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This article suggests approaches to building cash flow by looking at an unexpected model.
Think about an industry which has immense capital costs and a high break even point, governmental restrictions to new competition, severe legal restrictions and includes the cost of a precious vital non-negotiable liquid which is largely beyond the owner’s control. The smaller ventures in this industry are less than 10% as large as the major players. Oh, and obtaining that last five percent of occupancy might double the cash flow.
No, this is not a description of the apartment industry. Could we learn anything from the best in the industry described above? Yes–we can all learn from the airline industry. Look back at the earlier paragraph and you will realize that filling planes has a lot in common with filling apartments. Their precious liquid is fuel; our precious liquid is water. The cost of both of those necessary items is beyond the control of the owner. But the most important similarity is that whether it is a plane or a rental property, an un-rented space results in a loss of income for the company.
This article is a quick look at a book called NUTS! Southwest Airlines’ Crazy Recipe for Business and Personal Success by Kevin and Jackie Freiberg. The authors live in San Diego and have been working with Southwest for more than a decade. Their 350+ pages have more than a hundred good ideas, most of which could transfer to running apartments well. The authors point out that Southwest Airlines has been the most consistently profitable company in the industry, for more than two decades. They must be doing something right. Consider these ten ideas, adopted by Southwest, which might be useful to us.
1. Southwest takes customers and competition seriously, but doesn’t take itself seriously. Southwest fought for a year for the right to fly. Its president has tried to develop a “Battle of Britain” mentality. He is keen about having fun instead of, or because of, the challenge involved in their intensely competitive arena.
2. Hire for attitude; train for skills. Stuffed shirts and self-important professionals can build bureaucracy and kill the team spirit. Since the job is such a big part of life, enjoy it. Look for ways to have fun.
3. Act like an owner. Ask questions; think results. At Southwest, they hate waste and routinely search for ways to do things better. Tradition means little to these innovators.
4. Don’t fear failure; color outside the lines. Play to win. Do not play to keep from losing. There is an important difference.
5. Southwest has created a legendary culture. The leaders have deliberately chosen to build and nurture a culture that values specific traits and attitudes. Among those values are profitability, common sense, excellent service, family, fun, hard work, individuality, low cost, ownership, and simplicity. The people who run the place make conscious choices to create, celebrate and enforce this culture. They tell stories which demonstrate what the team is about. The company spends time and money to communicate who it is and what it expects.
6. Celebrate milestones. Celebrate people who show love. Celebrate. Take pictures of people having fun or doing the right stuff. Post those pictures so everyone will know how important that is. Say “Thank you” often. Make heroes of those people who glorify your company values.
7. Make work fun. Endorse the unexpected if it is likely to give a good result. When we goof, learn from it, forgive and move on. Think funny. Adopt a playful attitude. Be the first to laugh. Laugh with, not at. Laugh at yourself. Take work seriously, but not yourself. Work in play clothes. Try to make someone laugh every morning and every night.
8. One of Southwest’s most remarkable ideas is that customers come second. Employees come first. Great service begins at home. This company does a lot to treat employees like family. It gives a lot and expects a lot, which is another aspect of the “Battle of Britain” mentality.
9. It is hard to imagine a business loving anything. People who have studied Southwest Airlines claim that love is important to this firm. Southwest does understand that love is a decision, not just a feeling. The authors of NUTS remind readers that love is patient, kind, generous, courteous, affirming, humble and forgives. Gosh, that sounds like what one hears at weddings. Love chooses service over self interest. Love does not guarantee approval. Good parents know that. Approval is earned by performance. These business authors are convinced that part of Southwest’s profits and fun come from the love which people show each other at work.
10. There are scores of other ideas, but let’s finish by mentioning compassion for the community. Southwest puts their money and recognition into people who serve the broader community. It would be easy for us to do that with Christmas in April or volunteering to build for non-profit housing groups.
The theme of this month’s issue is customer service. This article suggests a host of ways to serve customers with excellence. In a sentence, it is to “treat people the way you want to be treated.” That is legendary customer service. What do you want your grandkids to remember about you? Run your property in a way that shows everyone what is most important to you. When you focus on others’ successes, your own success is guaranteed.
Author: Terry Moore, CCIM