How Much Do Managment Service Organizations Charge?

How Much Should I Charge For My Management Services?

Note: This commodity has been updated since information technology's original publication.

Determining a pricing construction for your community association management services

When yous are trying to break into the community association management business, i of the things that can be a existent roadblock to getting your new business off the ground is figuring out what to charge.

If you lot take not worked in that area of the country before, or oasis't worked with the kinds of communities your new business organisation is targeting, you may non fifty-fifty have a ballpark effigy from which to start.

Let's talk nearly the dissimilar ways direction companies set their prices and how y'all can determine how much yous should charge.

Step Ane, Gather Intelligence

Selecting your fee is something that is very specialized to the services y'all provide, your location, and the amount you can carry (what the market place will acquit vs your competition vs your feel).

I know you're hoping that somewhere in this article I volition give yous an exact number and say "Start pricing here". But I'chiliad not going to practice that at all, because things may be vastly different where I am than from the standards in your cervix of the woods. So you may lose accounts due to my price existence likewise high and seen as unreasonable, or it may exist too depression and non exist able to sustain you lot on anything but a Ramen noodle nutrition for the foreseeable future.

What I am going to exercise is talk well-nigh how you can decide for yourself what you should accuse. First, you desire to work out the answers to some important questions:

What will the Market Bear?

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You don't want to price your services besides high or you'll price yourself out of the running, but at that place is also a risk of pricing yourself and so low that the lath thinks, 'There must be something wrong with this visitor if they are and then cheap.'

You demand to learn what your target audience is currently paying in fees so you can measure your own fees against that. You don't desire to price your services too high or you'll price yourself out of the running, but in that location is also a risk of pricing yourself and so low that the lath thinks, "There must exist something wrong with this company if they are and then cheap."

Short of direct industry noesis, your best pick is to ask the manager or board treasurer of your own HOA for a copy of the upkeep (and have friends and family unit do information technology in their associations). The customs's budget is agreed upon by the general membership, and then as a member of the community, you should be able to get a re-create of that yr's upkeep simply past asking.

Yous'll find the direction fee line in the budget, but as well wait for reimbursement expenditure lines too to get as accurate a motion picture of what the customs is paying the property management company every bit you can (more on that in a minute).

What will the Client Conduct?

Regardless of the market, sometimes you have to cater to the specific client you are trying to woo. Consider the fee structure of the community.

A modest 24 unit building, fifty-fifty with a pool may merely be charging owners an annual corporeality, lets say information technology's $300 per year per owner. That means the full amount of money going into the community's coffers is $7200 annually, or $600/month. Out of that comes all of the budgeted expenses for the community, service provider fees (pool care, lawn care, garbage removal) as well as the big i, reserves. That doesn't leave a whole lot left over for your management fee.

Whenever you practice a proposal for a community, brand sure you take done your due diligence so you don't lose your seat at the negotiating table earlier y'all ever have a take a chance to sit down. You lot may find that tiny communities such every bit the 1 in the example simply are not worth your while to bid on. Ameliorate to larn that lesson now and then when yous are sitting across the table from the board, or worse, a year downwardly the road when you realize how much you are losing on this customs.

What are my Expenses?

Your business organisation has expenses you demand to encompass also – rent, electricity, bacon (even if you are just paying yourself, you notwithstanding need to make at least enough to encompass those Ramen noodles). How much will you need to pay for gas and phones? How about capital expenditures like computers and software? Also don't forget about taxes (you have to pay employment tax on yourself as well, yous know!)

Take all of your expenses and figure out how much it will be per month and you have a minimum corporeality that you tin can have just to survive.

How practice I know what salary to pay myself?

I know I joked nearly Ramen noodles, merely I want to say something specifically virtually salary. Entrepreneurs in particular are notorious for skimping on their own salary to become their business up and running, and that is perfectly acceptable, since the potential payoffs if y'all succeed tin can brand well-nigh starvation seem well worth it. That said, when you are setting your fees, you should at the very least be enlightened of what kind of salaries are sustainable in your geographic expanse.

It's of import to set a bacon for yourself when determining your expenses, because even if you wind up reinvesting that money into the company instead of yourself, you are still giving yourself that absorber to fall back on should you demand information technology.

Y'all should be paying yourself a reasonable salary that you can include in the breakup of your expenses if you lot should ever need to show that to a customs association lath. CAI does a salary review every three years that they publish (here is 2013) For a more than recent (but more regional) salary written report, you can check out the FLCAJ 2014-2015 Bacon Data Survey. Still, for but a quick regional check based on reports by actual community association managers in your area, you can employ GlassDoor.

Step Two, Set a Rate

Once yous know your expenses, it's fourth dimension to calculate your charge per unit. Standard business organization exercise is to account for a 10-20% profit margin on meridian of expenses. Some startups go as much equally 50%. I call up information technology really depends on your experience in the industry and what kind of clients yous will exist targeting (gated, luxury communities can handle a larger fee, only they too need more than of your time and attention, so you should definitely accuse for information technology!)

If you charge simply enough to encompass your expenses, you'll never have plenty majuscule to hire on more than employees, or you'll wind upwardly working yourself to the bone

The fundamental is you need to have sustainable rates, that is rates that will enable your business to abound into the future. For case, if you charge just enough to cover your expenses, yous will never have plenty capital to hire on more employees, or you lot will wind up working yourself to the os with more and more than clients to try to make plenty to accommodate the growth of your business.

So you tin can take your corporeality of monthly expenses and add a multiplier (for example, 1.2 for 20%) to set your monthly charge per unit. Next, dissever that number by 173.ii to get your hourly charge per unit.

Step Three, Cull a Charge Method

In that location are 3 main charge methods that management companies employ: all-inclusive, variable plus amended reimbursements, and the matrix model. Each of these has their pros and cons, and different parts of the state favor one or the other. I would encourage you to consider all of your options and cull the method that makes the near sense for your business. Y'all may notice that a modified version that combines elements of two or fifty-fifty all 3 of these is best for you.

All Inclusive

With an all-inclusive fee (flat fee per door), the management visitor assumes that it takes a relatively equal amount of endeavor to manage a single home in any community. So the direction fee simply varies based on the number of homes in the customs, and does not business relationship for additional work or procedure.

While all-inclusive charging sounds actually piece of cake, information technology can actually be the least accurate method of pricing your services. Unfortunately, all things are not created equal, and a community with 10 homes could have up far more than of your time and free energy than i with g homes.

One major downside of all inclusive pricing is that there is little fashion to accurately predict how many copies, mailings, additional meetings, etc. y'all will need to do for this community. Management companies who use this method often wind up losing money on the contract and not getting paid for the volume of work they are doing. (In that location is also little room to grow or negotiate in this method. Because it is a flat fee, the value of the private services being rendered are not represented in the fee structure.)

If you choose to get with an all-inclusive model, you lot should appropriately increase the base of operations fee by a cistron of 10-20% to adapt for all of the 'extras' that may come upward over the course of fulfilling your contract.

Variable Rate

hoa-property-management-software

With a Variable Rate model, the management company sets a low price "fixed" price for the management fee. This is often very competitive (read cheap) and barely covers the direction visitor's expenses. (Sometimes, it is a loss leader and does not even cover expenses.)

This low fee is offset by Addendum Charges that cover every action not outlined in the actual management fee (copies, minutes, postage stamp, attention meetings, gas, newsletter, inspections, collections, insurance claims, vendor management… pretty much everything except the bare bones nuts that are included in the contract.)

Imagine going to a fast food restaurant and ordering fries from the dollar menu, but to go charged $7.fifty. When yous exclaim 'How can it be then much?' the cashier explains the fries were one dollar but you were too charged for the container they were in, the salt on them, the napkin they gave you with information technology, the ketchup, and a portion to cover future repairs on the deep fryer. As you might imagine, this method of charging does not go over well with clients, who see these extra charges as "hidden fees".

If y'all cull to get with a variable rate in order to remain competitive with other management companies in your area, be certain that your schedule of reimbursable charges is very clear and that the lath understands how your charges will be presented.

Matrix Model (Cafeteria Mode Bill of fare)

Think of the Matrix Model similar a menu at a cafeteria, you can see every item clearly marked in price. If you want meatloaf and mashed potatoes, you lot see the price for each of those. You can choose if you want to include that succulent looking slice of strawberry pie. If you manage to resist picking up the pie, yous practise not take to pay for it, merely you can ever go back and get information technology afterward.

The matrix model outlines a matrix of each and every service you are able to provide, a number of hours per calendar month you lot would demand to spend on it and the number of times in a year the chore would be performed, times an hourly charge per unit, then adds up all of those values to get the management fee.

The value of the matrix model is that you can easily negotiate with Lath Members to institute a customized ready of services you volition provide to them, also as getting their purchase-in on the costs of adding additional services.

For example, if the Board has a Secretary who is comfortable taking notes at the board meeting, they do not need you lot to handle the minutes. No trouble, that'southward 1 60 minutes a calendar month at $25/hour that y'all tin can remove from the price. However, if a month down the road the Secretary decides he isn't comfortable taking minutes, the board knows that's going to add $25/calendar month onto the fees, since they are adding on a new service. There is no need for negotiation or give-and-take, or request you to practise it for free every bit a favor to the board. They know how much it costs (it'due south on the carte du jour) and they take already agreed to that pricing structure, so it's just a matter of course – if yous want pie with that, you accept to pay for it.

A great explanation of the cafeteria fashion menu was covered by James Bradley in his webinar on Behavioral Economics for community association management. If you lot take an hour, watch the whole matter. But if you only have a few minutes, the department on pricing starts at 23 minutes in, and the department on the deli menu is at xxx:35.
Pricing Matrix Worksheet

Pace 4, Finishing Touches

Once you take selected which charge method you want to use, your next footstep is to beginning putting information technology all together. You'll need to develop your schedule of reimbursable charges, and break down your fee on a per door ground. Both of these things should exist included in your management contract, and then the there is no confusion or dickering over price in one case the contract has been canonical and signed.

While writing this commodity, I consulted with PCAM Andrea Meyer Smith, and she had this advice to offer from her many years experience running a successful management visitor:

The master thing I learned over the years is to document everything that tin can occur outside of your routine services and document a charge for it or they will want you to do it without bounty.

Items such as website maintenance, insurance claims, projection oversight, fifty-fifty cyberbanking. I had one HOA that had us open accounts at vii different banks which took my CFO two full days to get to all of them and prepare all the necessary paperwork!

Nosotros fifty-fifty deemed for Board training when a new member wanted to come to our office and spend a half 24-hour interval questioning how we practise everything considering it would require 1 of united states to go through every process and explicate financial direction to them.

The purpose of the reimbursable charges schedule is to get paid for your fourth dimension for special projects and meetings that are non routine."

Schedule of Reimbursable Charges

A schedule of reimbursable charges (likewise chosen Addendum Charges) can (and should) exist used in conjunction with any pricing model. This worksheet is ordinarily included as office of the direction contract, and details all of the costs that the direction company volition laissez passer on to the community, and at what charge per unit. We offer a sample schedule of reimbursable charges hither.

While you SHOULD use a schedule of reimbursable charges, you lot need to exist very conscientious most arbitrarily inflating rates. For instance, $1.50 per mailed slice. This would cover a lot of things: the price of press the piece (wear and tear on equipment as well as the actual cost of ink and paper), the labor of physically folding the folio and putting it in the envelope and sealing it, the postage for mailing it, and any handling that needs to be done, such as taking it to the post function, or filling out a return receipt form.

It seems reasonable when you lot spell it out until you recall about the fact that for a 300 dwelling customs, if the management company is sending out on average five letters per homeowner per month, you are talking an extra $2250 per month that the community didn't budget for when they hired your company. Plus, between your discounted bulk postage charge per unit and your specialized folding motorcar or online registered post, it really isn't costing you $1.fifty for each piece of mail, is information technology?

While information technology is admittedly proper to charge for services rendered, yous should be conscientious not to corruption it. Addendum charges can add together upward VERY fast, and can easily leave of hand. This should never exist the chief source of income for your direction company. Management companies that rely too heavily on 'reimbursements' for their profits oftentimes are accused of 'nickel and diming their clients to death'.

Breakdown Per Door

Accounting Software For HOAs

Regardless of which accuse method you choose, your management fee is almost always communicated to the community's board of directors as a "Per Door" corporeality. This allows the community to pause out the amount each owner's assessments would cover, allows for growing communities (for example, merely phase one of the development has been built out, and then the community only has 100 homes now, but within three years there volition be 1200.) and also helps the board in the budgeting procedure.

To summate the per door charge, have the monthly amount you have decided to accuse that community and divide it past the number of units in the customs. This will be the direction fee amount that you quote to the lath in your proposal.

Information technology you've followed all of these steps, at this point, you lot should have come up with the perfect pricing scheme for your management company that fits your location, is appealing to your prospects, and most of all, puts ameliorate food on the table than Ramen noodles. Now leave in that location and win some contracts!

I'll save you a piece of pie.

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Jeff Hardy is the founder of TOPS Software. Jeff Hardy was the owner of a very successful management visitor with a portfolio of over 90 community associations. Feeling that a amend solution needed to be made available to serve Community Association Management, Jeff began work on Condo/HOA management software. Today, TOPS is the manufacture leading Customs Management software solution. TOPS is in apply in over 2,400 organizations to manage millions of homes. TOPS is a consummate accounting and holding direction system that brings all facets of community direction together into i, integrated organisation.