Starting a property management business can be stressful. Deciding when to sell that business can be just as agonizing. If you’re feeling overwhelmed at the thought of getting your company sale-worthy, it can be helpful to know what options are available to you. Deciding which option is best for you can make it easier to determine what needs to be done to prepare for the road ahead. Here are the three main courses of action you could take.
Option 1: Cash and a Clean Break
If you’re feeling burnt out, have lost your passion for property management or are simply nearing the age when retirement is calling, this is probably the option that makes the most sense for you. Not only does it require less effort than the other choices, but it’s also much less risky. Of course, as a tradeoff, this option also happens to offer the lowest potential return, since the money you receive from the sale of your company will be based solely on a snapshot of where your business stands right now.
For this type of sale, you’ll need to gather all the important details prospective buyers will be interested in: your revenue, your property portfolio, your earnings before interest, taxes, depreciation, and amortization (EBITDA) and your internal processes. If everything looks good and your business seems like a profitable investment, someone will make you an offer. Once the paperwork is signed and the cash exchanges hands, you can ride off into the sunset.
Option 2: Sale with Terms
If you’re disillusioned by the amount of money you’re being offered for a cash and carry sale, this option might be more attractive from a financial standpoint. But here’s the catch: instead of getting payment in full for your property management company, the proceeds of the sale will be spread out over a period of months or years (typically anywhere from 12 months to 5 years). This presents a higher risk. For instance, if the company goes under before you’ve been paid off, you might be out of luck.
To improve your odds of a profitable deal, make sure you are absolutely confident that the business you are selling is sustainable enough to continue being successful well into the future. Equally as important is ensuring that the party you sell to is savvy and capable enough to run the business well.
Keep in mind, also, that in this scenario, you may still be somewhat involved in the business even after the sale. It’s not uncommon for a buyer to contact the seller with questions for several months following the closing, as they get familiar with the company and its inner workings. It’s in your best interest to be available and offer as much assistance as necessary because, if the business fails, your future payments could as well.
Option 3: Retain Stock and Shift Directions
This last option is ideal for someone who still wants to stay involved in the property management industry, but doesn’t want the hassle and headache of running an entire business. If you’re someone who is investment-savvy and wouldn’t mind being compensated in salary, bonuses and stock options, this may be the best path for you.
With this type of arrangement, the buyer would pay for the business in shares of stock and bring you in as a high-level employee. As part of the process, you would negotiate what you believe your role should be, as well as how much you’d like to be compensated. This way you’d still be involved in making the business a success, but without the burden of running the entire ship.
Regardless of whether you’re looking to make a career change or retire from the workforce completely, if you’re considering selling your property management business, you have several options to choose from. The three choices listed above should provide a solid starting point.
