Mike Catalano and Steve Rozenburg Discuss Growth Through Acquisitions

All about Acquisitions: Michael Catalano and Steve Rozenberg Discuss Evaluation and Integration

Mike Catalano and Steve Rozenberg joined Alex on The Property Management Show to talk about growth through acquisitions. Mike Catalano is one of the most experienced property management owners to talk about acquisitions, and Steve Rozenberg runs a tightly systemized company and is thinking about acquisitions as part of his growth strategy.

Alex and Mike spent some time talking about acquisitions in 2015.

A lot has changed since then, and a lot hasn’t.

Why Would Anyone Want to Acquire a Property Management Company?

Steve has a successful company and is growing organically. He executes well. So why would he suddenly be interested in acquiring new companies? Many people would see it as an unnecessary headache.

But, you don’t have to grow one way or the other. You can use both strategies to grow – organic marketing and new business acquisition. When you’re trying to grow your property management company, you have to look at all the avenues. Adopting a growth through acquisition strategy doesn’t mean you have to stop pursuing your organic growth.

If you’re thinking about expanding into a new city, for example, acquisitions can get the momentum moving. It provides instant doors, an immediate presence, and a lot of momentum. You don’t have to build in a new market one property at a time.

When you have a strategy of both organic marketing growth to attract new leads, you win on every level. Your organic growth is steady and your growth through acquisition is immediate.

When should you not acquire companies? When you don’t have solid systems and procedures in place, and you cannot support the growth internally. As they say in the airline industry, that will get you to the crash site quicker. Acquisitions help you capture a market share, and you have to be procedural.

Before you buy: Operations and Sales/Marketing

When you’re buying another company, you need to know that the operations are in place. From there, you’ll decide what you’re going to change and what you’re going to keep. Once you know a company is set up operationally, take a look at their sales and marketing. Before you do any new marketing, you’ll want to make sure you have the capacity to support the new business it will bring in. You don’t want to bombard the staff you’ve kept on board.

Operationally, you want a company that has a structure allowing them to stand on their own. Structural soundness is essential before you acquire. And, every single company runs differently. Sometimes, you can learn from the companies you acquire. For example, you might buy a company with value-added fees and services that you never heard of before. Then, you can incorporate those into the rest of your business.

Evaluating the brand value is a little more complicated than evaluating a company’s operational soundness. You can look at the website, reputation online, and how long they’ve been in business. If a company has been around for 25 years with a percolating website, that’s valuable. But, it’s hard to quantify brand value.

The industry is learning metrics. Understanding value per door and the cost and value of the leads that are acquired every month are valuable tools in evaluating a brand. People are tracking more in this industry than they ever have before. So, the day will come when it’s easier to put a value on each brand. Some companies know their numbers and can talk about lifetime customer value and profitability. But, not all companies can currently say what their acquisitions costs are or how much they spend per lead.

Until it becomes easier to identify brand value, don’t evaluate for current opportunity. Evaluate for future opportunity.

Did you get that? Evaluate for future opportunity, not current opportunity.

Remember, that company’s reputation might be strong and you don’t have to change the name or intrude upon their brand. If they have a company name in the area that people recognize and embrace, leave it alone. They’ve been in business for a long time, so changing their name to yours won’t help you.

What is a Property Management Company Worth?

Property management companies are worth whatever a buyer is willing to pay.

Currently, the industry standard is pretty wide, and every acquisition is different. In general terms, your company is worth between 8 and 18 times the monthly gross revenue.

When you think about your monthly gross revenue, you’re not just talking about management fees anymore. It includes any consistent income on anything – from management fees to leasing fees to late fees, pet fees, etc.  A sample size of two or three years is also required to make these calculations.

The amount that company owners are willing to sell for often depends the motivation behind the sale. 

There’s now a generation of property management company owners getting out of the business. They often have lower valuations because they made their money, they ran a good company for a while, and they’re ready to exit. The newer companies that are operationally strong often want to exit in order to make money. So, they’re going to have a higher valuation. It’s a mixed bag, always.

It’s important to be selective.

Out of an average of 10 companies that Mike looks at, he probably buys one.

If it doesn’t fit, don’t force it. You have to be careful with what you buy or you’ll run into problems. 

The Deal: How Property Management Companies are Acquired

Cold calling is one way to find companies who are interested in selling. You can also speak at events, and let people know you do this. Banks hold trust accounts and they know who wants to sell. Talk to different groups like NARPM, PM Grow and Broker/Owner. Let your colleagues know that you’re looking to buy. 

Social media works, too. Facebook groups are full of people you’re trying to reach and hoping to target. You can share some information so people know you’re an authority; maybe put out an eBook. People can read it and take a look and ask questions.

Integrating an Acquired Company with Your Own

Integrating a new company can be a challenge, especially if you have a lot of momentum and depth and you’re able to execute with your existing company. It can be difficult to bring in a new part of your business that does things differently.

But, there are many ways to make it work, and it really depends on the company you’re acquiring.

Mike’s new strategy is that he doesn’t initially change anything. The accounting is integrated because it helps the company flow smoothly. But, there’s no change to pricing, and none of the property management systems are disrupted. Things run smoothly for a while and the employees are comfortable and productive. Then, new things may be introduced. The website is integrated. Contracts are changed.

This strategy has helped Mike keep a 100 percent retention rate in his last two acquisitions, which is pretty remarkable. So, for companies that are running well on their own, there’s not any reason to force the integration right away.

If the company is not aligning or there are problems that need to be addressed right away, you can work with an immediate integration and change all the contracts. Sometimes, that’s the only way to do it. It depends on the team and the alignment between the buyer and seller.   

Don’t fix what isn’t broken.

You can buy a company and do nothing to it, and you’ll still make money. But, if you buy a company that’s underperforming, you can systemize it on the back end and make it scalable. You’ll want to look at it on a case-by-case basis.

Owners need to be notified when ownership changes, and that also depends on the seller. Letters are sent out to tenants, and then Mike works with his sellers to notify the owners. Sometimes the seller makes a phone call, sometimes they make the phone call together, and sometime Mike calls to introduce himself and does it on his own. The goal is to keep it as personal as possible.

Let the clients know there won’t be any changes. They need a familiar face, so consider keeping the owner on staff for a few hours every week. Then, that time commitment can taper off. Keeping your clients makes the profit higher for the buyer and the seller.

Work together.   

There’s a lot more to talk about when it comes to acquiring property management companies.

Contact Steve at steve@empireindustriesllc.com. He wants to acquire property management companies in Texas, the Midwest, or even in the east. Mike can be reached at mike@recproperties.net. He’s looking to stay in California, but will make an acquisition work anywhere.

You can also contact either of these two through Alex.

Don’t forget about our podcast property management website special!

Visit fourandhalf.com/grow to learn more and to receive an exclusive podcast offer of $400 off your next property management website!

Thanks for joining us, and if you have questions about The Property Management Show, contact Alex at Fourandhalf.

Alex Osenenko

About Alex Osenenko

Alex’s professional mission in life is to help small businesses grow and thrive. Alex is the President and CEO of Fourandhalf.com and a Co-Founder of the PM Grow, Inc. His business philosophy is simple: Happy Customers are created by Happy Employees, which results in Happy Shareholders. Alex's deep commitment to entrepreneurship and improving the lives of small business owners everywhere empower him to host “The Property Management Show” bi-weekly Podcast and speak internationally on the subjects of Growth, Marketing, Sales, and Entrepreneurship.

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Alex Osenenko
President and CEO

Alex’s professional mission in life is to help small businesses grow and thrive. He is the President and CEO of Fourandhalf.com and is serving his 5th year on the Board of Directors for CALNARPM.

After spending 9 years in the trenches with his property management clients, Alex draws on his experience to host “The Property Management Show” Podcast and co-authors a weekly Property Management Blog on Fourandhalf.com. Alex has extensive experience speaking for various NARPM events at the local, state, regional and national level.

Alex is a graduate of San Francisco State University with an Electronic Commerce Systems Degree. His business philosophy is simple: Happy Customers are created by Happy Employees, which results in Happy Shareholders. Alex serves on the Board of Directors of CALNARPM (California Chapter of National Association of Residential Property Managers) and hosts a Podcast “The Property Management Show“, available on iTunes.

 

John Bykowski
Chief Operating Officer

After graduating from the University of Michigan with a film degree, John proceeded to do everything but. During his career, John has specialized in operations and has developed processes for small companies in diverse industries, such as bleeding-edge marketing technology, social networking, trade shows and exhibitions, and cloud software. John and Alex had worked together previously, and when he needed someone to help take Fourandhalf to the next level and beyond, Alex brought in John as his first employee, and later, business partner.

In addition, now that he’s using his film school know-how to help property managers look their best in their blogs, his mom no longer feels his degree was a complete waste of time.

Danny Morris
Director of Account Management

Born in Australia and growing up in Israel, Danny has spent a lot of time traveling the world between those two places. After completing his military service in Israel, Danny began following his biggest passion, writing, which he discovered while backpacking South America and publishing his first book.

When it was time to unpack, he returned to Australia to complete his Journalism studies amongst the beaches of sunny Perth. Danny is a huge online fan and after working in a number of related jobs, he finally gets to combine his two favorite things, working with media and people.

Marina Osenenko
Product Manager

Marina draws upon her real estate, business operations and customer service expertise for Fourandhalf. Her favorite part of being with Fourandhalf is the opportunity she has to really get to know our clients, build professional customer relationships and truly be part of a team that assists in their success.

Her time away from work is happily spent watching her children grow up and attempting to keep up with them! Any spare moments beyond nurturing her children are filled with hiking, spending time with friends, exploring the Bay Area and squeezing in a non G-rated movie every now and then.

Marie Liamzon
Product and Marketing Manager

Before joining Fourandhalf, Marie worked for one of the largest banks in the world. She took on different roles, but couldn’t find what she was looking for. She pursued a variety of side projects until she finally decided it was time for a career change.

Marie is very passionate about helping people and learning new things. In her spare time, you might catch her exploring new places and taking far too many pictures.

Kyle McLean
Customer Success

Born in San Diego County, Kyle McLean has since migrated to the Oakland woods. A fan of tall trees and tall tales, he holds a bachelor’s degree from the creative writing program at the University of California, Riverside and is a licensed California Certified Shorthand Reporter.

After a few years as a freelance court reporter, Kyle has joined Fourandhalf for an opportunity in sales and digital marketing. In addition to reading and writing, his hobbies and interests include gardening, hiking, soccer, coffee brewing, and craft beers.

Karen Wyle
Account Management

Originally from the Philadelphia area, Karen moved eight times in seventeen years all over the East Coast and to the Midwest before settling here in Northern California six years ago. She is an alumna of Brandeis University with a BA in American Studies and earned a MBA in Marketing Management from Indiana University in Bloomington. Karen’s business career has been well-rounded, with experience including advertising, direct marketing, corporate retail, product management, new product development, and new customer generation. Beyond an office setting, she has been thrilled to volunteer her time giving back to the community with KPMG’s Family for Literacy, at her daughter’s school, and as a Girl Scout Troop Leader. Karen enjoys music, good food, traveling to new places, completing jigsaw puzzles, meeting people and making connections.

Karen became a part of Fourandhalf’s Account Management team in 2016, relaunching her marketing management career after a pause to raise her family. She is excited to rejoin the business world and to work with such a strong marketing management team.

Paige DeRuyter
Account Management

Paige graduated from Chico State University with a degree in Journalism. Her favorite part of working at Fourandhalf is helping clients create and produce educational blog content to grow their business. She is an avid sushi enthusiast who enjoys riding her bike and watching college football and in her free time.

Nissim Boozaglo
Web Hosting Support

After working as a Radioshack store manager, Nissim decided to change his career path and pursue his passion for music production by getting his B.A.S. from Expression College for the Digital Arts. Nissim has a beautiful 8-year-old girl and loves cooking delicious homemade food and going camping with her! At Fourandhalf, Nissim is responsible for the implementation of the clients’ Landing Pages and Google Adwords campaigns.

Theresa Barnes
Campaign Director

Theresa Barnes was born and raised in the Bay Area and graduated with her Bachelors Degree in Communications Studies at San Francisco State University. She worked in aviation at a private FBO for 3 years, and other industries, before joining the Fourandhalf team. She finds a balance between being a young mother, work, and living a healthy lifestyle outside of work by staying as active as possible. She is dedicated to customer satisfaction and having a great work ethic.

Brittany Stephens
Campaign Director

Brittany recently moved to the Bay area after graduating from California State University Chico with a degree in Business Marketing. She is known for her excellent communication, customer service skills, and shameless nerdyness. Her passions include: music, tabasco, Lord of the Rings, and the Golden State Warriors.

Logan Jones
Business Development

After graduating from CSU Chico with a Degree in Business Marketing, Logan moved back to the East Bay and pursued a career in sales. With an attention to detail and a relentless drive, he strives to improve himself and his passions each day. When not at work Logan enjoys playing guitar and writing songs, and occasionally performing around the Bay Area. He is an avid sports fan keeping up with everything SF Giants, 49ers, Cal Bears, and Golden State Warriors.

Hope Lumbley
Account Management

Hope recently moved to the Bay Area after graduating from Chico State University with a degree in Journalism. She is coffee crazed, dog obsessed and hopes to visit all National Parks. One of the greatest times in her life was when she lived abroad in Costa Rica and hopes to travel more of Central America in the future. She feels blessed to work for a company who supports her love for travel and the need to learn more about what the world has to offer.

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