Key takeaways
- The clearest sign is a business that depends on the owner for every decision.
- A management company runs the business against agreed targets; the owner keeps ownership.
- Agree scope, targets, reporting, decision rights, term and exit in writing.
- Ask what the company runs today, not what it advises on.
Signs it is time
- Every decision still waits for the owner.
- Revenue is flat or falling and the cause is unclear.
- Costs are rising faster than revenue.
- Staff turnover is high and standards vary by shift.
- You own several businesses and none gets enough attention.
- You want to step back from day-to-day running without selling.
What a management company does
- Runs the business
- Daily management of people, suppliers, costs and customer experience.
- Sets and tracks targets
- Budgets and targets agreed with the owner, reviewed every month.
- Reports to the owner
- Clear reporting on results, risks and decisions needed.
- Fixes what is broken
- A defined plan where performance has slipped.
Running one business day to day is Operate. Managing a company or private institution as a whole is Manage.
Common arrangements
| Arrangement | When it fits |
|---|---|
| Full management | You want the business run for you on an ongoing basis. |
| Turnaround | Performance has slipped and needs fixing within a defined period. |
| Launch and handover | A new business needs opening and stabilising before you take it over. |
Questions to ask before you hire
- What businesses do you run today, and can we see one?
- Who will actually manage our business, and how much of their time will it get?
- What will you report, and how often?
- Which decisions will you take, and which will come back to us?
- How is your fee calculated, and is any of it tied to results?
- How does the agreement end, and what happens at handover?
What to agree in writing
- Scope
- Exactly what the company manages, and what stays with the owner.
- Targets
- The measures that define success, and the budget behind them.
- Decision rights
- Spending limits, hiring, contracts and pricing authority.
- Reporting
- Content, format and frequency.
- Term and exit
- Duration, renewal, termination and handover.
Take independent legal advice on the management agreement before you sign it.
How New Line Investment can help
We own and run gyms and a café in Abu Dhabi and Al Ain, and we take on management for owners. See Operate, gym & club management, F&B operations and company management.
Questions we get asked
Do I give up ownership if I hire a management company?
No. A management company runs the business on the owner’s behalf under an agreement; ownership stays with the owner.
How do I know the management company is doing a good job?
Agree targets and reporting at the start, and review results against them every month.