Peter Lohmann's Mailing List - Issue #61

Client Concentration Risk and its Impact On Company Value

What’s your average number of units per client?

We have 621 doors (units) and 250 clients, so ours is 2.48

All else being equal — the more units per client you have on average, the more fragile your business is (because a small number of clients controls a larger number of doors). The flip side of this is that your account management overhead goes up if you have a very low number of doors per client. Each property owner has a fixed amount of labor time needed to service the account (it doesn’t scale up with units in my experience).

Sometimes I wonder how many more doors we could manage with the same number of staff members if we owned all the properties directly. I suspect the answer is A LOT. Account management overhead is real.

There’s another very important angle to this, which is the impact on your company’s valuation. Josh Heintz just wrote up a really great piece on this over at his new blog.

Josh was the Director of M&A for Evernest until recently, so he’s gotten a first-hand look at how a larger group executing a rollup strategy thinks about property management company values.

Here’s how he suggests units-per-owner (UPO) may impact your company’s valuation:

So by this math, my company would have “no change” to our valuation. But if we nudge just a bit higher to say 2.6, we would see a 0-5% decrease. Fascinating stuff and highly actionable for PM company owners looking to maximize value at a sale.

He goes on to discuss the impact of other related metrics on company valuation, such as Largest Individual Client and Top 5 Client Impact, and how they these metrics can “stack” (for good or ill) to impact your company’s value.

Highly suggest you go give it a read. Thank you Josh for contributing some NEW, fresh, valuable written content to our industry. If you’re thinking about selling your PM company, consider contacting Josh or another PM-specific business broker… here’s my list of them.

(If you’re interested in reading some of my own thoughts on PM company valuations, check out this blog post from a couple years ago.)

Side note - I find it hilarious that Josh would be banned for sharing this exceptionally valuable and unique content in several of the industry Facebook groups due to “self promotion”. I’m on a mission to encourage more sharing and more written content within our industry. Have you written something cool? Send it to me and I may just feature it in this newsletter!

Fall Foliage Prediction Map

Not property management related, but I think this is really cool. Move the slider and see when the leaves will be looking their best in your area.

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Industry News & Events

• Data Matters: How Data Impacts Your Client Experience. Free “Peter & The Wolf” webinar Oct 5th at 1pm Eastern. Register here.

• Sales Mastery Live (Allbound Conference) from RentScale - December 4th in Austin TX (right before the LeadSimple conference). I’ll be there! Register by Sept 30th for $100 off.

• PM Systems Conference - January! I’m speaking.

Quick Podcast Update

Are you a subscriber to my property management podcast Owner Occupied? If not, you probably missed the 2 most recent episodes:

• Property Management Sanity with Adam Willis

• Thinking Big with Mark Ainley

Mark and Adam are two of the most-respected property management company owners in our industry. It was an absolute pleasure to get them behind a mic and learn about what they’re doing to grow and stay profitable in 2023.

Closing Thought

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That’s all for this week! Have a great weekend -Peter

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