The majority of people reading the title of this blog will immediately start thinking about linen, wages, consumables and vacuums, however it’s about a different type of “housekeeping”.

Solicitors reading this will know what I’m talking about because they use the term often when they are speaking with their management rights clients.

It should more aptly be titled, “Getting Your House in Order”.

Frustrating is the word that springs to mind whenever we go to list an “A” grade property only to discover shortcomings such as:

• The agreements only have 15 years to run because nobody addressed the issue of topping them up in the last 5 to 10 years.
• The “Gallery Vie” clause hasn’t been included in their agreements.
• The required Property Management forms are not all in order and signed.

I fully appreciate that the vast majority of management rights owner are very busy people and work hard at maintaining their businesses.

Every day they can be seen letting units, cleaning glass and lifts, slaving away in the gardens and talking to owners and their committee.

That’s all wonderful and will certainly help when it’s time to sell your business, however none of that will add one dollar of value to your management rights investment.

The top current value of management rights in Queensland is between 5.5 and 5.8 times the verified nett income of the business under a two person management team.

Now, before anyone starts trolling me, yes I know some businesses have sold for 6 or even 6.5 multipliers over the last 10 years, but that is not the norm and the industry valuers will not support those sort of values.

So! Great business, very good nett profit, excellent location and beautiful manager’s apartment.

Except the agreements have been allowed to run down to 15 years and the vendor doesn’t want to approach the BC for a top up.

Collective sigh from all concerned, particularly the agent.

Valuers and more importantly  the Banks (No disrespect to valuers intended), will immediately downgrade the value and lending ability of a business with 15 years to run on 25 year agreements.

Your multiplier will also be downgraded from a potential 5.5 to 5.8 times nett income to possibly 5.1 or 5.2 times.

That downgrade is your money, your capital gain, your investment and your hard work, and yet so many managers are quite prepared to throw it away for the sake of some regular housekeeping.

I think we all have computers these days on our desks and we use them to run our businesses.

On the computer is a calendar function, which can be programmed to bring up anniversary dates for your business.

Put it in your calendar. 6 months before the first 5 year term runs out on your agreements, have a reminder pop up to speak to the BC Manager and make sure a top up of your agreements is on the agenda for the next AGM.

It’s that simple to get the ball rolling.

It won’t top itself up.

Be proactive in your business and you will reap the rewards when it comes time to sell.

For all of the timid, “I could never do that, Managers), there are people out there who can help you. Speak with your agent or someone at ARAMA for the name of an expert who can help you do your housekeeping and get back the value you may be at risk of losing.

*** August was a very good month here at RCA Business Brokers with 5 management rights contracts signed off. Our marketing and point of difference is obviously working well and we urgently need more businesses to sell.

If we can help you sell your business, please give us a call.

Have a great month

RCA Team.