The most common questions and points of discussion between strata business owners when it comes to industry valuations often centre around:
- How much did you get for strata business or OC portfolio?
- What multiplier did you sell for?
What Multiplier are Strata Management Businesses Worth or are Valued at?
Our view here at Strata Business Brokers is that the multipliers that the industry throws around can sometimes be interesting because it doesn’t account for whether the strata management fees make up 60 cents or 80 cents in the dollar (of total revenue).
On this basis, multipliers (when you hear them or are talking about them) should be seen more of a yardstick rather than end-all-be-all.
So where does conventional wisdom put this yardstick or rule of thumb (currently, based on current market conditions)? The broad rule of thumb is 3 to 3.5x the strata management fees. Of course, the value of each strata business for sale will depend on a host of factors i.e. composition of the portfolio, coherency of buildings, contract lengths, staffing required to run the portfolio, market supply/demand, other revenue opportunities etc.
Strata Business Brokers – Victoria OC Portfolio Sales
We know for a fact that even as far back as 10 years ago there was large strata business in Victoria that bought a portfolio for 3.5x. Their thinking and logic was the potential for other revenue avenues – in that they could introduce insurance commissions where outgoing manager didn’t receive the insurance.
At Strata Business Brokers, we were involved in one sale last year that transacted at 3.5x and we know of another that transacted at 3.45x. Having said that we also brokered a strata business that transacted last year at 2.8x management fees. Why? Because a lot of the boxes and caveats in the above, simply weren’t by ticked by this particular strata business / OC portfolio.
Buying or Selling a Strata Business in Victoria?
Start a confidential conversation by getting in touch via [email protected] or on 0480 857 183. We can guide you on the true valuation of your strata business – based on facts, supported by in-depth calculations, and backed by over a decade of industry experience.
