Managing Your Firm
Running the management business
Managing a property management firm requires business planning, organization design, policies and procedures, client selection, management agreements, pricing, financial controls, quality assurance, technology, and succession. Know the difference between revenue, gross fee income, direct property labor, overhead, and net profit by client. The management agreement should define scope, authority, fees, reporting, termination, indemnification, insurance, and owner responsibilities. Growth should be gated by systems, staff capability, and cash.
Traps
Common traps are unclear scope, underpricing to win business, and failing to track profitability by property or client. Commingling owner funds with firm funds is a serious control failure. Do not assume a percentage fee is profitable; a low-fee, high-touch account can lose money. Also watch for auto-renewal or termination clauses, unreimbursed costs, and growth that outpaces systems and trained staff. Review contracts and fee schedules annually.
Worked example
A firm manages a property with $1.2 million in annual collections at a 4% management fee. Fee income = $48,000. If direct staffing, accounting, insurance, and overhead allocated to that client total $55,000, the account loses $7,000 per year before owner-requested extras. Rule of thumb: calculate client-level contribution margin, not just total firm revenue; fix or exit accounts that consistently fail the margin test.