February 3, 2014
In most cases the primary, and often only, asset that a property management company owns is its management accounts. While most businesses sell for 3-5 times their annual income, a property management company generally sells for right around 1 year of revenue. The primary reason for this is that a portfolio of management accounts generally experiences a great deal of attrition. In the first year 20-25% of the portfolio leaves just because they do not like change. Over time a further percentage of the portfolio sells, forecloses, passes away, etc. In most cases the acquiring company does not want the other “assets” that make up a property management company. The employees are often let go, the building or real estate is not needed, and all of the systems are usually integrated into the new company.
The entire focus of our business is to help property managers turn their property management websites into assets. Assets that grow the business while you own it, and turn into cash when you sell it. If your website is found on search, converts well, and replaces the accounts that are lost through attrition, then you have another asset to consider. This asset can also set a buyer’s mind at ease that even if some of your accounts leave, the company’s web presence will replace them. There are a lot of business reasons for this, and some very close to home personal reasons. My parents were property managers, and I was my mom’s business partner for 3 years. When she remarried, I helped her sell the business, and she received about 1 year of revenue. She did not have a website. My dad suffered a stroke in 2012 and had to immediately sell his business. I helped him sell his business, and due to the desperate nature of the sale, he received less than one year of revenue. He did not have a website.
Many property managers work 20, 30 years or more growing their businesses only to sell them to another company for what seems like a pretty small sum. The purpose of this series is to educate property managers on the power of a website as an asset, but also give a few additional items to consider when buying or selling a property management company.
There are three major reasons for a property management company to even have a website. Get more clients, rent properties faster, and to make a business more efficient. If your website doesn’t do any of these things, it is probably a waste of time and money (A liability). In order to accomplish the first two items, the website has to be found. Efficiencies are normally gained through your existing customer base, and they will find your site because they are already doing business with you. It is extremely difficult for a property management company of any size to compete for search terms for tenants, although some our clients have. In most markets those terms are dominated by Zillow, Trulia, Craigslist, Homes.com and the bigger ILS companies with multi-million dollar advertising budgets. Therefore, this series will focus on the first item, gaining new management clients. We are going to teach you the difference between on-site and off-site factors, determining the level of competition in your market, and building a strategy to accomplish your SEO goals. We are also going to help you set expectations when embarking on the journey of improving or dominating SEO for your property management company.