Whether you’re looking to sell or scale your property management company—or you simply want peace of mind—it’s important to know how much your business is worth.
When you can accurately value your business, you can secure your financial future, understand whether your company might be a good target for acquisition, or determine whether you can purchase another property management business.
With that in mind, let’s take a look at some of the elements you should consider to understand how much your property management company is worth—or how much one you’re thinking about purchasing might set you back.
How to Valuate a Property Management Company
If you’re wondering how to value your property management company, you’ve come to the right place. Here are some things to keep in mind to determine how much your business is worth.
Add up your assets.
First, add up all your assets to determine how much they’re worth. This includes buildings, property, tools, equipment, and vehicles.
Assess profitability.
Next, determine how much your business brings in after taxes and expenses. The higher the profit margin is, the more valuable the business.
According to the National Association of Residential Property Managers, the average property management company makes an adjusted profit margin of about 6 percent. Although that number might not be bad for massive operators, it can make the going tough for smaller businesses. Generally speaking, you should aim for a 20 percent profit margin. If you’re not there, you may want to reassess your operations to identify inefficiencies.
Consider the brand name.
If your business has a reputation for being the premier property management company in a specific area—and has a lot of clients, has been in business for a long time, and has a diversified portfolio—it is more valuable compared to a startup.
Determine the debt-to-income ratio.
Your debt-to-income ratio outlines how much gross monthly income is spent on debt payments. The lower the ratio, the better position your business is in. With all else the same, a company with little to no mortgage obligations is generally more valuable than one with enormous debt.
Calculate overhead.
Figure out how much your business spends monthly on things like equipment rental, staffing, utilities, suppliers, checks, and paper. Do you spend too much? If so, you may be able to reduce overhead costs by investing in purpose-built property management software.
Evaluate growth potential.
Is your business in an up-and-coming area? Are you considering adding additional properties to your portfolio? A company positioned to grow and set up to scale is more valuable than one with dismal growth potential.
Conduct an industry comparison.
How does your property management business stack up against the competition? Conduct an industry comparison to determine the benchmarks in your local market and see how you compare against other property management companies.
How valuable is your property management company?
In the property management industry, profitability starts with efficiency. If you want to increase the value of your business, you need to do everything you can to streamline operations.
If you’re still doing business the old-fashioned way—with lots of manual work and error-prone processes—you are not as profitable as you could be, meaning your company is worth less than it could be. It’s that simple.
One easy way to increase the value of your business is by investing in property management software designed specifically to support portfolios like yours. With the right solution, you can bake efficiency into every work process while engaging your employees and delighting your owners and residents.
Whether you’re looking to sell your business or fatten your margins, property management software can make all the difference.
But don’t just take our word for it.
Request a demo of Netintegrity INFO-Tracker™ today to see the transformative power of property management software with your own eyes.
