So You're Thinking of Starting a Management Company

Posted by Jeff Hardy on March 29, 2019

Last week we spoke about making a choice to self-manage your association. But what about the other side of that spectrum? When you feel so impassioned about the community association management industry that you want to join it and help make it better? This article, penned by TOPS founder Jeff Hardy, is an insightful look into not only what it takes to start your own management company, but also to understand the benefits a management company brings to your community should you choose the PMC route instead of self-management.

Thinking of starting a new community management company?Why Community Association Management?

The HOA and Condo community management industry is largely recession proof. Unlike most other businesses, you do not have to sell something every month to keep generating revenue. The management fees are recurring every month, plus there are other sources of income from pass-through expenses you can earn extra revenue on. Best of all, the recurring management fees are largely unaffected by a poor economy. Therefore, it is a highly desirable business during an economic downturn. Although, as the recent recession showed us, it can make for more work—such as handling historic levels of delinquent owners who cannot pay their maintenance fees.

Industry Statistics

  • 342,000 community associations in the US
  • Thousands added every year
  • Estimated $70 billion dollar industry
  • Most new homes are part of a community association
  • Industry is largely recession proof

How I Started My Management Company

After being a community officer for a couple of years, I started my management company in the Washington, DC suburbs in 1977. I had a wife, small children and a mortgage, so as a safety net against financial disaster, I started my company as a part-time job. My wife manned the phones and handled office tasks by day while I worked my full-time day job. I handled the property management and board meetings in the evenings and weekends. It worked out quite well until my company grew so big over the next 15 months that I had to quit my day job and devote all my time and attention to my growing management company. You could do the same.

What Does a Management Company Do?

You need knowledge of community management in order to make an informed decision that you want to start this kind of business. I’ll discuss the 3 general areas of community management and explain what is involved in each one. Management Company Functions can be broken down into 3 general areas:

Division of Labor in Community Association Management

  • 40% Accounting/Bookkeeping – 40% of what a management company does is accounting and bookkeeping. Don’t know much about accounting theory? Not to worry, most property management software, like TOPS [ONE], handles the accounting for you. You only need a basic understanding of accounting, like what you might get in adult education class on bookkeeping. While extremely important to keep accurate accounting records for each community, the accounting demands of most communities is very elementary.

  • 40% Property Management—40% of a management company’s job is to maintain the community. This means doing site inspections, issuing work orders authorizing repair work, meeting contractors at the community to get bids, overseeing work being done, and writing specs. Not sure how to write a spec for, say, resurfacing a tennis court? Once you meet an experienced contractor out there and pick their brain, you will know enough to write a spec that can be used to get other bids.

  • 20% Support of Community Officers—20% of a community manager’s time is spent in support of the officers who are elected by the owners to run the community. The community officers are normally homeowners in the community too. The officers have full-time jobs elsewhere or other responsibilities so they do not have the time or expertise to manage the community day-to-day. So they outsource the management to a professional community management firm—and that’s where you come in.

    You will be attending regular meetings, usually in the evenings, and taking down action items requested by the officers so you can report back on these items the following meeting. You are their adviser on issues like selecting contractors, writing policies and procedures, and making operating decisions. Think of the community as a small town with the officers being the town council. The community president is the mayor. Your role is to be the town’s business manager. This is politics at the grassroots level.

    Relations with the community officers is extremely important—they have the power to hire and fire the management company. Don’t get caught up in their politics or side with one group vs another in case there is a shift in power. You have to be like Switzerland—neutral in disputes except for giving good, honest, and logical advice that is in the best interests of the community.

What Does It Cost to Start a Management Company?

The cost to start a community management business is lower than most other businesses. In addition to your industry expertise, you'll need one or two staff members to help out with answering phones and dealing with issues (although this could be done alone if you're smart about it). You need the basics, like phones, desks, filing cabinets, computers and, the key decision—the right software to help you build your company

Continue Reading in Part Two: How to Create an Action Plan -->

Jeff Hardy, President and CEO of TOPS SoftwareJeff Hardy was the owner of a very successful management company with a portfolio of over 90 community associations. Feeling that a better solution needed to be made available to serve Community Association Management, Jeff began work on Condo/HOA management software. Today, TOPS is the industry leading Community Management software solution. TOPS is in use in over 2,400 organizations to manage millions of homes. TOPS is a complete accounting and property management system that brings all facets of community management together into one, integrated system.

Be Your Own Boss in Community Association Management