In the past few years, a lot of property management company owners have decided to sell their businesses for many possible reasons. Our research indicates there are at least four of them: owners got into business by accident and never intended to develop a company like this, owners mixed operational systems in a way nothing could function properly, owners built the wrong business model, or lastly, they provided services for a price too low.
It’s not easy to run a property management company. The owner has a lot of responsibility, from operation control to oversight of real estate. Property management is also the management of personal property, equipment, tooling and physical capital assets. So management mistakes are not only common but also expected, especially if the owner doesn’t have the right expertise.
The truth is: people have lots of reasons why they decide sell a property management company and in order to do that they have to learn how to maximize value for their business.
In the next few topics, you’ll find some tips to sell your business for the highest price.
What is your Property Management Company business worth?
A company like this takes a lot of effort to be a successful role business model, so it can take a few years for it to have stability in the market.
So the very first thing you must do is compile all finance reports and gather it with every data you can find from the past five years at least. That’s a very important step, as potential buyers will ask you about your company’s numbers.
Make sure you are able to answer these following questions:
- What are the sales?
- What is the profit?
- What are the growth trends?
- What is driving new sales and is that sustainable?
- What channels do new customers come from and what is the breakdown of each channel?
- What is your market position?
- Is your location favorable?
- How reliant is the business on the owner?
- What systems and processes are in place to run the business?
What makes a Property Management Company business worth more?
A property management company is worth more if there are predictable key drivers of new sales and a stable or growing traffic originated from diversified sources, for instance.
But it’s not everything. The company’s growth potential can also be found in finance reports, and it says a lot about how you’ve managed your business so far.
What does the average Property Management Company business sell for?
Since 2005, there have been very few property management company sales: only 36. But if you take a look at the total transaction volume of the past 10 years you’ll notice that these kinds of businesses are particularly expensive.
Property management companies were valued at more than $11.7 million.
And it’s quite profitable as well, with an average multiple of 2.23x and average sales price of $326k. But don’t get confused, in the next few topics we will break down these numbers and give you some valuable insights on the market, valuations, multiples and the steps to start your selling process.
What is the most frequent deal size?
In 2018 the deals were more spread out to bigger valuations, but in the previous three years (2017, 2016 and 2015) it is clear that the smaller companies won in the number of deals by a lot.
Even so, businesses with less than $250k in valuations scored more during the last years. As the market for property management companies generally ranges into smaller valuations, if you want to get a deal maybe it is best to stick with the market average and have a smaller business.
Is the Property Management Company market getting bigger?
Property management market has its ups and downs, but 2018 was the best year for this kind industry so far. Last year, there has been more than $3.7 million in businesses sold. But it really depends on the number of companies that were for sale.
In 2016 for example, there has been only $326k, which is exactly average sales price for a property management company.
Are bigger businesses worth more?
Yes! In property management companies, the bigger the deal size the higher the multiple, so the bigger your business the more profit you’ll get for it.
The only exception was 2018, when deals less than $500k and less than $250k had practically the same multiple rate — 2.20x for the first and 2.21x for the second.
The previous years followed the same logical sequence described above.
What states have the most Property Management Company business deals?
Are you wondering where the most deals were made throughout the country, or if your state has a hot market to sell fast? As you can see if you are located in Florida or Arizona, you may get a lot more offers than if you are in Indiana or Kentucky, for instance. But sometimes you can overcome the low number of deals with investors or competitors looking to enter a specific new area, and get lucky with an offer!
Why would you sell in the first place?
The reason to sell always varies from each person. Maybe you are looking for new challenges, businesses and opportunities, or you just want to enjoy your family and retire. Although it can seem tempting to get your hard worked cash, make sure that you are clear on the motives so you don’t regret afterwards.
How long will it take to sell your Property Management Company business?
If you have read all the necessary steps to understand your valuation, and think you have focused on all the topics that make your company worth more, it is maybe time to start the process. Selling your business is a long-term process, and doesn’t happen overnight. Usually companies sell in 12 months, but you can also see deals getting closed in 6 to 9 months depending on the opportunity.
What is the process of selling your Property Management Company business?
This step by step process will help you get less confused when you make sure you are ready and confident to let go of your business, and perform a nice and positive sell. Many entrepreneurs forget about a step, or just don’t have the right guidance to know all the stages necessary and get lost through the process. Don’t forget to go through all of these, and if you have any questions, comment at the end of the article or contact us for more help.
Who will buy your business?
If you are wondering about the buyers that can be interested in your Property Management Company, don’t worry, there are many options and possibilities. From First Time entrepreneurs, to businessmen interested in new opportunities, the chances are that in this particular market it may likely be a person who already had a business in the field.
How should I sell my Property Management business?
Marketplaces – (under $500k yearly profit)
Smaller business and micro-businesses are usually best sold privately by the owner through forums or classified websites.
To sell your staffing business, check out:
Broker/M&A Advisor – ($500k – $10m yearly profit)
Medium sized businesses in the $100k-$20m are best sold through brokers who help with finding buyers, negotiating and structuring the deal. To sell your staffing business, check out:
Investment Banks – (Over $10m yearly profit)
Larger businesses are best sold through investment banks or merger and acquisition companies. To sell your staffing business, check out:
How much will it cost to sell my Property Management business?
Generally a business broker will charge 8-12% of the sales price of a property management business including inventory depending on the deal size. Larger deals attract a smaller fee. Below is a range of fees at each deal value level.
- Under $1m – 12%
- $1m -$4m – 10%
- $4m -$10m – 8%
- $10m -$25m – 6%
- $25m + – 4%
There has been a lot of people trying to sell their property management companies for many different reasons. As it is a very difficult business to run, it is also very hard to sell it too.
But, as we could see, people may get a good profit with the company sale. So if you want to start accelerating your buyout process, fill out our free valuation form and get your business valued today! Leave your comments on any doubts or feedback, we are glad to hear your thoughts!