Sarah owned a management company for fifteen years. She built the business, kept happy clients, and grew a strong team. But as retirement loomed, burnout was setting in.

One afternoon she got a call from the CEO of an out of state management company. He wanted to expand into her market and saw her firm as the right fit. She wasn’t looking to sell but agreed to hear them out.

A few weeks later, the CEO and his team flew in and took her to lunch. They laughed, shared stories, and built a genuine connection. Not long after, the offer came. The number was almost too good to be true. After talking with friends and family, she decided it was time.

Once under contract, the due diligence began. Balancing daily operations with endless questions and document requests was exhausting, but she got through it. Then came the purchase agreement. The offer price hadn’t changed, but most of the payout would come later—only if ninety percent of her clients stayed on. She hesitated but signed anyway. This felt like her only ticket out.

A month before closing, a few clients and an employee left. The buyer used the instability to lower the price but she was in too deep to walk away and had no leverage on her side.

After closing, everything changed, and it changed fast. The buyer immediately offshored accounting, centralized customer care, changed software, and added new fees and mandatory services. Clients started leaving, then employees followed.

Just three months into the transition, the CEO flew in with his team and their attorney in tow and called Sarah into her into her own conference room. Fifteen minutes later, Sarah was fired. Her earn out was forfeited. She'd lost everything she'd built over fifteen long years in fifteen short minutes.

She had sold her company for pennies on the dollar. Instead of retiring, Sarah was now on the job hunt.

(This is a true story, but the seller's name was changed for privacy.)

HOAs pay monthly fees. Every single month. Not many industries can boast a recurring revenue of $500-$5,000 or more per account. Service-based businesses with recurring revenue and contracts in place are a hot commodity in today's fast-paced world.

It doesn't matter if the stock market is at an all time high or if we're in a recession, HOAs have to keep operating by law, which means most HOAs need to keep paying management. In an economy driven by the next best thing and five minute trends, a stable and essential business is a great investment.

HOAs across the country collect $11 Trillion in Assessments every year, and a big chunk of that goes to maintenance and construction work. The new trend in the industry is bringing project management and general maintenance in-house, a massive opportunity from an outsider's perspective.

Homeowners, board members, contact information, maintenance spending, property data, assessments, insurance information, and more. The amount of data stored across the industry is eye boggling. It might not be right to use all of that data, but the fact of the matter is the data is there.

An acquirer that comes in and changes everything too quickly is a risky deal, especially if a portion of the purchase price is deferred through a note, earn out, or an equity rollover. Clients in the HOA industry don't like change, and client attrition is the number one reason why acquisitions fail in the HOA space.

The offer price is often too good to be true. Let's face it, buying an HOA company is risky for a buyer and experienced buyers know they need to mitigate that risk. That's only fair. But putting all the risk on the seller with no control and no veto power can have devastating outcomes.

 If there's only one offer on the table, the buyer has all the leverage. If a buyer becomes aggressive or pressuring because a seller solicits multiple offers or hires an advisor, bad faith might be at play. There's no obligation to sell a business to anyone, and a buyer that demands exclusivity before an agreement is signed is a bad sign.

Due diligence is intense enough. The buyer is pulling out all the skeletons from the closet and combing over every transaction of the last few years. In assessing a business, the buyer has the right to look under the hood. But a due diligence process that becomes overly complex, and is drawn out longer than necessary can signal use of a tactic to fatigue a seller during negotiations.

Running an HOA company is different than running a coffee shop, a dry cleaners, or a marketing business. Buyers with no experience in the complexity and specialty in the HOA world can fail before they even get started, which is bad for clients and bad for the seller if the seller's sharing any risk.

Preparing a business for sale well in advance of going to market is the best way to ensure not only a good price, but also a great deal that minimizes buyer risk which in turn leads to more favorable terms and deal structure.

If clients rely on frequent contact with and service directly from the owner of the business, that's a risk for a buyer. Buyers will pay more up front for a business that runs smoothly without the owner involved in the day-to-day operations. Whether it's managing accounts or doing sales, an owner should delegate as much operational work as possible.

Assignment issues can blow up a deal. If an HOA company's management agreements all require client approval prior to assignment, it can kill the deal before it even gets started. Confidentiality is important during the process, and if clients and employees know the business is for sale it can damage the process.

One of the big trends in the HOA space is the use of modern technology. Boards and communities don't like change, but taking small bite-sized steps before a sale can make the transition easier. If a community is already used to using a popular software and using a bank lockbox for payments, there's less heartburn through an acquisition.

During due diligence, a buyer will be reviewing a company's financials, including balance sheets, profit & loss statements, cash flow statements, and tax returns. Tax returns that don't match financials or too many personal expenses running through the business can be a red flag to a buyer.

After an acquisition, a price increase is almost inevitable because many companies are charging below market rates. Adjusting prices to market rates can improve the success of a transition. There might be some accounts that are already at risk of leaving and are sure to leave after a sale. Before going to market, identify the at risk accounts and either invest in better service or preemptively terminate those contracts.

Regional competitors and national brands will acquire an HOA company for the marketshare. Many private equity firms will acquire one to break into the industry, and will likely pay more to do so. Building a company to be a viable platform for subsequent acquisitions can create more value, and might present an opportunity for a second exit if an owner stays on through the growth phase.

Don't take the first offer from the private equity firm or national brand that's been courting the business for a year. Instead, actively go to market and solicit offers from a number of buyers across all types. Competition is good for price and creates leverage around the deal terms.

Running a company is more than a full time job. Selling a business is a full time job too. From preparing the business for sale, marketing the opportunity, managing due diligence, negotiating deal structure and terms, planning the transition, and coordinating the transaction during the pre-close stage, selling a business is complex and time consuming and it requires expertise. The buyer brings attorneys, accountants, advisors, and lenders to the table. Someone needs to be in the seller's corner fighting for the best deal possible.