Nikonomics - The Economics of Small Business
00:29:35 · Peter Lohmann, Nikolas Hulewsky
[00:29:35] S0: So that that would be probably top priority. I would probably then focus on the the PPC because that's kind of instantaneous. The SEO stuff takes a while no matter what you do. So I would do that probably third. [00:29:46] S1: I think it's interesting. I'm come from a more operational background, but a lot of people when they're doing these, they think I just got to get customers, customers, customers, I got to grow revenue, grow revenue, but there's a whole other side of the equation, which is fulfillment. Right? So it's like, okay, I could get a 100 doors within six months. But then there's the fulfillment. There's actually doing the property management piece. And again, constraints are within six months. Are there plug and play like, Hey, here's your operating system that you need, you know, use these softwares. This is how you intake someone. This is how you do a background check, etcetera. Or do you have to figure that out on your own every single time?
00:30:21 · Peter Lohmann
[00:30:21] S0: There's a healthy ecosystem of vendors and software products and suppliers suppliers in our industry now. This wasn't the case like ten years ago, but today it is. And so you can sign up with a company like RentVine or Buildium or AppFolio, and they will have most of what you need to do the basics. They'll have some sort of a built in tenant screening. They'll have a way for you to send leases electronically. They'll have a way for you to collect rent online. And a lot of that is going to be built for you, you can kind of stand up and start operating the management company. That is the good news. The bad news is that property management is filled with an operationally complex nightmare of intricacies and details. You're dealing with structures that are continuously depreciating and falling apart. Mhmm. You are dealing with people and their house, their home where they live, and they come there every night, and their kids are there, and their guests are there, and there's refrigerators, and there's air conditioners, and there's bathrooms, and there's doors, and there's windows, and there's blinds, and all of these things. And you are also dealing with money, and it's not your money. It's... You are in trust. You are in the property owners entrusting you to deal with their money. And so there's a much higher level of expectation around things like accounting and reporting and transparency when you are handling money and trust, which you are as a third party property manager. By the way, this is also people's largest monthly bill, that is the rent, and it's your client's largest asset. And so the stakes are very, very, very high for everybody involved. And if anything goes wrong, you get blamed. So it's a lot.
00:32:10 · Nikolas Hulewsky, Peter Lohmann
[00:32:10] S1: No pressure. [00:32:10] S0: And this offer is great and everything, but the day to day reality of running a property management company is that it is difficult. I will say that. [00:32:19] S1: I agree. Alright, so I'm going to ask you two final questions. One of them is what opportunities you think are the biggest opportunities within property management? And the other question is what opportunities do you see right now that you're excited about outside of property management? But before I do that, cause if I do this at the end, everyone's gonna just like skip and tune out. Quickly give us where can people come find you? [00:32:41] S0: So you can find me on my website, peterlohmann.com. So if you go there, if you do nothing else, I would sign up for my newsletter. I write a weekly newsletter. It's all about property management. We've got property management companies for sale, news from around the industry. I'm sharing kinda what's working, what's not working about my business. Like, earlier last year, I wrote an article about how we lost over a 100 doors in six weeks and got a lot of feedback on that. Kinda. I'm sharing all the highs and lows of everything. So if you're into that, go ahead and sign up there.
00:32:41 · Peter Lohmann, Nikolas Hulewsky
[00:32:41] S0: So you can find me on my website, peterlohmann.com. So if you go there, if you do nothing else, I would sign up for my newsletter. I write a weekly newsletter. It's all about property management. We've got property management companies for sale, news from around the industry. I'm sharing kinda what's working, what's not working about my business. Like, earlier last year, I wrote an article about how we lost over a 100 doors in six weeks and got a lot of feedback on that. Kinda. I'm sharing all the highs and lows of everything. So if you're into that, go ahead and sign up there. [00:33:09] S1: Alright. First question. What do you think are the biggest opportunities within property management right now? Let's say that you had to start a business that was adjacent to the property management space. So you couldn't necessarily own a property management company, but you could be maybe one of the vendors or within the real estate space. What opportunities are you seeing?
00:33:09 · Nikolas Hulewsky, Peter Lohmann
[00:33:09] S1: Alright. First question. What do you think are the biggest opportunities within property management right now? Let's say that you had to start a business that was adjacent to the property management space. So you couldn't necessarily own a property management company, but you could be maybe one of the vendors or within the real estate space. What opportunities are you seeing? [00:33:26] S0: Right now, there's a bunch of big sort of private equity or VC backed groups that are that are acquiring and have been acquiring property management companies all around The US. There are... Honestly, a lot of them are not doing a great job. And so the clients who who were, you know, were previously with, like, some local management company that got sold, They are looking. And so even now, I think what we talked about earlier, like starting a company and growing it to a 100 doors, is still a great opportunity. There... That is still very... A viable path, And there are still a ton of groups rolling up property management companies. If you can get to like 200, 300 doors, you can sell your management company to any one of a dozen different strategics and do very well. [00:34:17] S1: 300 doors, I'm doing $800,000 of your top line, dollars 200,000 of your bottom line. What does that sell for? [00:34:24] S0: So at that size, I would expect you could get at least 1.5 x top line for your business. Wow. And the bigger you get, I would expect to get more like two X top line. Yep.
00:34:24 · Peter Lohmann, Nikolas Hulewsky
[00:34:24] S0: So at that size, I would expect you could get at least 1.5 x top line for your business. Wow. And the bigger you get, I would expect to get more like two X top line. Yep. [00:34:36] S1: That's like five, six times EBITDA. Yeah. On the smaller end of the, wow, that's incredible. Is it just because the customers are so sticky? [00:34:43] S0: It's an operational nightmare like I talked about, but the business sort of fundamentals are strong, which is that it's a sticky, contractually recurring revenue. Most of these folks are on one year agreements minimum. And then there's also really great cash flow dynamics. There's very few expenses that you have to outlay, capital expenses, and you also collect your fee right from the rent. So there's there's literally no AR. We don't have an AR function in the business because we just get paid right from the rents. And if you set it up right, you can actually you can actually have, like, a negative cash conversion cycle. So there's a lot of things that make it attractive. But, basically, these big groups that are funded by private equity and VC money, they see that you have 300 doors, you know, in, you know, some city, And they're just like, yeah. We wanna get into that city. We wanna expand, and and they just they just pay up for it because they they want all those contracts. It's like selling a book of business for for most of these guys.