Hopefully, you already know who Stephanie Gordon is.
She’s one of the most influential and talented property managers in the United States. As the founder and CEO of Gordon Property Management in San Francisco, and she has been a successful business owner and thought leader in the property management industry for decades.
Last July, she sold a large part of her company to a trusted team member.
Stephanie joined us on The Property Management Show to talk about how she came to that decision and what the deal looks like.
Exiting Your Property Management Company by Selling 49 Percent
Meghan Guerin is the person who bought nearly half of Stephanie’s company, and they’ve been working together for over 15 years. Meghan knows the business, and Stephanie had always told her that the business would be hers one day. It kept Meghan working and learning under Stephanie’s mentorship, and provided a path towards growth.
Stephanie and Meghan talked about this plan for years, and it took on a new urgency a few years ago, when Stephanie began to feel burned out. Her company has grown a lot over the years and she knew it was time to start thinking about an exit strategy because her attitude had shifted and she wasn’t feeling as motivated as she once did.
After 32 years of property management, burnout is understandable.
So, she took a look at all of her financials and tried to decide if early retirement was possible. It was possible, but it wouldn’t necessarily be comfortable.
While she was doing a walkabout in one of her favourite neighborhoods, she had a moment of clarity where she realized she didn’t have to sell the whole business.
It was a simple solution that would mean she didn’t have to retire, but she also didn’t have to continue working at her current pace. She would sell half of the company. Meghan agreed and they began to work earnestly on transitioning into co-owners and partners.
Last July the deal was closed: Stephanie owns 51 percent of Gordon Property Management, and Megan owns 49 percent of Gordon Property Management.
Math Matters: Owning 51 Percent versus 50 Percent
Most financial experts Stephanie consulted advised against an even split. With Stephanie retaining 51 percent of the company, she’s still in charge. If there’s a disagreement, Stephanie has the final say and the majority control. That’s important to her since she’s not ready to give up the business entirely. No one anticipates a situation where Stephanie has to outvote Megan, but if the unthinkable happens – she is prepared and protected.
How They Closed the Deal for Stephanie’s Exit Strategy
Greg Crabtree, the author of Simple Numbers, was a huge source of support and inspiration when it came to understanding the company’s financials and potential. Greg worked with Stephanie to analyse and dig deep into what all of her income meant and all of her expenses. They picked apart every line item in her budget and created reports and graphs that showed her what she needed to know about the health of her company. She began to see patterns in her financials and what that meant for her company’s value and her financial potential. She could take a clearer look at how her maintenance revenue impacted her income and what she was spending on maintenance staff. It gave her a clear picture and a detailed report.
Stephanie consulted with Greg for six months and worked with Danny Craig and Jordan Muela at Profit Coach. She found the information and its meaning to be fascinating.
She and Meghan poured over the data and arrived at a sales price and financial breakout that made sense to both of them. There was not a lot of negotiation; they were on the same page.
This tells you how well Megan knows the business.
Paying the Price: How to Fund the Sale
Stephanie loaned Meghan the money to buy half the company. It’s a 15-year loan that provides Stephanie with some income that’s tax-friendly over the course of the next 10 to 15 years. It also allows Meghan to pay off the loan while still enjoying the financial perks of owning a property management company.
They also had to think about what happens after the deal. Stephanie can buy Meghan out and Meghan can buy Stephanie out. The purchase agreement is pretty detailed about what needs to happen if one party wants to sell their part of the business to the other.
This is important and if you’re creating a deal with anyone to buy part of your company, you want to cover the Four Ds – Divorce, Disagreements, Disability, and Death. The agreement Stephanie and Meghan put into place covers all of these things and it’s been reviewed by two lawyers.
The Many Ways to Exit Your Management Company
There are a lot of property management companies that are family businesses, and that often makes an exit strategy obvious: your company goes to your kids.
But, not all children want to inherit a property management company. Stephanie’s kids grew up while she built her company and expressed no interest in taking it over. They remembered the apartment showings in the evenings and the middle-of-the-night phone calls. Her son did some leasing for the company for a while but was anxious to return to his chosen career field as a teacher.
A lot of property management company owners get attached to the idea of handing off the business. But, if it’s not something your kids want, don’t force it. They won’t pay attention to the business the same way you do. They won’t be excited or passionate about it.
There are other ways.
Meghan was an easy choice for Stephanie’s. She has been working at Gordon Property Management for a long time, and she knows the business and the clientele and the industry. She also holds her broker’s license in California and is one of the few professionals to have passed that exam on the first go-round. Meghan is organized, calm, friendly, and really good at sales. It was always going to be Meghan.
What Stephanie’s Role Looks Like Now
Now, Stephanie is working on the business not in the business. She doesn’t have a desk or an office, and she’s not dealing with any of the day-to-day company operations at the company. Instead, she’s using her time to grow and improve the company. For example, she’s nearly completed re-writing her property management agreement. She’s working with Andy Moore of Gulf Coast Property Management to implement EOS at Gordon Property Management. This is important because they’re putting together an organization that can run without Stephanie, and Meghan has not replaced herself yet. A new hire has to be next.
Without going into the office, Stephanie is taking the company to the next level by paying attention to where the industry is going. She’s following all of the tech and the venture capital money that’s flooding into the industry. There are a lot of new tools to learn, and she’s gathering all the resources that will improve the efficiency of her company and make Meghan’s life easier.
The new ownership structure was announced to the team at a company lunch meeting. No one was particularly surprised. The team has been reporting to Meghan for years, so this didn’t feel like a big deal to anyone.
Stephanie’s next order of business as a four-month sabbatical, which was much needed after the deal was closed.
She composed an email for her clients to let them know what was happening.
The brilliance of this email is that it was personal. She told everyone that half the company had been sold to Meghan and that she was going to spend some time relaxing in her garden in Sonoma, playing with her granddaughter in Virginia, and traveling to Italy.
This is excellent customer service. She didn’t want to send an email that said “I sold half the company and now I’m leaving for four months.” Rather, she shared her story. It worked well and she received a lot of warm, supportive, and touching emails from her clients.
How to Exit Your Own Property Management Company
You should be thinking about your own exit strategy, no matter where you are with your company. Choose a way that works for you. Don’t sell half your business to someone you don’t know and trust. If you have a Meghan in your organization and you can structure a sale this way, you’ve really got something to work towards.
However, it’s not for everyone.
You need to provide your employees with a path for growth in your company, and if you have a shining star – create a future. Make sure that shining star has everything he or she needs to learn and grow. Give them the gift of time. You’ll need at least a year to establish and reach your financial goals. You’ll need time to figure out what this will look like and what you’ll need to make it happen.
When you’re ready to transition, don’t worry so much about growth during that period. For Gordon Property Management, they are more interested in implementing this new system of working and setting themselves up for smart growth.
If you have any questions for Stephanie – she doesn’t have an office phone anymore. But, you can find her at some of the best property management conferences and mastermind groups. You can also contact us at Fourandhalf for any questions about growing your property management company – or even exiting from it.