Published: 17 July 2009.

Contributed by Geoff Ridings of Active Management Rights

Finding informed buyers for Management Rights can be a long and difficult process. Business confidence generally is in short supply and many first time investors looking at Management Rights are more uncertain than most. So it is more important than ever to present your business, your whole business, in the best possible light.

A business for sale has many components and many of these you can do nothing about. You can’t change the property’s size, its location, whether it does or does not have gates, pool or sauna etc. So if you can’t do anything about it, don’t worry about it. It is your broker’s role to find you buyer’s that fit the profile of your business and your property.

But those aspects of your business that you can do something about you should polish and present in the best possible light.

There are, of course, two parts to your business, the property and the business itself. Everyone has sold their own home at some stage in their lives and we all know the importance and value of making it look its best. Little things like; if it has been built on the small side, don’t clutter it and make it look smaller; get rid of unpleasant smells (more people than you can imagine make a purchasing decision on the smell of something);a neat property and garden shows you care about your home; and the list goes on.

This applies to Management Rights as well. Do everything you can to present your property the best you can, even if it requires getting in professional cleaners and gardeners. A sparkling property commands a sparkling price!

And the most important thing; the financial profile of the business!

I cannot emphasise this enough. Know where your income is coming from with the business and where the expenses are. And know them in detail.

Many people we speak to do not know their business well enough to do an Income statement regularly, probably at least once a month. This is not a criticism; many people are not accountants. But your trust account will tell you what income you receive for every property you manage (otherwise it is not a trust account). Tally this income every month; add your Body Corporate salary and other income like cleaning and maintenance and you have an Income statement. Sure it gets more complex if you have furniture packages and lease-backs but you do need to know this information and present it.

Remember your potential purchaser is not familiar with your business at all and will ask questions you long ago took for granted. It is your job to have all the business information detailed to the level required so that he/she can make an informed decision as to whether this Management Right is for them, even if you have your accountant prepare these numbers for you. When the purchaser makes an acceptable offer and it goes to due diligence without the necessary detail there is very high chance the contract will terminate before settlement. Why? Because the purchaser was not informed that, say some of the income was unsustainable or some expenses were not declared. An informed buyer’s offer is the most likely to proceed to settlement.

Preparing your Management Rights for a successful sale can be a daunting process but talk to your broker. They can help and they have done it before many times.

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