Buying A Property Management Company – The Needle in the Haystack May Seem Easier

Buying A Property Management Company – The Needle in the Haystack May Seem Easier

 

After awhile business brokers get a pretty good sense of which industries and companies are likely to bring lots of buyer attention, and which won’t. Some sectors are a whole lot tougher than others to get a deal done, like it or not.

 

At ManageVisors we get the most response for property management companies. Just look at how many property management postings you’ll find on BizBen at any given time. There aren’t a lot of choices. So when one hits the market, the owner gets lots of attention.

 

There are many reasons that so few PM companies actually reach the market. These reasons are why buyers have such a devilishly difficult time actually snagging one. Here are some of the factors why so few property management owners decide to sell their businesses:

 

 

  • Most PM businesses are quite profitable. The Business Reference Guide, published each year by Business Brokerage Press, shows that profit margins in property management are at the very top range of all industries. It’s not uncommon to see net profit margins above 35% or 40%, which doesn’t happen in other sectors.
  • Recurring revenues provide strength. The nature of property management contracts make it a low-risk business where relationships can survive through good times and bad. Look at the Covid pandemic. Many property management owners had outstanding 2020’s.  
  • Few assets to purchase, repair or replace. Most property management companies require little in the way of equipment, build-out, vehicles or tools. This makes these businesses more desirable to maintain and continue operations than retail, manufacturing or technical businesses, and therefore, less likely to get sold.
  • Growth through acquisition is quicker. It’s so much easier to go from 300 doors under management to 3,000 doors under management when you do it through acquisition. The same growth would take many years to achieve organically. This creates an enormous desirability for these businesses, as well as an enormous imbalance between buyers and sellers. Successful operators are far more eager to buy than sell.
  • Strong word-of-mouth industry. There are many deals done on an off-market basis. These transactions never reach the public. The exiting owner talks to an acquaintance, accountant or attorney they know, who talks to another person, and all of a sudden a buyer and seller are talking to each other about a purchase transaction.

 

 

So how can a motivated buyer overcome these obstacles? It’s challenging but not insurmountable. It does indeed help if you’re already in the industry. That word-of-mouth might come your way and you’ll hear about a potential deal.

 

Trade groups are a big deal in property management and an excellent door opener for finding deals. Buyers looking for residential property management companies should join NARPM (National Association of Residential Property Managers). I’ve heard stories where owners found buyers simply through the NARPM newsletter. The HOA world has the Community Associations Institute. In commercial property management there’s BOMA. Also look at the Vacation Rental Management Association. All these groups have the potential to lead buyers into an acquisition relationship.

 

I encourage PM buyers to start contacting their competitors. Draw a 10-mile circle around your company and build a spreadsheet. Don’t worry about seeming like an obnoxious caller. These competitors will be flattered that you’re calling. They may know someone who’s been talking about retiring or moving out of state.

 

It also helps a lot to have your ducks in a row as a buyer. Talk to SBA or commercial lenders. Get pre-approved at a specific loan amount. Have your personal financial statement, credit reports, bank info and other docs teed up and ready to go, so that a prospective seller will know you’re serious.

 

Also, engage a professional valuator or business brokerage like ManageVisors, who can help guide you toward making an offer. It’s not easy getting potential sellers to surrender sensitive financial information and operational details, so having a third party on your side can help.

 

Don’t forget the obvious. Let potential sellers know you are looking to buy a property management business by placing a Business Wanted posting on BizBen. It is the only business listing service on the web which allows you to seek out sellers with a simple, direct message that you’d like to start a conversation about buying their business.

 

No matter which approach you take as a property management business buyer, you must remember it’s a slow, uphill slog toward finding the right fit. But once you get there, the rewards could be life-changing.

How To Value and Sell Your Landscaping Business

How To Value and Sell Your Landscaping Business 

Landscaping companies are one of the more desirable industries among today’s business buyers. They sell well, especially when located in large markets.

 

There are quite a few differentiators that drive values in the landscaping sector. It’s important for owners to understand these factors as they consider selling their company. It’s worthwhile for owners to take any action possible to improve the value of their business, and the desirability in the eyes of buyers.

 

It’s all about risk. When buyers see very little risk, they move forward. With that in mind, here are many factors that play a role in valuing landscaping companies.

 

Residential vs. commercial – Companies with mostly or all commercial clients will fetch a higher price. Buyers assign greater longterm value to commercial accounts which are often supported by contracts. Many entrepreneurs start on the residential side then migrate toward commercial, so commercial accounts sometimes reflect a more seasoned company. Commercial clients tend to be less price-conscious than residential customers. (On the flip side, many commercial customers enjoy pushing their payments to 60 or 90 days out, rather than cash payments typical for residential.)

 

Maintenance vs. construction – This is the huge dividing line in landscaping. Many landscape construction specialists, hardscape designers, pool builders and others have carved out incredibly successful, profitable businesses over the years. But buyers assign more risk to this project-based income than they do maintenance-based recurring revenues. That makes selling a maintenance landscaping business easier.

 

Market Locations – There is enormous competition among the largest landscaping companies in the U.S. who seek to purchase local and regional businesses to bring into their portfolios. They attack growth strategies on a market-by-market basis. So if your company is situated in a target market, they will assign greater desirability to your acquisition (and possibly pay more). These strategic buyers are not alone in seeking attractive markets. A company in the heart of Los Angeles County will get more attention, and more value, than the same company in Humboldt County. 

 

Large vs. small – A small company carries greater risk so its valuation multiple will be lower than a larger company. This difference can be dramatic. Smaller companies may struggle to get 2.5 times earnings while a larger one may fetch above 4 or times earnings.

 

Reputation & Reviews – Yelp isn’t just for restaurants. Savvy business buyers often go right to social media outlets and review sites when they take their first glimpse of any opportunity. When investors see numerous negative reviews, it can kill their interest. They not only look at overall ratings scores and the ratio of positive to negative reviews, but also at how the company is responding online to the negative reviews. Are they addressing the negative comments properly and quickly? Are bad reviews allowed to build on themselves? Are bad reviews talking about the same issues?

 

Customer concentration – Years ago I sold a landscaping company which had 6 customers. That’s not an easy sell. The company’s customer base was HOA management companies who oversaw multiple properties and associations. There is more risk involved when losing one customer can have a substantial impact.

 

Equipment & vehicles – Landscaping requires lots of trucks, equipment and tools. If these assets are repaired and replaced properly, it will increase the company’s value. If the business keeps regular repair logs, that also helps value.

 

Marketing methods – There are quite a few landscaping companies who do little or no marketing or advertising. They have a website that serves as a digital business card and they spend no time or energy on the web. These companies will fetch less in an acquisition than a company with a fully built-out marketing platform. I always cringe when an owner proudly proclaims that all his business is word-of-mouth. That’s a negative which can impact the ability to sell your company.

 

Owner Involvement – This is a big one. If the owner is the C-27 license holder and also making all the major business decisions, assigning crews, working at job sites, and driving all new business, that fact will be obvious to buyers. It will also have a substantial negative impact on the value of the business. You want your company to run perfectly fine without you (an impossibility for many).

 

Most landscaping businesses will sell for a price somewhere between 2.5 to 4.0 times seller’s discretionary earnings. That’s a pretty huge range when you start doing the math. The more you can position the business favorably before you hit the market, the more likely you’ll have a successful outcome. 

8 Tasks To Help Sell Your Construction or Contractor Business

8 Tasks To Help Sell Your Construction or Contractor Business

 

There are unique challenges when it comes to selling a construction or contractor business. These companies bring licensing requirements and contractual issues into play that force entrepreneurs to do some special legwork ahead of time, well before your business actually hits the market.

 

Potential buyers of these companies have special hurdles to jump as they consider buying your business. Here are some tasks to take before hitting the market for sale:

1.       Make buying your company easy for outsiders – Don’t presume all buyers will have the same professional license you do. As a business broker specializing in selling construction, contractor, landscaping, property management and other license-dependent businesses, I’ve noticed many sellers mistakenly assume the buyer pool will be other folks in their industry. Not so. For instance, you’ll find many buyers who live and work closeby and will find your business geographically desirable, even though they’re unfamiliar with your sector. You’ll find buyers who are in an allied or complementary field, or maybe even carry a different contractor’s license than yours. Before you hit the market, write down on a single sheet of paper how you would envision a non-licensed, or other-licensed, buyer might still be a good fit. Then make sure your broker or representative understands these issues and can explain properly it to buyers.

2.       Tackle the licensing issue before you hit the market – When the owner of a construction or contractor business does not carry the necessary professional license, he/she can still own the business by having a Responsible Managing Officer (RMO) or a Responsible Managing Employee (RME). It’s this person who serves as the “qualifier” for licensing purposes. Several years ago California cracked down on the practice of “renting” an RMO or RME, where owners were simply paying a fee to a licensee who otherwise had no role in the company. A qualifier must be an actively-involved employee or officer in the company. So, as you ready your business for sale, consider your options. Ask yourself, if the new buyer needs an RMO or RME, who could that be? How can we help tee that up for someone? Could an existing employee or fellow professional fill the role? How about pulling someone out of semi-retirement to fill the role?

3.       Update your equipment – In construction and contracting, equipment and infrastructure can have a huge impact on a company’s desirability. When I review a company’s equipment list, one of the first things I check are the dates of purchase. Why? Because owners generally are more comfortable buying new equipment when business is strong and going well. Owners who are struggling opt to repair rather than replace. I also check if there is any pattern of equipment purchases, where new pieces have come in regularly over many years. It sends mixed signals if a company claims to be doing well yet hasn’t bought new equipment or vehicles in a decade.

4.       Prepare your equipment list – In addition to improving and repairing your equipment list, owners should spend a bit of time preparing a brief equipment and vehicle list. All tangible assets worth $2,500 or more should be on this list. It should show make and model numbers, year purchased, and the owner’s estimate of fair market value for each item. This should not be inflated, hyped prices which can create suspicion with buyers. Put down the estimated values if you were to throw the items on Craigslist. It also helps if you keep repair logs and can incorporate that information into the equipment list.

5.       Understand the differences between an Asset Sale and a Stock Sale – Why should owners care about how a buyer might structure the sale? Because in asset-heavy businesses like construction companies, the ability to depreciate vehicles and equipment can change a buyer’s offer to buy your business by hundreds of thousands, maybe millions, of dollars. An Asset Sale allows the buyer of your business to re-start the depreciation cycle, allowing them to enjoy expense write-offs after they buy the company. A Stock Sale, on the other hand, does not involve a restart. The buyer is purchasing shares of your company, retaining your entity and its tax bases, and therefore not enjoying those write-offs. So a stock buyer will not likely pay as much as an asset buyer. When offers come in, it’s important for business owners to understand the tax and legal ramifications of their side as well as the buyer’s considerations.

6.       Diversify revenues as much as possible – It’s easier to sell a company with recurring revenues rather than one-time income. It’s easier to sell a landscaping company which books both maintenance income and design-and-build income rather than 100% landscape construction revenues. It’s easier to sell a company with 200 clients rather than 20. It’s easier to sell a business that stretches over multiple counties than one centered solely in one area.

7.       Strengthen your management structure – It’s tough to sell a construction or contractor company where the owner not only carries the necessary professional license but also makes the business decisions and drives the client acquisition process. Do as much as possible to put a manager or supervisor in place who buyers will see as a potentially stabilizing force.

8.       Understand the unique nature of contractors – Construction and contractor folks are strong-willed, independent-minded people. They’ve taken considerable time, effort and money to get their license, build a knowledge-base, establish best practices, understand their marketplace, differentiate between sub-industries. Their independence streak inclines them toward wanting to start their own company rather than buy someone else’s. They are naturally disinclined to spend money on a business purchase and would rather take their own shot. So keep that in mind when pricing and marketing the business for sale.

How To Accurately Peg Your PM Company’s Earnings

How To Accurately Peg Your PM Company’s Earnings

Addbacks – How To Calculate Your Management Company’s Earnings.

It’s Actually Pretty Easy To Figure Out Your Cash Flow – Here’s How

It’s a pet peeve of mine. Business brokers and M&A advisors absolutely love making the business valuation process seem complicated and difficult. I guess we’re always looking for ways to justify our fees.

Well guess what? It isn’t really all that difficult to determine your earnings. If you’ve got accurate financial statements (a BIG if) you should be able to knock this out in 90 minutes or so.

There are three common ways to measure a company’s cash flow when selling a property management business. All three have distinct advantages and purposes.

  1. Seller’s Discretionary Earnings – SDE is the most common number in small business sales. It will almost always be employed when valuing companies with less than $5 Million in revenues. That’s because smaller company’s are usually owned by an individual or couple as owner/operators rather than a corporation with multiple shareholders. It answers the question “what is the total return of cash and benefits flowing to the owner?”
  2. Earnings Before Interest, Taxes, Depreciation & Amortization – EBITDA is used for valuating a company based on the return on investment. It answers the question “what is the return to the owner for a cash purchase of the business, after a market rate of compensation for work that the owner performs in the business (or for hiring someone else to perform those functions) has been subtracted?”
  3. Discounted Cash Flow – DCF analysis uses the “time value of money” concept to determine company value based on future income streams. It is typically used to measure the attractiveness of much larger companies, say with revenues of $100 Million or more.

All three methods pull numbers from your Profit & Loss Statements. We valuation specialists also look critically through your Balance Sheets and Cash Flow Statements to reach value conclusions but those are not directly utilized in our earnings calculations.

Unless your management company is doing $25 Million or maybe $50 Million in revenues, you’ll want to focus exclusively on figuring out your SDE. It will be the broadest and most favorable calculation available. Your earnings for SDE will be larger than your earnings for EBITDA so it makes your company look better to investment buyers.

Don’t be confused by various terms people throw around for Seller’s Discretionary Earnings.  It can be called recast earnings, normalized earnings, seller’s discretionary cash flow, adjusted cash flow or adjusted net income. SDE is the official terminology advocated by the International Business Broker’s Association (IBBA).

 

SDE Definition

The IBBA has defined how SDE is to be calculated. A business’s overall SDE is calculated as an average of the SDE for the 2 or 3 most recent full years, plus the current year in progress. If there is a strong trend in the earnings (up or down), much more weight will be placed on more recent years.

SDE is calculated for each year based on information from the business tax returns, the profit and loss statements and owner estimates. All of the following categories are added together in the SDE calculation. Here is what it includes:

  • Pretax net income. This is the bottom line number on your P&L. PLUS…
  • Owner’s total compensation. This includes one or two salaries paid to the owner plus profit sharing income paid to all the owners. If there is a second salary being paid to a spouse or family member, you must subtract whatever salary amount would be needed to replace his/her workload. WARNING: These salaries must be stated incomes appearing on your P&L and tax return. They can not be funds sucked out of the business through draws and distributions. PLUS…
  • Employer portion of payroll taxes paid based on the W2 salary of one owner. PLUS…
  • Business interest expense (because business debt is a “non operating expense” and assumed to be paid off). Do not plug in expenses for mortgage interest. PLUS…
  • Depreciation and amortization (non cash expenses). PLUS…
  • Discretionary expenses or personal perks paid by the business but which really benefit the owner. Common examples include the owner’s health insurance, personal use of automobiles, personal travel, personal meals and entertainment, etc. PLUS…
  • Adjustments for extraordinary, non recurring expenses or revenue (e.g., expenses incurred in a one-time lawsuit or damage from flood or fire would be added back. Revenue and expenses from a major discontinued product would be removed. PLUS…
  • This can get tricky. If you are enjoying rental income that your buyer will not, you must make a negative adjustment and subtract it from earnings. If a new owner’s rent will be different from yours, you must make an adjustment, either positive or negative. For example, if your business currently has two leased locations but only one is necessary to run the company, you can addback the rent you’re paying on the second office. On the flip side, if you’ve been operating from a home office and the business cannot reasonably be run without a physical space, you’ll need a negative adjustment for a fair market rent expense.

 

What Precisely is a Discretionary Expense?

Discretionary expenses are defined to be ones that the business paid for but are primarily of a personal benefit to the owner.  Typical expense categories (places to check on your tax returns/ P&Ls) are owner medical or life insurance, travel, automobiles, meals and entertainment, dues and memberships.

To qualify as discretionary, each expense must meet all 4 of these criteria:

1)  Benefit the owner(s)

2)  Not benefit the business or the employees

3)  Are paid for by the business and expensed on tax returns and P&Ls

4)  Be documented and verifiable by a prospective buyer as discretionary.

Illustrative examples of expenses that would NOT qualify would include:

  • Medical benefits for an employee
  • Counting all meal & entertainment expenses as discretionary even though dining with clients is a critical way of building relationships
  • Counting all travel as discretionary, even though some travel is necessary for business (such as to a trade show)
  • Counting all auto expenses as discretionary even though the vehicles are used to deliver products or by employees
  • Any marketing or promotion related expense even if it “didn’t work and it wouldn’t be done again”
  • Expenses for a Rotary or club membership if any clients are gained through such memberships
  • Counting unreported cash sales unless the buyer has a straightforward means to verify such sales
  • Counting dozens of personal purchases on a credit card where the card is also used for business purchases, or where the expenses are buried in a much larger expense category or several expense categories and therefore nearly impossible for a buyer to verify.

It is better to be conservative in your estimates than aggressive.  If buyers believe you are exaggerating the discretionary expenses, they will conclude you are untrustworthy and likely making other misrepresentations. Worse, if they purchase the business based on your misrepresentations, you may be guilty of fraud.

 

So What Are Non-Operating  & Extraordinary Expenses?

Extraordinary expenses are defined to be ones that 1) the business paid for 2) are truly unusual or exceptional in nature and 3) documented and verifiable as extraordinary.  By their nature there are no “typical” extraordinary expenses.  Examples might include expenses associated with natural disasters, a move of location, or a lawsuit out of the ordinary course of business.

Examples of expenses that would not qualify would include a marketing campaign that failed, headhunter fees to replace a manager that quit, research and development of a product or service that was later scrubbed. Keep in mind, most businesses list nothing in this category so you need to be conservative and cautious in your calculation.

Non operating revenue is unrelated to the business operations, such as interest revenue, rent from a property owned through the business or sale of equipment or part of the business.  Non operating expenses might include those to repair or fix up a building owned by the business.

 

The Question To Ask Yourself

In trying to figure out addbacks and adjustments to reach an accurate earnings number, ask yourself this question – if another guy owned my business right this minute, and operated it in the exact same way, in the same place, with the same employees and clients, what income and expenses would be different for him? Those are the adjustments you need to make to your net income figure on the profit and loss statement.

Very often, addbacks are not 100% of an expense category. For instance, your company’s annual automobile expenses may be $10,000. The business does own a couple cars but you also run  your personal car’s gas, repairs and licensing through the company. So you’d call that a 25% addback, or $2,500. Maybe you expense $15,000 for bookkeeping and accounting but included in that is your own personal returns and tax help. That could be a 50% addback. Do your best in making an accurate estimate of what is a personal benefit to you versus a business benefit to the company.

Once you finally have an earnings number for each year, the fun starts. You now have choices to make. Do you claim your management company has an SDE based on last year’s numbers? Or do you use an SDE that’s averaged over three years? Or do you use a 3-year weighted average, where last year’s earnings are given greater weight than those from two and three years ago?

Depends on who’s asking. Most will rely on a Trailing 12, an SDE calculation based on the last 12 months in which monthly reconciliations were completed. They will compare the Trailing 12 performance to previous years and draw opinions about how to treat it.

One reason the property management industry is very popular with business buyers is that revenues are typically rather consistent, without roller coaster rides seen in many other industries. Even if their clients’ properties are struggling with vacancy, maintenance or delinquency issues, the management company’s revenue will remain pretty consistent. New clients come, old clients go but the income stream is often stable.

If there isn’t a great deal of difference between your Trailing 12 and last year’s P&L, lenders and valuators will use last year to calculate the SDE number. Lenders always go back to the tax returns to underwrite a deal.

Once you have your earnings number, now you need to figure out how to use it in calculating the value of your company and the price a buyer may be willing to pay. That’s the next part of the valuation game. Check our site to pick up the process from here.

 

This post intended for informational purposes only. It is not intended to constitute legal, tax or investment advice. There is no guarantee that any claims made are accurate or will come to pass. ManageVisors does not warrant the accuracy of the information. Consult a financial, tax or legal professional for specific information related to your own situation.

Don’t Be A “Hub and Spoke” Property Manager

Don't Be A Hub Spoke PM Owner

10 Warning Signs You’re a Hub-and-Spoke Owner

Fix These Issues and Watch Your Company’s Value Soar

Picture a bicycle wheel. On the outside is the rubber wheel affixed to the metal frame. Then you have dozens of spokes leading from the frame to the center. The hub is where all the stability and balance comes from. The wheel is nothing without the hub.

This hub-and-spoke image is one of the most popular concepts used in John Warillow’s Value Builder System. For millions of business owners, it’s also the most critical key to improving operations and increasing company value.

The wheel is only as strong as the hub. The moment the hub is overwhelmed, the entire system fails. In business sales, the owner is the hub. Everything else in the company are the spokes and wheel.

You want to do everything in your power NOT to be a hub-and-spoke owner. When daily operations are so completely dependent on the owner, the enterprise value nosedives. You’ve probably heard the phrase “the owner is the business.” Don’t let that be you.

Business buyers have very little faith in these businesses because they understand how dangerous it is. When the owner leaves, so much can go with him – clients and key relationships. Employees. Vendors. Financing sources. You name it.

Most property management companies start small, so there are many pitfalls. It’s easy to become a hub-and-spoke owner and often tough to recognize. But if you want to scale your company and improve its value with an eye toward selling, you need to see the signs. Then do something about it.

Here are 10 warning signs to guard against, along with some fix-it suggestions.

You sign all of the checks

Most business owners sign the checks. But what happens if you’re away for a couple of days, or a couple weeks, and an important supplier needs to be paid? Consider giving an employee signing authority for checks up to an amount you’re comfortable with. Then change the mailing address on your bank statements so they are mailed to your home (not the office). That way, you can review all signed checks and make sure the privilege isn’t being abused.Having statements go to your home is also a good anti-theft practice.

 

2. Your mobile phone bill is over $200 a month

If your employees are out of their depth a lot, it will show up in your mobile phone bill. Staff will be calling you to coach them through problems. Ask yourself if you’re hiring too many junior employees. Sometimes people with a couple of years of industry experience will be a lot more self-sufficient and only slightly more expensive than the greenhorns. Also consider getting a virtual assistant (VA), who can act as a first line of defense in protecting your time. I’ve had great luck with offshore VA’s based in the Philippines or Malaysia who have excellent language skills and can perform key accounting, database and marketing functions.

3. Your revenue is flat when compared to last year’s

Flat revenue from one year to the next can be a sign you are a hub in a hub-and-spoke model. Like forcing water through a hose, you have only so much capacity. No matter how efficient you are, every business dependent on its owner reaches capacity at some point. Consider how you can reduce the number of time-consuming tasks or technically complex duties. Focus on reducing your personal involvement by 50% in some key areas. You don’t need to give up total control. Just find a happy medium in your daily tasks.

4. Your vacations suck

If you spend your vacations dispatching orders from your mobile phone, it’s time to cut the tether. Start by taking one day off and seeing how your company does without you. Build systems for failure points. Work up to a point where you can take a few weeks off without affecting your business. We often refer to the “3-Week Vacation Test.” If your business runs fine while you’re in the Bahamas, you’ve done it right.

5. You spend more time negotiating than a union boss

If you find yourself constantly having to get involved in negotiating with property owner/clients or vendors, you are a hub. Consider giving at least one staff member a platform where they have your approval to negotiate. You may also want to tie any employee bonuses or leasing commissions to their ability to solve problems and work through complex matters independently.

You are the last one out the door every night

If the clock strikes 5 every night and you’re the only one behind a computer, then you are very much a hub. If you don’t trust others to close out your management software, lock the doors and set the alarm, you’ve got some work to do. The solution may start with SOP’s. When owners take the time to write out simple-to-follow operating procedures, life gets a lot better. Maybe put together an employee manual of basic procedures. Then get to the ne.

7. You have given all your PM clients your mobile number

It’s good to have the pulse of your property owner/clients. But you’ve got serious problems if they’re calling you rather than the office for routine matters. It can be a delicate balance for property managers. On the one hand, you want your clients to know you are keeping their needs and issues very top-of-mind. On the other, you don’t want them to think you’re the only solution. Avoid having your personal relationship be the glue that holds your business together..

8. You get the tickets to the game

Clients, vendors and contractors sometimes want to show their appreciation by giving you free tickets to sports events or concerts. That’s great. But if you are the only one at the company they consider, that’s not a good sign. They have pegged you as the only one worthy of their generosity. Try integrating one or two people into more of your.

9. You get cc’d on more than five e-mails a day

Employees, clients and vendors constantly cc’ing you on e-mails can be a sign that they are looking for your tacit approval. Or maybe that you have not made clear when you want to be involved in their work. Start by asking your employees to greatly reduce the number of times you’re copied in e-mails. Ask them to add you only if you really must be made aware of something – and only if they need a specific action from you.

10. You have not taken the time to automate

Automation is so important in property management companies. Rent collections, maintenance requests, invoicing, accounting, marketing, you name it. The more that gets automated, the less the business is about you. And the less the business is about you, the greater the value to a potential acquirer.

When To Tell Employees You_re Selling

When To Tell Employees You_re Selling

When To Tell Employees You’re Selling The Company

It’s Easy To Commit A Major Mistake – Don’t Have “The Talk” Too Early

 

A huge part of any exit strategy is properly planning for that moment in time when employees find out the business is for sale or, preferably, has already been sold. Your workers have been kept in the dark for as long as possible. Some won’t be a bit surprised. Others may be devastated.

In almost all cases, a property management owner should delay the news as long as possible. There is usually very little to be gained by “getting the word out.” Thousands of business owners can relay stories about the damage to their business or the emotional trauma that accompanied a premature release of the information. Don’t inform employees what’s going on until the transaction has closed. Or at minimum, the buyer has removed all contingencies and there doesn’t appear to be any major roadblocks to the finish line.

Wait Until The Wire Has Landed

Resist the excitement and temptation to share your secret. It may even seem dishonest to keep employees in the dark about the sale. But not only could it cause disruption to the business, it could cause unwanted worry with your buyer about the potential for a smooth transition. 

Telling your employees too soon could also decrease the value of your business. Anxious workers may decide to leave before the deal is done, which can have devastating consequences. The last thing you want is to create a panic while you’re still involved in daily management.

There will be some circumstances which dictate telling a worker ahead of time. The most common is when owners need the cooperation of employees to prepare financials, orchestrate tours, or provide information that the owner cannot.

The other important consideration (which deserves an article all its own) is your “key employees.” Many businesses have one or several critical workers who deserve special attention or retention strategy planning. In all cases, you should emphasize repeatedly the importance of confidentiality in the process.

When Is The Right Time?

Many owners stress about how to break the news. Managing the messaging is critical. In today’s smartphone universe, it’s a mistake thinking you can get the word out in several stages. News will travel instantly among your people. Use that to your advantage. Do it once and do it well.   

Try to bring together as many employees at the same time. Teleconference the announcement if needed. Do not bring the new owner, or representatives, to the initial announcement, unless there is an unusual circumstance. You’ve got to be ready for all types of reactions. It’s best to limit the emotions to existing personnel.   

Challenge your employees to take complete ownership of their work and assure them their jobs are secure. Invite them to become actively involved in the transition, within limits.  Keep it short but informative. Be honest and comfortable in telling them the circumstances behind your selling. Emphasize this will be a win-win-win for you, the employees and the new owner. Calmly convince them the company will go on without you.

Be ready for all types of reactions. Don’t be surprised if someone tells you, to your face, they’re glad you’re leaving. Try to soften the blow with your words and actions.

Keep things upbeat and honest. Don’t dwell on the experience, merits or background of the new ownership. Selling that comes later. Let them know they are among the reasons the new owner is so excited about the purchase. Ask employees to keep the news within the company until you’ve had a chance to contact property owner/clients, vendors, and maybe the media.

Spell out briefly how you envision the transition to work. Emphasize that you’re going to be actively involved through the process and can be contacted. No one likes change. But remaining forthright, calm and supportive can go a long way toward a comfortable handoff of ownership.