How Much is your Property Management Company Worth?

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We highly suggest every property manager has insurance, but, do you know how much your company is actually worth and how much you would loose if you lost it all?

There is no cut and dry calculation to determine the value of your company. You can have two different professionals do calculations but even then there could be discrepancies between the two numbers. The most common techniques looked at are your ability to generate sales with cash flow and the value of your assets.

When using the cash flow technique you will use a multiplayer against your actual cash flow/profits each year. In order to qualify for this calculation you need to have low fixed costs and very few assists. These numbers will be looked at over a  5 year period. In this method, disagreements can occur regarding calculation of cash flow and estimated sales projections. These numbers fluctuate where the owner takes profits from the company. This is called “recast” The actual multiplying number is not just pulled out of the air. There is a standard of 2.0-4.5 range. Here is a break down if your annual profits are 150,000 per year your company is actually worth $300,000-675,000.

The second way to calculate your companies wroth is thru the assists you have required. Unfortunately many companies are sold under less then ideal conditions. Their cash flow may be on the downfall or non existent. When this happens the company will sell for the lowest price. many aspects contribute to your assets such as customer list, logo, branding,  contracts, and patents. If you ever find yourself in this situation we highly suggest getting an appraiser.

These numbers have a large range yes, however, this calculation will help you determine how much you could sell your company for as well has how much insurance you should carry. Don’t forget it’s not if you are going to get sued it’s when. Talk to your insurance agent about how much insurance you should actually carry with comparison to how much your company is with.

 

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rents2richesHow Much is your Property Management Company Worth?