Northpoint

Where to learn more:

If you want to learn more about Northpoint Asset Management, head on over to their flagship website NorthpointAM.com.  And if you want to get in touch with John personally, tune into the show to learn how to do that.

Transcript:

Jordan: 0:00:00.0 Welcome closers, today we have another episode of The Profitable Property Management Podcast coming at you. This is Season Three on profit.

0:00:07.7 I’m your host, Jordan Muela, and every week I interview world-class industry experts and entrepreneurs who share actionable insights to help you grow your property management empire.

0:00:16.6 Whether you manage 100 or 10,000 doors this broadcast is designed to help you see the big picture and to give you the tools and tactics that you need to get to the next level.

0:00:26.0 Today, I’m talking with John Laviter, the Chairman and CEO of Northpoint Asset Management. This is a real estate company with 25 offices across the US. Northpoint represents nearly a billion dollars in assets.

0:00:41.2 And John’s been in the game for some time now. He’s built a successful operation. I’m excited to have him on the show to talk about what scaling looks like.

To talk about having a little bit more of a finance and an asset management perspective and what that looks like when operating a property management business. 0:01:00.0

0:01:00.0 John, thanks for coming on the show.

John: 0:01:02.6 Welcome to be here. Thank you Jordan.

Jordan: 0:01:04.9 Well let’s start here: How did you get into the business?

John: 0:01:08.5 Well, like many of our colleagues, I entered into the business in and around the recession.

We started out in San Francisco, but not in property management. Actually, we got going as a private equity firm buying buildings in the San Fransisco Bay Area.

0:01:31.9 Fortunately, we were doing that without leverage, and so, when we went into 2008 and 2009, holding assets ourselves, we were able to weather that.

0:01:46.3 But because of the slow down, you know, no one wanted to sell. 0:01:50.6 And buildings weren’t selling. The investors were reluctant to buy.

And so, some of the private equity fund investors into our company had existing assets and reached out to us, asking us if we would manage those.

0:02:08.8 We agreed to do it, and we found over the next year or two that we were pretty good at it. 0:02:14.0 And so, we started to expand from there. 0:02:18.0 So that’s kind of how we got into it.

Jordan: 0:02:20.2 Got it. So how did that feel in retrospect? Kind of getting into it with the timing of that happening. With the market. I mean, that had to be a bit of a sucker punch.

John: 0:02:28.9 Yeah. I think everyone was unclear as to how long and how deep the recession was going to last. I think that there was just a lot of uncertainty.

And, you know, here we were as an investor doing ok because of the lack of leverage.

0:02:50.7 But we had this management expertise that was exploding. 0:02:54.9 I mean, back then it was not that hard to scale a property management business.

You take that in contrast to, say today, where it’s a very good market. 0:03:06.2 It’s a whole different set of skillsets and approach to do it. 0:03:10.2 But that’s how we got started.

Jordan: 0:03:12.6 Got it. So what does the business look like today? Give me some rough parameters around head count. We mentioned 25 offices. What’s the operation look like?

John: 0:03:21.0 Ok great. So. Well, the first thing that I would say is that there was a point at which, I’d say maybe 2009 – 2010 where we decided we were going to make it a professional approach to property management.

0:03:35.4 We weren’t just going to do this because the opportunity existed in place of – or in lieu of larger investments. We were going to make this, you know, a real thriving business.

0:03:48.4 And so, when we did that, we set the business up from its foundation with the plan to have it scale across the United States. 0:04:00.6 So it was set up with that in mind. 0:04:03.4 And that really enabled us to quickly grow.

0:04:07.9 So today, to answer your question, we’ve got, as you mentioned, 25 office locations. Our head count is about 140 to 160. It fluctuates in that range.

0:04:17.6 And as you mentioned early in the show, we’ve got just about a billion in assets under management.

Jordan: 0:04:23.2 So what is the structure of the organization look like? Of that head count, for example, that you quoted, what percentage is local versus in a back office setting?

John: 0:04:32.9 So, yeah, ok good question. So, the way we’re structured – let me kind of go vertically, like top to bottom.

0:04:41.4 So we have a board of directors, which I chair. And they kind of handle – we kind of approach the 30,000 foot view to the company. The strategic decisions. 0:04:54.6 And try to think, instead of working ‘in’ ‘on’ the business. That’s really its core function.

0:05:00.6 And then we have the Executive Committee underneath that. I’m the CEO of that executive committee. There’s three other members aside from myself. 0:05:08.7 A CFO, a COO and then a Vice President of Marketing.

0:05:15.1 And then, underneath them we have a line of regional managers. Those regional managers are traditionally the brokers. They oversea all of the staff, management, agents, that work in the field in the actual offices.

0:05:29.8 And so, underneath them you have associate and senior managers, property managers.

0:05:35.8 And then administrative staff and maintenance technicians.

0:05:38.2 So that’s kind of top to bottom how it works.

0:05:41.8 As far as how many people are at the headquarters, it’s mainly accountants. And the Executive Committee, we have two of us here in Salt Lake City and then the other two are on each sides of the coast.

0:05:54.9 So, one in North Carolina in that office there, and then the other one is Sacramento.

Jordan: 0:05:59.9 And how many regions are there?

John: 0:06:02.4 So, we qualify regions by offices. So, 25 offices. I don’t know if that answers your question Jordan.

Jordan: 0:06:12.8 I had assumed that a region was something upstream of an office.

John: 0:06:17.0 Oh. Ok, so we have – we’ve got eight regional managers.

Jordan: 0:06:21.9 Got it. Ok. Got it. It makes sense.

0:06:24.0 So, the first question I have for you is, what’s your commentary and feedback on the promise versus the reality of a centralized back office model?

In theory, it’s massive efficiency that leads to greater service delivery and a lower expense.

0:06:41.9 Sometimes, in execution, it’s a lot of top heavy overhead that brings down profitability for the whole system. Even though there are some strong individual performing markets.

0:06:51.3 What’s your take on what that looks like when it’s well done?

John: 0:06:56.4 I think that you’ve got to be – you can’t try to create a one-size fits all back office. Because there are just some functions that are more efficiently handled in the region specifically.

0:07:11.4 And so, you know, there has been some trial and error in our company. 0:07:16.9 Trying to figure out which specific functions were best in the location or best back in the main headquarter office.

0:07:26.8 As far as specific functions go, obviously accounting – the whole back end operation of our accounting software, whatever accounting software you use, that’s handled at the corporate headquarters.

0:07:39.3 Legal. This is something – you know, the real legal – I’ve found that a lot of management companies are not sharp enough in their legal.

0:07:49.8 And that is a critical point of being able to get through some of the real difficult trials through growth. 0:07:57.7 But we handle that at the back office as well.

0:08:03.1 What we try to do is make it simple for the managers that are in the field. We don’t want to overburden them with – we don’t need them to be an expert in everything.

0:08:14.0 For instance, the legal side of things. Or the real technical accounting. 0:08:16.5 We don’t want them doing that. We want them maximizing their time in the administration of the properties and the leasing out of vacancies.

Jordan: 0:08:27.8 So there are two things that came up for me, was you mentioned that – I’m thinking about maintenance and legal.

First with legal, are you talking about landlord and tenant issues? Those sorts of thing that will get you into trouble with – are you talking about trust accounting?

0:08:40.7 What’s, kind of, the surface area of where your concerns are about how some companies handle the legal aspect of it?

John: 0:08:49.2 Yeah, that’s actually a good point to dive into.

0:08:55.0 So, I’m – what I’m not talking about is the general legal knowledge that any licensed real estate property manager needs to know.

0:09:05.2 So, what they teach you as far as state and federal laws, everyone needs to know that. And they need to continue with – continue in education to keep current on those laws.

0:09:18.4 What I’m talking about is when you have a particular situation and a lawsuit is threatened.

0:09:25.8 Or somehow, our liability is being exposed due to something the manager did or a maintenance technician did. Or the tenant did.

0:09:33.4 Those kind of issues need to be evaluated and handled by someone who really understands the law when it comes to litigation. 0:09:44.3

Jordan: 0:09:43.8 Got it. So this would be a genuine luxury of scale. You could actually afford a full-time in-house legal representation. That makes sense to me.

0:09:51.0 The other question I had was on maintenance. You didn’t mention maintenance having anything to do with the back office component. 0:09:56.5 Is that entirely happen on the local level?

John: 0:10:02.4 You know, I know that some of the national groups have a more robust maintenance back office operation.

0:10:09.5 For instance, they might have a Vice President of Maintenance that oversees some kind of function for the whole group. 0:10:15.1 We do not have that. 0:10:18.0 Most of the maintenance is handled locally.

0:10:21.4 I think part of the reason that we’ve kept it local, is that there’s so many moving parts with maintenance.

0:10:30.3 And so, you know, we just never thought that it made sense to try to establish some sort of national – somebody handling something in a local region. It just – too many moving parts.

Jordan: 0:10:45.1 Got it. So, when we think about the emphasis or the flavor of what is unique about Northpoint, what comes to mind for me is more of a background in finance and real estate asset management.

0:10:58.5 And that may be a great marketing tagline, but what does that look like in practice in terms of what you’re able to offer your clients?

0:11:05.2 As opposed to somebody that fell into this business from being a real estate agent.

John: 0:11:09.9 Yeah, well. So there’s two sides to that, to answer that.

One side is the actual client that you’re managing properties as a third-party manager. 0:11:25.9 And I know that that’s what you’re more referring to.

0:11:27.3 But I wanted to mention that it also affects the investors.

0:11:31.2 So you’ve got a client that owns a property. The property managers in the field in our company, while they may not have the same financial depth of expertise as some of us in the main office do – we do an annual company conference, for instance, where we bring the whole company, get them together, because we’re so spread out, and you know, we build the team and we train.

0:11:57.6 And one of those topics that we really hit on is to understand the mindset of an investor.

0:12:04.1 But not just, you know, their appetites, but also the language to speak to them. Cap rates. 0:12:11.7 You know, financial returns. Internal rates of return. How to calculate these.

0:12:15.8 How to build them into the conversations that they have with their clients.

0:12:21.3 So, we do take time to try to educate them in that regard. But the truth is, is that if you haven’t got, you know, a long background in finance, you – it’s really hard to grasp if you’re a property manager, to the degree that an investment expert would.

0:12:39.5 So, you know, they’re educated enough to maybe maintain a light conversation. I think. But maybe not to the degree that we in the back office have.

0:12:51.1 Now, the interesting thing, in contrast, is that I think in the investment world, understanding the converse, the actual ground level management techniques and all the little nuances that go into managing a property are just as valuable, and I think are severely lacking when people are making major financial decisions.

Jordan: 0:13:16.9 Interesting. Ok, so this would speak to the institutional play. The Invitation Homes, American Home Rentals. Some of the larger funds that are managing ten or twenty thousand homes. The Street Lane, which was just snapped up by the guys over at Roofstock, for example 0:13:33.7.

So those decisions are being made based on some really intense financial analysis.

0:13:38.9 But in terms of the actual management of the portfolio, there may be a gap in that area, because the background is more of a finance background as opposed to an operational boots in the background. 0:13:50.3 That’s the point that you’re making?

John: 0:13:52.3 Yeah. In essence, I think so. I think – there’s kind of three different stages.

0:13:57.4 You have the investor expectations. You know? Returns on the investments that they make. 0:14:01.9 And they’ve kind of got a conceptualized on paper view of what that investment looks like.

0:14:10.6 And then the next stage, is you have the asset managers that are between the investors and the property managers.

0:14:15.1 And they’ve got a – they have a little better view into what’s happening on the ground.

0:14:18.1 But I think what I’m really referring to is the actual property managers that are like, actually walking these properties. Shaking the hands of tenants. Diagnosing maintenance issues.

0:14:32.9 These people have just a wealth of knowledge about what to do and what not to do. 0:14:39.2 And we think that’s really important.

And that’s why, you know, our company has adopted a style to do both investing and management. 0:14:46.9 And we think it benefits both sides.

Jordan: 0:14:49.2 Ok, interesting. So, as you’ve seen over the last decade, single-family returns from an institutional perspective start to catch up to multi-family returns as an asset class.

0:15:01.2 What you’re saying is that there’s always going to be a gap of the actual judgement of the local person that’s going to be difficult to roll up into a spreadsheet in a financial model?

John: 0:15:10.9 I think so. I think that’s a fair statement yeah.

Jordan: 0:15:16.2 Fair enough.

So let’s talk about when we go back to what you were saying about catering to that, maybe a higher level investor perspective.

Are you trying to pull the market or to cater to what these folks are already looking for?

0:15:29.8 You have different segments. You’ve got institutional on one end, mom and pop, accidental landlords on the other.

0:15:37.1 So do you guys view what you’re doing as educating the market? Or meeting market expectations? I guess that varies depending on the segment of your client basing.

John: 0:15:52.0 If I understand your question – so the way Northpoint is organized, is we have our investment side and then we’ve got our management side, the service side. 0:16:05.2 Service as a third-party.

0:16:06.4 And within that division, we’re split between commercial real estate and then what we call ‘single unit division’.

0:16:11.3 Where we’ll manage single-family homes, townhouse, condos, those types of assets.

0:16:20.0 So whether we’re trying to educate the market or taking advantage of the opportunities the market has? Do I understand that right?

Jordan: 0:16:29.4 Well, some folks would feel like what you’re talking about in terms of cap rates, etc, that this would just be like total overkill to be providing that to their average client. Their client wouldn’t understand it. 0:16:39.1 How do you interact with that notion?

John: 0:16:41.7 Ok, so here’s the thing. When we’re in a recession, you know, there’s a ton of accidental landlords, right?

There’s a lot of, you know, just single-family homeowners that would prefer to sell but can’t.

Jordan: Right.

John: 0:16:57.4 So in that environment, no they probably don’t really care as much. You know, their goal is to meet their mortgage expectations, the cost, maybe make some money if they can. But simply wait it out until the economy recovers and then they can dispose of the asset.

0:17:15.1 However, in an economy like we have right now, it’s interesting. It’s a very good economy and so, you know, you’re seeing a lot less of the accidental landlords and the opportunity exists much more with the bonafide investors.

0:17:29.8 People that are in the business to accumulate property. They may not be, you know, an American Homes for rent or an Invitation Homes, that has 20,000 homes.

They might be someone that just has five or ten. 0:17:42.4 But that’s why they’re there. They’re not there accidentally.

0:17:45.7 So, in those situations, you do kind of have to understand how to present opportunities to them.

0:17:52.6 A lot of the properties that we add to our portfolio of management are because we’re finding more properties to buy for that investor.

0:18:06.5 So that the opportunity has changed based on the economic fluctuations. And that’s why that crowd, they are interested in cap rates. They are interested in IRRs.

Jordan: 0:18:19.6 Sure. Yeah. I love it.

So anytime you can have your existing client working with you at a broader scale, buying more properties, that’s fantastic. Relative to acquisition costs of growing your internal based revenue and your internal clients versus getting new ones.

0:18:33.2 It’s pretty obvious the mathematical advantage is there.

0:18:36.7 When we think about focus, when we think about doubling down on the thing that’s working, you mentioned a couple of different business units, the management versus the investment and the management commercial single-family.

0:18:49.5 How do you approach the idea of focus versus capitalizing upon the opportunities that fall into your lap?

John: 0:18:58.0 Well, you know, I think that that entrepreneurial spirit, sometimes it’s got to have some boundaries.

0:19:10.2 And, you know, I know that there’s a temptation for entrepreneurs to keep chasing opportunities and in doing so, you know, often they’re brilliant and they identify, you know, unique market opportunities, but if you don’t ever stick with one, in other words, focus, you really can never capitalize off of it.

0:19:29.4 So, if I’m answering your question correctly, I think what I would say is that, for us, you know, we try to benefit from both sides of an economy.

0:19:44.4 And so, we’re investors, but we’re also managers.

And, you know, that same philosophy takes hold not just at the top level of our company, but all the way down to our managers.

0:19:58.9 I don’t think a lot of companies make as much as a focus as we do on both selling the properties that we have under management as well as managing and leasing them. And we do.

0:20:10.9 I mean, we really push selling as much as you can. And we think that that’s smart at that level too.

Jordan: 0:20:21.2 So when you say push, what do you mean by that? You mean like advertising? Or do you mean like offering an annual CMA?

John: 0:20:28.3 Like offering an annual CMA. So we are constantly educating our management group on trying to get the clients to let us list their property.

Jordan: 0:20:39.7 Love it. So, this is a great – this is a great topic.

Some folks on the smaller end of the spectrum will say, “We want to be management only. We don’t have a brokerage and, therefore, it’s easier for us to work with other real estate offices to get those kind of referrals.” Etc.

0:20:55.2 What you’re trading off there – the underlying assumption is that the revenue that you can capture through having a robust brokerage is going to be less than the revenue that can come from third-party management scaled up, be it these other referral sources.

0:21:08.2 To me, that math oftentimes doesn’t make sense. It’s a false dichotomy, per se.

0:21:13.5 When you think about the revenue contribution of the brokerage side of the business, based on what you’re saying, I’m assuming that’s a meaningful contributor to the overall revenue makeup of the organization.

John: 0:21:26.2 Absolutely. I think the, you know, the property manager is kind of in between all things and the have the opportunity to capitalize on all kinds of different income streams.

Such as – not just management income or leasing income, but maintenance and sales.

0:21:42.9 Those are the four big income streams that result. 0:21:47.4 It is not easy to create a – especially a national program that can try to do all of those well, but it is possible.

Jordan: 0:22:02.1 So what I think is, as a fiduciary, and as a steward, as that higher level service provider that is not a glorified gopher, there is an expectation that you will speak to and have the acumen to speak to a broader life-cycle of what the client is going to experience as opposed to being silent within a specific spot.

0:22:21.5 So talk me through the CMAs. How do you make sure that you are – that it’s just a given that when a client churns out that you’re going to experience that brokerage revenue on the outside?

John: 0:22:35.6 So, you know, we encourage all of our managers to create an alert within our Propertyware system. We use Propertyware.

That basically tells them about 60 days out that the tenancy is going to end. 0:22:50.0 And that’s kind of their trigger to create the CMA and send it voluntarily to the client.

0:22:57.8 But, you know, I feel like I should add something in here.

You know, I think that a really important aspect of our being able to successfully pursue all four of those income streams is that we seek managers that are very dynamic. You know?

0:23:12.6 These are generalists. They’re not specialists. 0:23:18.2 They’re good at a lot of different aspects in real estate.

0:23:20.9 So often, when we recruit, we’re looking for someone who has sales experience and that contributes. You know, they want to. They understand it.

Jordan: 0:23:33.3 Yeah, that makes sense. I can see that. So do you find yourself hiring folks that have property management in their background as well? Or no?

John: 0:23:42.5 You know, we’ll certainly look for the most experienced candidate. But I think that what’s most important to us is not necessarily the most experienced person, but the best fit.

And I’ve found, you know, in our recruiting that when it comes to property management, we’re looking for certain characteristics.

0:24:03.5 Not necessarily that they’ve had a 20 year career in property management. They may bring with them a lot of bad habits.

What we’re looking for is someone who has the right temperament, someone who can handle that level of stress. Somebody who is good with the details, you know, the paperwork.

0:24:23.6 But also good with people.

And those two, you know, very opposite traits are often not found in one person.

0:24:33.6 And that’s what, I think, lends itself to a dynamic individual. They can do both of these things well.

0:24:38.7 And we’ve found that that type of individual is not just good at property management, dealing with conflict, for instance, they’re also a sales person.

0:24:49.3 And, you know, sales people are sometimes not the best at dealing with the mundane. Right? And vice versa.

0:24:57.5 And so, you know, at least for our service offering, it’s very important that we hire someone that has that unique dynamic.

Jordan: 0:25:08.4 So let’s talk about the systems and the process that these folks are getting plugged into.

In my mind, when we think about the tension between process versus policy, there’s a real interesting conversation there.

0:25:23.5 We can enable and handle some really dysfunctional policies with great processes. Or you can do it in reverse. Right? 0:25:32.8 You can simplify your processes by just tightening up on your policies. And your service levels and what you will or won’t do.

0:25:39.8 Having achieved scale, how do you balance the unique wants and desires of each client for the need to keep your staff sane and to have a scalable business?

John: 0:25:52.8 Yeah, that’s… So, man. There’s so many – there’s so much that goes into that question, Jordan.

That’s a great question and to break it down, let me try to hit just a couple topics of that. Because I think there’s like 30 that can result in that.

0:26:15.5 So, one thing is, you know, something that I believe in, is that if you’re going to be a successful enterprise, as a CEO, you have to be comfortable with constant evolution of the processes.

Jordan: No doubt.

John: 0:26:31.3 And the procedures.

What you do at a lower level will not necessarily work scale wise at a higher level.

0:26:39.2 And so, you might have to scrap a whole accounting system, for instance.

0:26:43.6 And, you know, the staff doesn’t like going through those cycles. You know, we the owners are willing to go through 0:26:52.1 [Inaudible] of it. But they don’t’ have that same motivation. And I can’t blame them.

0:27:00.9 And so, one thing I always tell our staff is, “Listen. We, right now, know of like ten things that we should be doing right now. But if we do all of them right now, it will be total chaos.”

0:27:13.1 And so, we try to, you know, pick and choose a reasonable amount of improvements in the processes that the rest of the staff can handle. And it won’t ruin their experience.

0:27:30.5 You know, it’s almost like a customer experience. Like, you know, like when someone comes to a movie theatre, and the second they walk in those doors, the smells, the sights, the technology. You know, everything. It’s a whole customer experience.

0:27:43.9 And I look at it as the same thing for our employees.

0:27:47.7 I think that, at least for me as a CEO, I focus a lot more on the experience of our employees than I do the clients.

0:27:55.6 If I take care of our managers, they will do a great job in taking care of the clients. And I think that’s shown in our reputation nationally.

0:28:05.3 If you go to any of our offices and look at the local reviews online, it’s overwhelmingly positive. And that really has everything to do with those people’s actions.

0:28:19.2 And so, that’s one aspect I would answer in response to that question about process.

Jordan: 0:28:24.8 Yeah sure. So you hire smart people and you don’t tell them what to do, you let them tell you what needs to be done by enabling them, creating culture of excellence. Totally get that.

0:28:37.9 I would love to hear a little bit more on this idea of policy versus process.

0:28:41.9 Are there any specific owner policies, ways that you relate to your owners, whether or not they be accidental landlords, or investors that own larger volume of properties – how do you approach them – ten people wanting things done ten different ways, the making of exceptions.

0:29:06.5 Are you hard nosed? Are you flexible? How do you handle that conversation?

John: 0:29:12.3 Yeah, I’ve found that some companies that are local, they can be much more hard nosed. We, as a national company, can not be that way.

0:29:21.9 And I’ve found that, you know – I wouldn’t say that everybody on my executive committee is on the same page with this topic. I’m, you know, I tolerate a lot more flexibility, I think. 0:29:36.6 But I think it’s a tug-of-war.

You know, somebody at our recent conference in Dallas mentioned something, and I thought it was quite insightful.

0:29:46.0 And that is that you have to constantly educate your clients. 0:29:51.2 That’s part of this job, to help them understand.

And so, when we have policies that we want to be strict, to avoid too many exceptions which slow down the entire organization. 0:30:08.1 You know, we try to approach it with educating the client.

“Here’s why we don’t do that any longer Mr. Client.”

You know, “I know we used to do that, but this is the repercussion of us doing this for you.”

0:30:22.1 You know, we try to help them understand that it just isn’t really in their best interest if we allow so many different exceptions.

0:30:30.1 And if somebody can’t, you know, start to understand that logically, then we have to cancel the agreement. 0:30:37.6 I mean, we just – you do lose some business due to being more strict, no question about it.

Jordan: 0:30:41.3 So what about the client profile? What do you communicate to your individual market leaders around the types of properties that Northpoint will and will not manage? What are the bright lines there that are in place?

John: 0:30:54.2 So like specific policies you’re saying?

Jordan: 0:30:59.5 Yeah, exactly. Are you guys from class A luxury all the way down to section eight?

In terms of the properties that you will or won’t manage, that obviously determines a lot 0:31:08.2 [Inaudible] properties, it’s a much simpler conversation.

If you’re handling a Section 8, the hard nosed thing, it just kind of goes with the territory. 0:31:15.1

John: 0:31:15.7 So, ok, alright. So we do not have a policy to not manage Section 8, but we generally shy away from it.

One way that you can, you know, avoid managing Section 8, if you don’t want to have to outlaw it – because some laws are toying with making it mandatory, is you charge fees that, if you happen to get it, you’re like, “Great! We’re charging a very high fee.”

0:31:44.7 So, a couple of things, is we stay out of the ghetto. You know, we stay out of areas that we feel are seriously unsafe.

We’re not – we’re willing to take on challenges, but if it’s, you know, I think that this is pretty obvious across the board, and I wouldn’t expect any other management company to be different.

0:32:04.4 But we do have a policy that if it isn’t in a minimal, habitable condition, we’re not going to manage it.

0:32:12.3 Here’s another unique one: If a client starts threatening us, you know, they start either threatening lawsuits or, you know, yelling at us, you know, we have a policy where we make one attempt to reason with them.

0:32:29.8 And that attempt usually includes, “Listen, we have to maintain a long relationship here. We can’t have this kind of conflict.”

Jordan: Adversarial relationship.

John: 0:32:41.1 That’s right.

And if they become more adversarial, then our policy is to drop them within 24 hours. And let me tell you why. That’s a very unique one to North Point.

0:32:50.1 We’ve found that when we tolerate a longer cancellation, let’s say 30 days, all it does is give them opportunity to build a case against us.

0:33:02.1 And so, you know, that’s one policy that we’ve adopted recently that we just feel that it’s not in anyone’s best interest when the relationship of trust has gone away.

Jordan: 0:33:13.1 I love that. So, if you give them longer notice, they may be more inclined to all of a sudden become a forensic expert in landlord tenant law and accounting, etc. Ok. 0:33:23.8

John: 0:33:26.0 They’ll abuse laws. You know, they’ll try to – they’ll become adversarial. Their goal is to actually hurt us, and that’s, you know, that doesn’t make any sense to stay in.

Jordan: 0:33:36.8 It’s interesting. On some of the online forums, from time to time, you’ll see a question that’s along the lines of:

“I’ve got an owner-client that’s really giving me a hard time, being extremely difficult, they’re asking for change X. I could either handle it this way or handle it that way. What do you think?”

0:33:55.0 But the implicit assumption is that they should keep working with this person that’s being a total pain in the neck.

0:33:59.7 Your solution is – and this is kind of related to hiring too, right? Hire slowly, fire fast. Expunge the system at the point that you know that the relationship is no longer going to be profitable.

0:34:10.4 Totally makes sense to me, loved that answer.

0:34:12.7 I do want to hear a little bit more about growth.

0:34:16.9 John, my opinion, when I think about the, kind of the pyramid, let’s call it Maslow’s Hierarchy of Entrepreneurship and Business, when we think about how owners move through thinking about growth, the first epiphany is that, “Hey you know what? Growth actually matters. Sales and marketing is not the same thing as ‘just good service delivery’”.

The initial inclination for small operators is that: “If you build it, they will come”.

0:34:44.5 “The best service will always win.”

0:34:46.1 It sounds nice, but eventually you realize that, “You know what? That’s a separate skill set. It takes some intentional effort.”

So people are willing to spend some time, spend some money.

0:34:55.0 And then the new epiphany comes that sales and marketing is actually very, very different than operations. It’s a fundamentally different skill set.

0:35:05.0 What is your journey as an entrepreneur and as a business owner look like when it comes to growing the business and how you’ve approached that from day one to how you approach it now?

John: 0:35:16.6 Ok. So, first of all, I completely agree with you. You know, the mindset that if you build it – you know, you build something good that they’ll just come. Yeah, they’ll come over 20 or 30 years. 0:35:30.2 You’ll build a ma and pa enterprise.

0:35:32.2 But if you want something professional, something that is going to thrive, something that is going to beat the competition, it takes smart, proactive business development and growth strategy. 0:35:46.1 It really does.

You have to think of things that your competitors have not thought of. You need to, you know – for instance, we use a software called LeadSimple. 0:35:58.1

And that – before we adopted that, you know, our process of just managing the client from first initial contact to close took a lot more time. 0:36:12.4 And it was hard to do at scale.

And so, I think that, you know, adopting the right technology, adopting the right processes, hiring the right people, investing in a growth mechanism that can, you know, really push your organization, is vital if you want to be a top competitor.

Jordan: 0:36:38.8 So, tell me more about what that looks like internally. Do you have somebody responsible for growth in a full-time capacity in the 0:36:44.0 [Inaudible]?

John: 0:36:47.0 We do. So, Patrick Monaghan is a member of our executive committee. He is the Executive Vice President over Business Development.

0:36:56.9 Now, I take a personal interest in it as well. So you have both of us who spend a lot of time in reviewing our processes, hiring the right people and staying agile.

0:37:10.8 It’s a constant moving market. Especially in today’s world where we – well, not only in today’s world, but also our company, where we are an organic growth-oriented company.

0:37:21.7 There’s a lot of our competitors that are growing by acquisition. I think that’s a great way to grow. We’ve just chosen to grow by organic growth.

0:37:31.2 And so, what we’ve found is that the market is changing, like on a month to month basis. Throughout the year.

0:37:39.1 You know, statistics that we see, for instance, in January of 2018 don’t necessarily match January of 2017. 0:37:49.6 And I’m not sure that I have the answer for that, but the point is that we have to keep watching it very closely.

0:37:55.9 And we’re shifting our strategy, our approach, all the time.

0:37:59.3 So, that’s who we have at the top, the C suite. We’ve got seven business development managers and they are trained to be just hounding these leads constantly. 0:38:12.9 And we’re always in for the kill.

0:38:16.5 And we can sense from how our closing’s going, both the interest at the general public level, as well as what our competitors are doing. 0:38:27.3 And we’re a moving target. And so that’s some of our strategy.

Jordan: 0:38:33.4 I love it. Man, I love that answer. I feed off of that energy.

So, seven business development managers. Are these – do they have regions? Are they centralized?

What is the gap between – well, I know somewhat behind the scenes, so I know that they are centralized.

0:38:50.7 What’s the gap between that and the boots on the ground approach?

This is a really interesting one for me because I’ve seen a number of organizations that have started doing the multi-site thing, but they’ve resisted centralizing that back office function with sales.

0:39:08.0 What caused you to go down that path and how far along were you before you made that transition?

John: 0:39:13.1 So, I mean I feel like this hops back to the beginning of our conversation when we were talking about, you know, what responsibilities are held at the local level versus the corporate level.

0:39:23.7 We try – you know, our managers, you know, they want to do the business development themselves.

0:39:31.7 I get that constantly. Like, “Hey just let me handle the leads.”

0:39:35.3 And that’s another policy, going back to policy. We don’t allow that. 0:39:38.8 And it’s because we know that once they get too many properties, they’re not going to be able to do that well.

Jordan: 0:39:44.9 Totally.

John: 0:39:45.8 And they try to do everything and we won’t let them.

0:39:48.8 And so, you know, it takes educating and communication. Not just the client, but to our own team.

And to help them see, “Listen, we’ve been doing this for well over a decade. We know exactly what’s going to happen once you get too busy.”

0:40:04.3 And so, we try to limit what they can do, so that what they do, they do the best in their industry. 0:40:11.5 So we keep those separate.

Jordan: 0:40:14.2 I love that. So, to me, it’s about professionalizing and operationalizing sales and marketing.

0:40:21.7 Those of you listening to the podcast have heard me say this a million times by now. But what is relevant here is, by acknowledging the skill set and communicating to the property manager,

“I’m sure you could handle that responsibility, there’s no doubt. But the problem is, that your best is not good enough, because we’re not looking for your best. This is a specific skill set around having, in my opinion, 0:40:45.3 a process, math-based – let me rewind that. 0:40:52.0

0:40:52.5 In having an activity-based model. The activity based model, meaning that doing your best to call people back, and it happens to be six hours, or it was the next day, you were slammed, I get it. No problem. But is that acceptable? And if it’s not acceptable, then why?

Is it because there are actually significant, mathematical implications to calling somebody back within 24 hours versus five minutes? Yes. There is. And that’s why we do that.”

The maturity to get to the point where sales and marketing actually gets the credit that it deserves is a real mental shift in a lot of operationally focused organizations. 0:41:27.0 I love that you guys have gone down that path.

0:41:29.8 What is the structure look like with the business development managers? Who manages them? What kind of reporting do you look at? How do you manage that department?

John: 0:41:40.8 So we hold a quarterly meeting with the whole business development team. 0:41:45.1 Which comprises of me, Patrick Monaghan and the seven business development leaders, managers.

0:41:49.6 And in that meeting, you know, we’ll at that time, you know, convey new policy. If we’re going to shift some things because of whatever’s happened in the last quarter.

0:42:00.0 And then we also kind of cross pollinate ideas. These are people that are handling business development all over the country. They stumble upon different methods that are working.

0:42:11.8 And that context, you’re able to get a really good sense as to how the whole country is doing. 0:42:19.7 So that’s one thing that we do. We do the quarterly meeting.

0:42:23.8 Everything is processed through LeadSimple. Our CRM. And so, it’s very easy to, and for me or Patrick, to log in and see exactly at any one moment how they’re doing.

0:42:37.8 And, if we start to see that things aren’t closing, inevitably, there’s something wrong. 0:42:43.8 And it’s usually because they’re quoting too high. You know? Or something to that effect.

0:42:53.3 And so, that’s kind of the sales and marketing piece. You have the advertising and the more technical side. We’ve got some outsourced help on some of our marketing campaigns.

0:43:04.1 Those need to be watched. I found that – really, Jordan, it just takes a lot of attention. You know? 0:43:12.8 Nothing – it’s just been my experience, nothing just happens well. If you leave something alone, it inevitably starts to break down.

Jordan: 0:43:21.4 That’s great. Yeah. Totally agree. But it’s fair to say that the reward with sales and marketing is worth it.

When you think about the economic contribution that the growth department can make to the organization as opposed to operations, it’s worth investing. It’s worth developing that skill set.

0:43:39.0 I think there’s probably some gaps and some of the listeners are wondering about.

0:43:42.6 How far do your BDMs take it? Will they go all the way through the close? How do they handle an in-person visit to the property? How does that work?

John: 0:43:52.5 Yeah. I mean, the business development manager is held fully responsible from start to close.

0:43:57.4 You can’t hand it off to anybody else because no one is going to care enough to call it ten times a day, if you must.

0:44:04.8 But as far as, you know, appointments, we – these business development managers have online access to the calendars of all the managers. So they can instantly see their availability.

0:44:18.0 We don’t try to say, “Oh I’m going to have such and such manager call you and set up an appointment.” Right then and there we get the appointment set.

0:44:27.8 And, I mean, it’s a joint effort. The manager, who’s going to that appointment, they’ve got to be just as good of a sales person. 0:44:34.9 I mean, they’ve got to sell them right then and there. 0:44:37.1

Jordan: 0:44:37.4 But it’s on hand off. The BDM is still responsible.

John: 0:44:41.9 They are absolutely still responsible.

0:44:45.3 You know, it’s frustrating when a manager is not able to close in the appointment. 0:44:49.3 I think that the number one, you know, success factor, once they get them on the phone is to get an appointment set.

0:45:01.4 So, you know, it really is a joint effort. If the manager is lacking or the business development manager is lacking, then it won’t work. They both have to be strong.

Jordan: 0:45:11.7 Totally makes sense.

So you’ve described some of your responsibilities. You take an interest, an active interest in the growth piece of the business. 45:21 What are the other – if you wrote a job description for John Laviter as the CEO, what does that look like?

John: 0:45:27.1 John Laviter.

Jordan: 0:45:28.6 John Laviter. Sorry, thank you. Thank you.

John: 0:45:32.0 So, job description. Ok. I would break that down into probably four areas.

One is financial. So, I keep my eye on our financial performance. 0:45:48.4 You know, a successful company, I think, is a joint – you have to not just grow revenues, but you also have to have a very, you know, fiscally conservative model that’s supporting it.

0:45:59.7 And so, I’m constantly watching our finances.

0:46:04.5 The second thing would be recruiting. I’m very involved in who we recruit. Of the 150 – 160 people that we have, I’ve probably been involved at some level with 90% of those. 0:46:18.5 And it’s because, you know, if we get that right, then it solves a lot of issues.

Jordan: Amen.

John: 0:46:27.1 So, recruiting.

The next one would be the business development that we went over. I’m on that business development committee.

0:46:32.2 And the last one would be a soft factor, but I think probably one that is often way overlooked, and that’s culture.

0:46:42.4 So, you know, I do a lot of things that seem maybe to some, not important. But I know that they are vital to maintain that positive culture that is the glue that keeps our company together and strong.

0:47:00.0 For instance, our annual conference. That’s an expensive thing to do to take everybody. For instance, to Puerto Vallarta to a five-star resort.

Jordan: Oh, nice.

John: 0:47:10.1 Do you want to come.

Jordan: 0:47:11.9 I have a soft spot in my heart for Puerto Vallarta. Love it.

John: 0:47:17.8 Other things are something as simple as: When there is conflicts happening, to remind everybody to approach it with the right attitude.

0:47:25.9 It’s so easy to get into a blame game with clients or tenants. Or inside the company. To just get it off your chest.

But there’s a healthy way to do that and then there’s a very damaging way to do that. 0:47:40.8 And when people get into that cycle, suddenly it’s like a toxic environment.

0:47:45.2 And so, I spend a lot of time making sure that those human frailties within the organization don’t destroy the place.

0:47:53.3 If you can imagine how many, you know, how many difficult things that everyone’s experiencing with as many clients, tenants and properties we manage, it would be easy to get out of control quickly.

Jordan: 0:48:05.4 So at the scale that you’re at, it’s fair to say that there are more things that you don’t do than that you do do.

And I think it’s also fair to say that that’s more causal than correlative.

0:48:15.6 In your experience, what have been the personal development and the leadership development factors that have allowed you to get to where you’re at?

0:48:25.3 What would be your encouragement to a smaller operator that feels like, “Hey I want to scale. I want to grow, but I just don’t have time. I’m so busy. I’m so bogged down in the weeds.”

0:48:36.1 What’s your advice on some things that somebody that feels stuck in that regard could begin to implement to make a higher level shift that’s bigger than one process, tactic or strategy?

John: 0:48:49.2 Yeah. Very good question.

Jordan: 0:48:56.0 And let me just interrupt you before I even let you answer. What did your journey look like, John?

If we rewind back to the beginning, did you have that phase where you were ever stuck and you were just like hands in it? Were there any real transition moments for you in that regard?

John: 0:49:12.5 Absolutely. Absolutely.

So, the first one I would say is that, you know, you have to learn to – you have to know yourself well enough, I think, to know how to manage stress.

0:49:31.6 So, for instance, there came a time where I was trying to do to many things. You know?

0:49:38.5 I’m fairly good at a number of things in this company and sometimes, I think, entrepreneurs default to: Well they can do it best.

0:49:47.6 And you want it to be done so well that you end up doing it yourself when what you should be doing is becoming a trainer.

0:49:55.5 And what I have done is become a trainer. 0:49:56.7 I am constantly training. Instead of taking the time to do it myself, I would rather take the time to train someone else to do it.

0:50:05.0 And, they may not ever do it as well as I could myself, but if they can do it fairly well, that frees me up to focus on working ‘on’ the business instead of ‘in’ it. Right?

0:50:17.3 So that’s one thing.

0:50:17.3 I think that I came to a point where I physically could not do that much. Just physically can’t do it.

0:50:25.0 And so, I took a training mindset. I started training everything.

0:50:30.8 And I know some people would say the obstacle is, “I can’t pay for it.”

0:50:35.2 What I did is I cut my salary in half. And it was really hard. There was a time when I said, “I’m not going to be able to live that lifestyle.”

0:50:42.0 And one of the hardest things for humankind to do is to go down the ladder. But I cut my salary in half and I just focused on training, and it enabled me to scale the organization so that I could make even more. 0:50:59.6 That’s one thing.

0:51:02.1 Another one, kind of going back to what I was mentioning on the stress level is, you have got to be able to not internalize all the difficult battles that go on on a daily basis.

0:51:16.0 So many people, they absorb it. And they let it get them – they let it throw their chi off, if you will. 0:51:22.7 And I think that you have to learn to not let it do that. You don’t allow it. 0:51:27.6 And that’s very hard to do. Easier said than done. 0:51:33.4 Let’s see, sorry go ahead.

Jordan: No you go ahead. 0:51:36.5

John: 0:51:37.4 Something that really helped me was, you know, I did a business program at Harvard Business School.

Jordan: 0:51:42.7 That’s what I was going to ask you about. Yeah, tell me about that. OPM.

John: 0:51:47.1 So, first of all, Harvard’s education is everything it’s cracked up to be. It really is. You know. For me, it was a life changing mindset.

0:51:57.8 And I think, if I worded it, just give the conclusionary statement as to what it did for me, is it taught me how to get from Point A to Point B.

0:52:06.4 Often, I think as business entrepreneurs, there’s like fog between you know, where you are and where you want to be.

0:52:16.4 You just cannot see how to get there. You can see your goal, you know what you want, but you don’t know how to get there.

0:52:21.9 And so, going to Harvard taught me how to get from Point A to Point B. 0:52:28.2 It showed me how to scale.

And one cool thing about Harvard is they don’t care what industry you’re in. They don’t care what it is. What they care about is can you make it big. Can you scale it into something impressive.

And so, that’s where we – a lot of our discussion, our class discussion was. 0:52:46.5 We did a bazillion case studies, and you really start to pound it into your mind and heart how to do it.

Jordan: 0:52:53.7 How long did that program last for?

John: 0:52:55.7 It was a three year program.

Jordan: 0:52:58.5 Love it.

So I’ve audited one OPM class and I realized within the first 30 seconds that it was legit when I saw Wolfgang Puck sitting a couple seats over. 0:53:09.4 There’s some real ballers that are in the room.

0:53:13.7 And, when you say it’s all it’s cracked to be, it better be, because it’s not cheap. Right?

So, you made the investment. 0:53:21.3 Yeah, so making the financial investment. I really like what you said about lowering your salary. It’s never a question of is it possible, it’s about what are you willing to sacrifice.

0:53:32.4 And it is crazy how going backwards is so painful. Whatever we’ve achieved is the new normal and is the new need level. 0:53:40.2 “No, I need that.”

0:53:42.4 It was a perk and it was a bonus and an accomplishment before, but now it’s like my base consumption need level, but it’s always about what are you willing to sacrifice. 0:53:50.2 Sleep? Is it time, is it money?

0:53:52.6 Resources are 0:53:53.5 [Inaudible]. You’ve got to pick one.

0:53:56.6 John, I want to close with asking you the same question that I ask every single guest, and that is this: In your opinion, are entrepreneurs born or bred?

John: 0:54:09.4 I don’t know. That’s a good question that I’m not sure that I have the answer to. I guess I would say that – I’d say that anyone can be an entrepreneur if you’re honest with yourself.

0:54:31.7 I think that sometimes, I’m going to use ‘we’, we entrepreneurs, you know, aren’t honest with ourselves about what we aren’t.

0:54:42.8 You know, we’re very, very bold about what we are, but we’re not willing to recognize maybe the skill sets we don’t have, or the temperament we don’t have.

0:54:55.2 And there are certain things that I know that I don’t have. And in order to compliment those, things that I don’t have that will absolutely be necessary for success, I rely on other people.

0:55:05.1 And I’m willing to share the profits with that individual.

0:55:08.2 And so, together we’re entrepreneurs. Maybe one or the other of us can’t be qualified as an entrepreneur, but together we are and we can succeed. 0:55:19.2 That would be my answer.

Jordan: 0:55:20.9 Man, I love that. What you’re bringing up for me there is just thinking about how we resolve cognitive dissonance.

We could either discount the importance of those things that we’re not great at and just say, “Well it doesn’t matter, it’s not important.”

Or, we could embrace a guilt trip that says, “Oh I’ve got to be that. I’ve got to figure it out.” As opposed to building a team around you that can do it.

0:55:42.6 I really like that answer. Glad you came on the show. This has been an enlightening interview. I think folks are going to have some significant takeaways. 0:55:50.4 If folks want to learn more about North Point, possibly get in touch with you, what’s the best way for them to do that?

John: 0:55:55.9 Maybe through you, I don’t know.

Jordan: 0:56:00.3 Alright. So, the website is NorthpointAM.com. If you want to shoot John an email, contact me Jordan@LeadSimple.com. Hey, this has been great, the next time you’re in Austin, I’d love to get together and break bread.

John: 0:56:20.2 That’d be great. I’d love that Jordan.

Jordan: Alright, be in touch.

John: Alright man.