When you are getting into the property management game, the last thing that you are considering is how you will exit it; however, this is a very important aspect of running a property management company. While you may not think of creating your exit plan until shortly before you plan on retiring, it is something you should have starting day 1. Exit plans often take much longer to implement than expected and you don’t want to be stuck doing paperwork when you want to be retired. Additionally, exit plans aren’t a one-size-fits-all, your plan should be personalized to you and your needs. Consider your financial, legal and emotional needs and plan accordingly.
While everyone’s plan is different there are 4 key steps to a sound exit plan:
- Streamlined Operations
- Financial Strength
- Emotional Considerations
- Execution of Plan
The first step is to streamline operations. This is important because you want your company to be able to run smoothly and profitably without you. You should do anything in your power to achieve this whether it’s updating systems, policies and procedures or changing employees and organizational structure.
Consider the Emotional side of the exit. Is your company, your baby, or you ready to move on? Put thought into what your life will look like after you exit. This isn’t the type of decision you want to regret or wish you had done differently. Although it’s good change, change is still scary.
To ensure your exit strategy is sound, you may want to consider meeting with advisors. A financial planner can help you plan for life after you exit, ensuring you don’t run out of your retirement fund. A business tax expert can help you identify and avoid taxes based on how you sell/exit your company. Finally, an attorney can help with the actual exiting/sale process including negotiations, paperwork and more.
The last step is to execute your exit strategy when you are ready! Start by determining the valuation of your property management business. Next, find the right buyer. As you are emotionally and financially invested it is crucial to find the right buyer. Consider how they will run the company in the future and how their values align with yours. Pay attention to how the deal is structured and to protect yourself financially. Consider if you want to receive a stream of income or a lump sum. Last, prepare yourself emotionally for exiting. No matter how much you prepare, there will still be an adjustment period after you exit.
If you are interested in more information on property management exit strategies, come see my talk at the 2020 NARPM® Broker/Owner Conference & Expo in April. I will be diving further into exit strategies and how you can walk away wealthy. I look forward to seeing you all there!
Kathleen Richards, is the owner of PM Made Easy and The Property Management Coach. With her 13 years as a broker/owner of a property management company she speaks from experience. Kathleen authored, Property Management A-Z and teaches regularly at community colleges and conferences on property management topics. She is active in her field and holds professional designations as Master Property Manager (MPM®) and Residential Management Professional (RMP®) and her company held the coveted, Certified Residential Management Company (CRMC®) designation from NARPM®. She is currently a National Instructor for NARPM® and is honored to be sharing best practices with other NARPM® professionals. Kathleen has served at the local and state level on the boards for NARPM® (National Association of Residential Property Managers