Are you thinking of starting a property management business? Whether you have years of industry experience or come from a completely different background, one of the key decisions aspiring entrepreneurs must make is whether to start an independent company or join a franchise organization. While both options offer great solutions, there are several factors that will help you decide which pathway is best for you. Let’s examine the differences between franchising and independent companies so you can confidently make the right choice.
As you may know, a franchise is a business where the owner (franchisor) licenses its products, branding, and knowledge to a franchisee in exchange for upfront and ongoing fees (royalties). Franchising has been an established business model dating back to the 1920s and 30s. However, property management franchising is a relatively young concept. There are a handful of franchisors in this space and it’s important to know what benefits exist within this option.
- Instant Network: Building a property management business can feel like living on an island. When you join a franchise, you gain instant access to other business owners with similar goals and experiences. Being a part of a larger organization helps independent business owners feel a sense of belonging and camaraderie with their peers. You are part of a team and in some franchises, a family.
- Established Brand: Take the guess work and the time out of creating a brand. Your brand is more than a logo, it’s how you differentiate yourself in the marketplace. There needs to be a cohesive approach to your look, style, tagline, voice, and overall feel. Branding a new company can be a beast, especially if you do not come from a marketing background. If you choose a brand that has a positive reputation in your area, it can help you attract customers and grow your business faster.
- Vetted Technology: Property technology (PropTech) and vendor partnerships are vital to the success of a property management company. Franchisors have a responsibility to their franchisees to properly vet any new vendor partnerships or PropTech companies they onboard. They have developed a tech stack for you which allows you to focus on sales and new clients and not get into the weeds trying to find the best software solutions. Franchisors are also able to leverage the brand to bring their franchisees better pricing and partnership opportunities.
- Tested Business Model: Franchisors have already developed and tested their business model, making it easier for you to get up and running quickly. This can save you time and money comparatively.
- Training and Support: Property Management is not a profession you can go to school for. Learning is often on the job and support comes over time through industry connections. In a franchise you receive initial training and ongoing support. You also gain access to valuable resources such as document libraries, marketing materials, operations manuals, and best practices. The top property management franchisors also offer dedicated business coaches to guide your business.
Opening an independent company may seem daunting to some and a welcome challenge to others. Going it alone means you have the opportunity to perform all of your own business planning, licensing, branding, process development, marketing strategies, document creation, and more. You are starting from scratch, but there are some benefits to this strategy.
- More Control: If you start your own property management business, you'll have more control over the business and the decisions you make. You'll be able to set your own policies and procedures, and make changes as needed. You aren’t locked into a contract, so your exit strategy may be more fluid as well.
- Lower Costs: Starting your own property management business can be less expensive than franchising. Instead of paying an initial franchise fee, tech fees, and ongoing royalties you can infuse your funds directly into marketing campaigns, staffing, professional services- heck, you can sponsor a little league team!
- Flexibility: As the owner of your own property management business, you'll have more flexibility in how you operate. You can make changes to your marketing and advertising strategies or completely pivot your brand. You can choose technology platforms that are custom tailored to your needs rather than to the broader franchise. Go to a conference and pick up some new ideas? You can implement them without question.
- Competitive Advantage: If you develop a unique brand and business model, you may have a competitive advantage over franchised property management businesses in your area. This entirely depends on your market and the impression your area has of local franchises. Some areas prefer to “support local” and even though franchises are independently owned and operated, they may be consider a corporation rather than a local business.
- Geographical Area: Opening a property management business independently means you are not purchasing a specific territory, neighborhood, or area. This will allow you to market to multiple cities, counties, and neighborhoods. Your only limitations are those imposed by your local licensing requirements. For example, if you have a real estate license in Utah you cannot operate a property management company in California under your license. You would need to stay within the state of Utah.
As you can see, there isn’t a clear right way to start a property management company. Here are some important deciding factors to consider as you weigh out your options.
- Your long term goals: Some people start property management businesses because they want to have a solution to manage their own portfolio of homes. Others want to build a legacy company to pass on for generations. Your motivation and long term goals may make the decision for you.
- Knowledge and resources: Think about what you have access to. Things to consider include your existing industry knowledge, local access to professional organizations like NARPM or the National Apartment Association, knowledgeable friends and family members, affiliation with an industry business coach, document libraries, training resources, and available funds to hire someone with industry experience.
- Your Personality: Are you a self-starter, driven, and resourceful? Consider whether you are more of a Lone wolf or have a pack mentality. Where do you find the most success? Your personality may be better within a brand or it may clash with the structure and lack of flexibility.
- Capital: As much as we wish it wasn’t a factor, money matters. How much money you have to build your new business may be a limiting factor. It’s important to know that buying a franchise does not mean you forego all the other business startup costs. Your franchise fee is just one component of the overall budget you will need to have. If you are going independent you will still need a considerable amount of capital to get going.
- Do you love the brand? If you choose to join a franchise, keep in mind you are entering into a long term relationship! Make sure you LOVE it. Property management franchises are not created equally, they have different business models, mission statements, and goals. Make sure you choose one that you LOVE so you can go all in on your new business partnership.
Franchise or Independent; we understand that making the decision to start a new business can be overwhelming. There are many more factors to consider than we were able to list in this article, which is why we invite you to contact us. We would be happy to help you navigate through your options to find the best fit for your unique needs. We have a truly unique perspective and wealth of knowledge through our firsthand experience with both franchise and non-franchise property management business startups and would love to work with you to reach your goals.
If you are looking for authentic, honest, and straight forward guidance, schedule a consultation with us today.