Case Studies

The decision to sell your business is difficult. It’s something you usually only do one time in your life, and it is important to get it right. That being said, have you ever considered what it would be like to sell your business?

If so, read on, because we have some stories to tell about a few companies we’ve acquired.

If not, we still invite you to read on. There may unexpectedly come a time when your life circumstances, a shift in priorities or market changes ignite the spark that makes you ask yourself, “is now the time to sell?”.

Here are some case studies, brief whirlwind tours through a few of our early acquisitions.

Get to know more about how we approach the inexact art of purchasing a management company. Imagine yourself in a seller’s shoes as you read about both the smooth pavings and the somewhat bumpier stretches on the road to closing.

We want to tell these stories because we believe in complete transparency. A property management company acquisition is never easy. There are so many things to consider. In fact, you may be a bit surprised that we were willing to include some of the details we will share with you here.

Experience is still teaching us how to create the most attractive deals that will achieve the goals of each seller. We continue to build our experience with every decision we make and we are careful to take notes when some of those decisions turn out to be poor decisions.

Every property management company is different. Every seller’s situation is different.

Let’s look at three separate deals that we, gkhouses, made with three sellers and examine the lessons we’ve learned.

There’ small seller (portfolio: 40 occupied* properties), medium-sized seller (200 occupied properties) and a large seller (500 occupied properties). All names have been changed for these case studies.

*Note: We typically speak in terms of occupied properties. We feel this gives a more accurate representation of the size of the portfolio.

Case Study #1 – 40 Occupied Houses:

October 1, 2016: Company A acquisition

Company A was a 40-house property management group in Birmingham. Its owner Arthur is an attorney whose wife Kathy capably managed the business from the tiniest details through to the big-picture stuff.

Kathy’s property management work brought in about $3,000 a month, a tidy income given the part-time nature of that business. A major life-change was the catalyst for Arthur and Kathy’s re-thinking her role in the company: when she discovered she was pregnant, Kathy knew she would want to focus her attention full-time on the baby. The couple decided to sell the management side of the flourishing real estate company Arthur owned so that the closing would coincide roughly with the birth of the couple’s son.

It was timing, pure and simple, that led to their interest in selling their company.

Since Arthur and I were both hands-on property managers in the same market, we already enjoyed a friendly professional relationship. Passionate property management owners tend to cross paths frequently! In May 2016 Arthur and I began to seriously discuss the acquisition, shortly after Kathy’s pregnancy was confirmed.

From start to finish, the purchase process was straightforward and relatively painless for both of us. Financial terms were quickly agreed upon with limited negotiation. Arthur was pleased that we offered him a deal allowing a clean extraction of his realty business’s property management division, with no further impact on his company’s strong branding. When asking Arthur what he felt was less-than-ideal about our acquisition process, he said he found our requests for detailed documentation to be somewhat burdensome “ but, of course, that is part of all deal-making. Besides that, he believes the transaction was smooth sailing.

Arthur wrote a letter to his 40 clients explaining the sale of his portfolio and introducing them to our gkhouses team. This was followed up with written communication from us. As an established business in Birmingham, gkhouses was a known entity to most clients.

There were no staff members to be relocated, no property to be sold. Most of the business processes from the original company dovetailed smoothly into the ones we use. The transfer took place with no hitches. Arthur was hardly called upon at all to help during the transition period.

There was an adjustment period after the sale for some of the newly acquired clients. They had been accustomed to the one-on-one, personal approach that the small company offered, and it took them a couple of months to embrace our different dynamic. Of the 40 clients that came over with the acquisition, only one has decided to leave.

This purchase was easy, and both parties completed the transaction feeling great about the decision.

Lessons learned:
The positive professional relationship that preceded Arthur’s deal with us certainly helped grease the rails for the acquisition. The deal only became a realistic option when Kathy decided to step back due to her life circumstances. This helped us better understand the importance of a seller’s timing; be it life circumstance “ health, having a baby or retiring. Or it may be that a new opportunity presents itself for the seller, and his or her business becomes more of a burden as he or she pursues that opportunity.

Case Study #2 – 200 Occupied Houses:

May 1, 2016: Company B acquisition

Company B was located in Nashville. It was a medium-sized property management company with 200 houses. Bob had owned the business for over 25 years and had developed a very loyal client base due to his excellent reputation in his market. Bob had invested much of his life (25+ years) in making his property management business successful.

After all those years of hard work, Bob was getting ready to cut back on his involvement. He wanted to retire and travel the world. Perhaps he would engage in some real estate sales back on the home front just to keep his fingers in the pie.

We had just set up a new team member; we call him a Team Leader, in a new Nashville office with the intention of expanding into the market. This was our first move into a different city than Birmingham. We were rookies! This acquisition was to be gkhouses Nashville’s start-up portfolio. I had heard from a friend about Bob’s intention to sell. That precipitated my outreach to him.

Bob was understandably skeptical at first. He wasn’t 100% convinced at the start that our Birmingham-based company with a new bare-bones local office could satisfy the needs of the client community that he had nurtured for so long. We were sure that gkhouses could meet his clients demands.

We were looking for a high-quality acquisition like Bob’s. Bob was keen to sell and outlined his financial expectations. He was pleasantly surprised when we were able to come back to him after only a few days, agreeing to the price he was asking.

The LOI (Letter of Intent) was signed, and our due diligence began. Bob’s record-keeping was incredible, which helped us easily gather the data we needed to support what he was telling us. He was happy that our due diligence phase did not impact his daily business.

There was still a lot of back-and-forth discussion of terms right before closing. Finally, both parties signed on the dotted line of the closing documents in Bob’s office. The deal closed.

We recently interviewed Bob, now a year later, about some of his feelings from the transaction. One of Bob’s priorities in the deal was to ensure the future well-being of his staff and clients. He believes he spoke with us about his wish that his two employees be kept on and be able to work in the new, roomy office space at the company.

In a perfect world, company operations would continue to run as they always had under his watch. It was also important to Bob that customers receive the same level of service as when he was at the helm. For him, it was the little details of personalized customer service that counted: providing a drop-box at the new office location, a real person answering the phone, and quick turnaround on inquiries.

Despite the straightforward negotiations and audit, transitioning Bob’s company into gkhouses was a fun challenge “ due to the timing of the transition (most houses renewed over the summer) and the changes we made to the company. Bob stayed on to assist with the transition for 30 days, moving to part-time over the next 30 days.
Bob’s employees had to share tight office space with the new Nashville Team Leader. (Neither employee works any longer for gkhouses.) We installed the drop-box only some months after closing, in hindsight something we should have done immediately. And clients calls to gkhouses are no longer picked up by a real person, but rather are directed through a phone tree. Some finer points that, in Bob’s mind had been discussed, had not materialized.

In February, we sent out a survey to all the clients to gauge how well we were doing. We thought the results would be positive, but we were surprised at how positive they were. We use an indicator called a Net Promoter Score (NPS). The NPS for Nashville was higher than even for our home office in Birmingham!

I don’t recall many of the details regarding Bob’s frustrations with us in the previous paragraphs; however, this speaks into our lessons learned below.

Lessons learned:
Decisions about certain considerations should have been taken early on and set down in writing. The contract had been mutually agreed, but there were details that remained unarticulated “ by both parties. We needed to understand better from the start that Company B was the seller’s life legacy. Some expectations for his business’s future went unfulfilled. We need to paint an accurate picture “ during early discussions “ of how a business will look post-acquisition.

We were naive in believing organic growth would come easy in our very first market where gkhouses has weak brand awareness.

We continue to have a great relationship with these owners, and our team is growing in Nashville.  Additionally, we continue to look for ways that will increase the happiness of our acquired owners, and the newly acquired owners, since the acquisition.

Case Study #3 – 500 Occupied Houses:

January 1, 2017: Company C acquisition

Company C was owned by Cindy for over 17 years and had a portfolio of more than 500 occupied houses. Cindy had been thinking for a while that it might be time for a shift in her professional responsibilities. She was hoping to leave behind the day-to-day stress of running a large property management business, and devote more time to developing owners knowledge “ educating others about the nuts and bolts of the property management business through speaking engagements and teaching through professional organizations.

It was Cindy who reached out by responding to an email I previously sent her, and our discussions began in May 2016. The sale of her 500 occupied-house business was to include her office. It was clear that the terms of this deal, involving the largest portfolio yet, would need to be very detailed.

Cindy was able to share some Company C’s financial information early on. But it still took several months for us to come up with ideas of what a proposal could look like for her business. In addition to striking a deal to sell her company, Cindy wanted to continue working under the gkhouses umbrella after the transition. At the time of the sale, Cindy’s company had seven staff members in addition to herself.

Finally, we made her a proposal over lunch. It felt like a win-win for both parties. Cindy remarked in a post-acquisition interview that she appreciated how easy it was to work with us. The due diligence and auditing procedures went smoothly and were handled efficiently, almost unnoticed by Cindy’s team.

One hiccup in the process occurred due to the inclusion in our original proposal, which Cindy had accepted, of her owner-financing part of the deal. When we ran the proposal by the bank, they said that they would not allow this to be done and required us to give her all the money up front. So, we went back to Cindy and told her that since the bank required that she receive all the money up front, she wouldn’t have to carry the risk of receiving it over time; however, to be able to do the deal, we had to discount the sales price by an effective 7% interest rate over that time — this reduced the overall sales price by $50,000. As this unexpected scenario became more complicated, I believe an erosion of trust began to gnaw at the working relationship between us, in part because she didn’t completely understand why this change was happening.

To further complicate the deal, the hot sales market lead to some client attrition at Cindy’s company. When she delivered overdue revenue reports in mid-December, we decided to reexamine the purchase price based on a significant decrease (-15%) in expected revenue. Thus, in the final days leading up to closing, financial discussions restarted and new conditions settled at one minute to midnight. While we didn’t change the sales price, we did agree on a guaranty of management fees for the upcoming 12 months.

Transitioning this relatively large company into gkhouses has been a bumpy journey, but I’m very excited about where we are in integrating their processes into our business. Cindy’s company relied on simpler old-school operations “ which is quite a bit different than the automated systems that we implement. The new systems were installed, and existing data and operations migrated. Company C’s staff of 8 needed to receive training.

Cindy’s company relied on simpler old-school operations “ which is quite a bit different than the automated systems that we implement. The new systems were installed, and existing data and operations migrated. Company C’s staff of 8 needed to receive training.
The processes involved in taking over a company of this size are numerous and complicated. Our team, knowing that this would be an enormous acquisition, had prepared for months, anticipating every possible thing that could go wrong. Still, there were challenges. Items like updating from one company to the other for simple things like utilities was slow and arduous. From Cindy’s team, only three original staff members now remain with gkhouses. (Some left because it was their wish, others were asked to leave. Each one received a severance.)

When we interviewed Cindy for this, she shared with us her frustration that she felt it wasn’t clear during negotiations that her own branded website would be taken down immediately.
Cindy does continue to work under contract for gkhouses.

Lessons learned:
From the very start of deal-making, we need to paint a realistic picture of what a company and seller will experience once it comes under the gkhouses umbrella. What’s the branding going to look like over time? What changes will come to the client experience? Exactly what software will employees use? What’s the timeline for training?

That’s how we can balance expectations with reality.


Summing up, each of these three acquisitions had its story, and its ups-and-downs, and certain lessons that we took away from them.

One overarching, but a very basic lesson that can easily be overlooked is this:  Every company and every deal

Every company and every deal are different. Make no assumptions, and document all expectations so both parties have a clear understanding.

Some companies are immaculate housekeepers, and their financials are always up to date. Other companies close out their statements less regularly, leading to last-minute surprises!

Company cultures are remarkably different too. A group of employees who have been in the business a long time may adapt less quickly to new systems than a company who has employees with less experience.

We build our business on Three Uniques that we think separate us from other property managers.

We don’t hire property managers “ this is a little “tongue in cheek” way of saying, our business is the quality of our people. Property management experience for our people is not a must when they come to work with us.  Fitting with our culture and our vision for the business is most important.  We want bright people who can pass our rigorous interview process that we affectionately call The Grinder.

We communicate with uncomfortable transparency “ trust is the cornerstone of any business relationship. We believe we can build trust, much like I’m doing in these case studies, by being uncomfortably transparent. We’ve found that owners don’t expect us to be perfect. What they do expect is for us to communicate and be very transparent with them.

We celebrate the tenant “ a rental house is not an asset. The real asset is the combination of the right house with the right tenant. That’s why when we find a good tenant, it is important that we keep them. How do we do that? We celebrate them. Some simple ways we celebrate the tenant are gift cards when we find them doing something right, or even to mark their birthdays. Or thank-you cards we send once a week showing our genuine appreciation for them as the reason we are in business.

gkhouses isn’t perfect. Much like you haven’t built your business by being perfect. What I think all the sellers would say is that we are motivated to find the best way to provide clients with efficient, reliable and well-run property management that your tenants will also love.

If you’d like to discuss more with me about your business and what a sale would look like, please feel free to give me a call on my cell at 205-585-0415 or shoot me an email at I’d love to share more about these stories and the new ones we are creating . . . particularly if they can be helpful to you.