Learn How to Calculate The Churn of Your HOA Management Company

Learn How to Calculate The Churn of Your HOA Management Company

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October 5, 2021

If you’re like most property managers, you’ve probably heard the phrase “customer retention” one too many times. In fact, customer retention is considered one of the most cost-effective strategies that a property manager can implement. No manager likes losing tenants — oftentimes, a loss of a tenant can result in an uptick in time investment, money, bad reputations, and sometimes a growing lack of trust. There’s no question that when it comes to the property management industry, obstacles can sometimes outweigh the successes. Analyzing a few determining factors such as churn rate and customer feedback are ways to improve your community and increase your customer retention rate.

“Over 60% of customer turnover is controllable, with staff performance being the largest determining factor in why a tenant moves out."

Zillow Rentals

What is churn? 

Churn is considered one of the most important metrics when it comes to defining a company. Churn is a measurement that tracks the retention rate of any given business. Most of the time, churn is calculated by a percentage of customers that stop using your business within a specific amount of time.
What drives churn?

“This concept of reduced cost per dollar of revenue is the simple driver behind most of the focus on churn.” It’s no surprise that it costs a business far less to keep a current customer vs. the cost it takes to gain a new one. In most cases, a business should track churn on a monthly, quarterly, and annual basis.

What is considered a good and bad turnover rate?

“A “low churn rate” or an “improving churn rate” are indicators that your business is operating well or improving in its efficient use of capital to acquire more revenue.”The higher the churn rate, the more retention rate suffers.

Happy Tenants = Increased Profit

Why is having a good churn rate important?

  • Saves time and money:  cost and time it can take to keep a unit filled can increase over time. As a property manager, your goal is to retain clients. By organizing a sufficient budget and increased occupancy, HOA homeowners are likely to renew and be more satisfied with their customer experience.
  • Increased reputation: the more a property is highlighted with good reputation, new and current HOA homeowners are likely to stay with your management company. Keeping clients longer boosts profits and can help the company to understand how to continue to decrease their churn average.

The Churn Rate Process

Churn Rate Formula = Lost Customers / Total Customers x 100

  • Step 1: Designate a time
  • Step 2: Determine how many customers were acquired and how many customers were lost during that period. 
  • Step 3: Take the number of customers lost and divide it by the number of acquired customers.

    Example: As the property manager of a condo building, you managed 600 residents in January at the start of the year. As you enter into December, your number of residents is now 550,  meaning you lost 50 residents within a 12-month timeframe.

    In order to calculate your annual churn you will use the following calculation:

Annual Churn = (number lost/starting resident number) x 100
Annual Churn = (50/600) x 100
Annual Churn = .08 x 100
Annual Churn = 8.3%

Lower your rate

The overall goal is to lower your churn rate. When doing this, a business can maximize its recurring revenue while reducing its unit turnover expenses. Let’s consider the following tips as a way to help your business reduce turnover:

  • Obtain feedback - A key factor to helping reduce churn is by looking at your areas of improvement. One includes input from your residents, such as resident experience, communication, and general HOA topics. 
  • Prioritize positive feedback - Positive feedback is just as crucial as unfavorable. When receiving positive feedback, prioritize how you can emphasize these areas of your business. As a result, clients are less likely to decline your offer to work together or renew your service. As our saying goes, Happy Client, Happy Life.
  • Understand your client’s value - Understanding your client’s worth is essential to lowering your churn rate. When assessing your current situation, look at factors such as your client’s financial expectation, consumer lifestyle, the client's budget, and what the community is seeking to gain by working with your management company. 
  • Improved training for community managers - A great way to help reduce churn is by improving the manager’s credentials and licensing. Many managers often seek training programs and additional certifications to increase customer service and credibility within the job market. 

Tips for Retaining Clients

  1. Expand your communications outreach on all fronts: One fundamental way to retain clients is by expanding your communication. For example, consider using your company's social media presence as a way to showcase important news or updates about your company. Use Google reviews as a way to showcase positive reviews from customers and spread the word about your company.
  2. Implement new services for your clients: No client wants to be behind the times. To retain clients, consider implementing a service such as HOA software for your clients. This works as a great way to increase profitability for your business, all while improving and maintaining the relationships you have with your clients.

Learn How TownSq Business Can Help Your Management Company Reduce Churn Overnight