3 minute read
Are you thriving or are you reaching burnout?
By Adam Balkcom
The consolidation of our industry is happening at a rapid pace. It’s rare now to converse with owners nationwide who haven’t either witnessed a major national firm acquiring management companies in their market or aren’t being reached out to daily by someone wanting to buy their company.
Why is this consolidation happening?
Numerous factors are driving this trend. Many owners have reached retirement age and are seeking to monetize their most valuable asset. However, a growing and worrisome reason we’re noticing is owners selling not because they’ve reached retirement but due to burnout.
The recent years have been tumultuous. Coupled with increasing inflation and employment expenses, already stretched management companies are losing staff to competitors or other sectors offering better pay. Often, this leaves the owners to pick up the slack.
How can we counteract burnout-driven sales?
There are three discernible trends among companies that continue to thrive and maintain profitability in these challenging times:
1. They have diversified their revenue sources beyond base management fees. This is the most important trait we have seen in the companies that are thriving. For the top-performing companies, only about 40-50% of their total revenue comes from management fees.
2. They are leaning into technology. Presently, many firms are upgrading their management software, optimizing, and automating essential service delivery processes. AI is increasingly handling board and homeowner inquiries.
3. They are tapping into outsourcing. This can involve specific segments of their business, like the accounting department or project bidding procedures. Or it can look like hiring team members from countries like Mexico or the Philippines, where there are significant payroll cost savings.
These strategies bolster revenue while simultaneously cutting down on costly staff expenditures. With this structure, companies can offer higher salaries to their employees, invest in enhancements and expansion, AND still ensure a profitable return for the owners.
Regrettably, the firms not adopting these strategies are often being acquired by those that do, and they are being acquired for lower multiples.
The landscape of the community management sector is swiftly evolving. Several elements are driving these transformations, such as:
• Escalating employment expenses
• Significant influx of private equity investments in the sector
• Changes in the economy led to a large drop in resale revenue … for many companies, that was their profit
• Increased volume of interactions from homeowners and board members now working from home
• Management company owners nearing retirement age
• Advancements in technology and automation
The most successful executives are adapting to these changes. Now is the time to make sure you are investing in the three trends mentioned in this article in your business.
INTRODUCING THE EXECUTIVE CORNER
This is a new column for Vision Magazine that will be included in every issue. It is written by staff at CAM Leadership Institute, an organization that focuses on community management company owner and executive leadership development. CAM Leadership Institute hosts mastermind groups attended by almost 100 management companies from across the country every month, which gives them unique insight into the industry. Starting in this edition, the staff at CAM Leadership Institute will provide quarterly columns specific to management company owners and executive leadership teams.
