The End of the Line for Mediocre Management Companies

The End of the Line for Mediocre Management Companies

Last year, I made the following statement:

In an industry like community association management, where profit margins are slim and everyone offers a similar set of services, competition can be fierce.

HM emailed me and asked, “If the above quote is true, why are so many management companies offering the same services to community associations, and so many new management companies coming aboard?”

Great question, HM.

3 Reasons for Mediocre Management

There are three factors that I believe contribute to the current glut of mediocre management companies:

1. The Condo/HOA industry is worth approximately 70 billion dollars.
2. Condo/HOA management is largely recession-proof due to the fixed nature of HOA dues. Even during the biggest housing bubble burst in US history, CAM Management companies continued to stay in business and in many cases even thrive in spite of many other related service providers going under.
3. It’s reasonably easy to start a community association management company – there is no national licensing requirements or restrictive legislation on a national level (of course on the state level this varies greatly)

Taking those three things into account, even with thin profit margins, it’s easy to see why more and more CAM Management companies are springing up every day. They all want to catch a ride on the easy money train.

Demand Generation

As for why mediocre management companies are all offering largely the same services, I think that the problem comes down to lack of education on the part of association board members.

Since they are not aware of what services and technologies are available, boards are often willing to accept whatever is offered to them. This lack of demand means that a vast number of management companies do not feel pressured to push themselves to differentiate or go the extra mile to get and retain business. It also means that everyone is competing on just one factor—price.

That Was Then, This Is Now

While the above may be true today, the situation in the industry is rapidly changing.

Big business is entering our industry, education for board members is becoming more prevalent, and board members are getting younger and more technically savvy. These factors combine to create smarter boards with higher expectations, a better understanding of what is available to them, and (gradually) more willingness to pay for better service.

All these factors put together mean that management companies that do not do more to differentiate themselves and raise the quality of the services that they offer today are nearing the end of the line on the easy money train. The age of mediocre management is nearly behind us.

Thank goodness.

Time to Make a Change

Now is the perfect time to be a management company that goes the extra mile.

You can stand out in the crowd simply by doing more than everyone else is doing, and doing a better job of what they are doing. And, with all of the amazing technology and resources available to you, you can even do it within those same thin profit margins. But change is hard. And sometimes it’s easier to keep doing what you are doing than to leap into the unknown.

So I want to leave you with a question: What’s the cost of doing nothing?

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