The property management industry is not only facing the well-known challenges, but also a drastic shortage of skilled workers, which has become increasingly severe in recent years. This development not only affects the property management industry, but also many other industries. In this article, we focus on the consequences of this shortage of skilled workers for the search for successors in property management companies and at the same time present creative solutions to ensure successful company succession.

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The situation of the property management industry

The property management industry in Germany plays an important role in the management of around 40 million apartments. With more than 31,000 companies and over 150,000 employees, it generates annual sales of around 20 billion euros. Despite its importance, the industry faces major challenges such as a lack of affinity and implementation of digitalization measures, broader range of services, constantly changing legislation, moderate growth in property management remuneration and high ESG demands placed on owners and thus indirectly on management.

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The shortage of skilled workers as a central problem

The annual increase in age-related retirements combined with a lack of qualified young talent means that the property management industry is continually losing staff capacity. This demographic change is particularly noticeable in rural areas, where the supply of suitable successors is very limited. At the same time, the industry is experiencing increasing demand for property management services, which is leading to a paradoxical situation. Due to the shortage of skilled workers, property management companies regularly have to turn down mandates and are therefore unable to exploit growth potential.

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Impact on Business Succession

The ageing workforce and the lack of young talent not only pose a challenge for daily work, but also jeopardize the successful implementation of a company succession. Property management companies are increasingly having to close their businesses due to a lack of prospects and successors. This is not only the case in urban areas, but especially in rural areas, where the supply of suitable successors is even lower. The consequences of this development are felt not only by the companies affected, but also by the housing and property owner communities, which may even have to consider self-management due to the loss of their management and an acute lack of replacements. 

Increase chances of successful business succession

Despite these challenges, there are ways to increase the chances of a successful business succession through advance planning. Here are four important points to consider:

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1. Trust in your own employees

Give your employees more responsibility early on to find out who is suitable for succession and has the appropriate qualifications. This way, you can also identify strengths and weaknesses early on and develop further training or mentoring if necessary. The easiest way to find a suitable successor is from within your own ranks, which is why you should anchor talent development and further training as a core component in your company. Chairing meetings in particular is a key responsibility in the WEG area, for which you should prepare your employees and delegate responsibility early on.

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2. Plan business succession early

Don’t wait until you’re older to start planning your company’s succession. It makes sense to talk to potential junior managers in your company about career planning at an early stage and, if necessary, to discuss specific plans early on. It is important to plan for a longer planning horizon in order to prepare the succession operationally. This enables targeted identification and promotion of potential successors from within your own ranks.

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3. Determination of the value of the property management 

You should be aware of the value of your management both in the case of internal company succession and in the case of a sale. Use standard valuation methods and experience from professional companies to determine the real value of your property management. This is particularly important in the case of succession through a sale in order to maneuver the negotiations accurately. You should not only consider pure sales figures, but also the area of ​​expertise of the employees, the innovative strength of the company or growth opportunities. A transparent presentation of the valuation to potential successors forms the basis for successful negotiations that will continue even after the change of ownership. 

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4. Different successor models

There are a variety of succession models, and it is advisable to take an open attitude from the outset and think through all options in detail. In addition to the possibility of succession within your company, you should also consider the option of a strategic partner as a potential buyer – or even a clever combination of both approaches. Another promising alternative could be a merger with another property management company, where you stay on board in an advisory role for a certain period of time.

The terms of the purchase agreement should not focus exclusively on the initial purchase price, but should also take into account the future development of the property management and the associated additional income that you can achieve if you continue to operate positively over a defined period of time. In this context, the long-term preservation and increase in value of your property management could be more important than immediate financial gain.

Conclusion

The challenges in the property management industry are diverse, but a smart strategy and the right measures can pave the way to a successful company succession. Early planning, strong trust in your own employees, a realistic and transparent valuation and the willingness to examine various succession models are key factors in significantly increasing the chances of success.

At dao, we specialize in supporting company successions and are happy to assist you. If you have any questions or would like further information about selling your property management company, please do not hesitate to contact us.