Nikonomics - The Economics of Small Business
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.
00:34:43 · Peter Lohmann, Nikolas Hulewsky
[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. [00:35:37] S1: That's freaking awesome. Alright. Well, I was gonna ask you what opportunities you're seeing outside of property management, but that's too good. I don't wanna distract anybody outside of property management. [00:35:45] S0: I don't wanna make it sound easy, though. I hope that came through. It's not easy, but you can do it.
00:35:45 · Peter Lohmann, Nikolas Hulewsky
[00:35:45] S0: I don't wanna make it sound easy, though. I hope that came through. It's not easy, but you can do it. [00:35:49] S1: I know it's not. This is my opinion. Pick your hard. Everything's hard. Yeah. Anything that looks like it's easy from the outside is difficult. Like, you get into it. I think we were talking about this, right? Like, you think it's easy, you get into it, you quickly realize it's not that easy, and that there's a reason why many people aren't doing what, you know, what you're trying to do. It's just a function of whether or not you have the ability to actually stick through it. So, yeah, I'm a big believer just in in pick your heart. So this was awesome, [00:36:19] S0: man. [00:36:19] S1: I appreciate you.