Business idea; private management company
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According to Rosstat, on average, a Russian spends more than 1,700 rubles a month on housing and communal services. The housing and public utilities market is three times larger than the consumer services market, four times larger than the passenger transport market, and seven times larger than the medical services market. At the same time, such a market size does not at all guarantee a business profit or even a breakout.
Inhabitants of the majority of apartment buildings do not maintain their houses themselves: they don’t change the light bulbs in the entrances, they don’t fix the ramps, they don’t remove the snow in winter. This is done by the management company, with which the residents of the house conclude an agreement. The Criminal Code receives money from residents for all utilities, pays suppliers for water, gas and electricity. And he keeps the money for the maintenance of the house.
UK is an ordinary commercial company, LLC or JSC. To open a management company, you need to obtain a license to manage apartment buildings and pass a qualifying exam. Then hire cleaners, plumbers and electricians, conclude an agreement with resource supplying organizations. It is more difficult than opening a clothing store, but it is quite possible - there are 20 thousand management companies operating in the housing and utilities sector in Russia.
We spoke with Inna from the management company Alfa-Service to find out why the huge size of the market does not guarantee even a small profit and why it is not worth going into this area if there are no trump cards in the sleeve.
Clients are hard to find
Finding customers in this market is more difficult than in retail or catering. It will not work just to launch advertising on the Internet or word of mouth - you have to go the hard way.
There are three main ways: to win the tender, to negotiate with the developer, or to convince the general meeting of tenants to change the Criminal Code. In the first case, a young company will not be able to compete with experienced competitors. In the second, the entrepreneur may lack connections. And the third requires incredible effort: you need to gather tenants and persuade them to go through a complex procedure. If the founder does not have strong connections or the ability to influence the decision of the tenants, it will be almost impossible to find objects to manage.
Customers often don't pay
The total debt of Russians in housing and communal services exceeds 500 billion rubles, which is about 10% of the total market. Residents may not pay for several months or even years. There are those who do not pay and wait until the statute of limitations has passed in the hope that they will not have time to be sued and the debts will be written off. If the company does not have time to go to court within three years, the money will be lost.
To get their money, companies turn off electricity, water, and sometimes put plugs in the sewers
Problems in housing and communal services
Surely most of the residents of modern apartment buildings are not satisfied with the work of the local housing and communal services, however, few people are capable of organizing an initiative group and fixing the situation. And all this against the backdrop of widespread devastation in the courtyards and entrances. Broken windows and doors, shabby stairs, clogged and dirty garbage chute, graffiti, leaking roof and much more. In addition, such a deplorable state of basements and entrances can be harmful to health. Dampness and unsanitary conditions, the spread of rats, fleas and cockroaches, mold. And just open access to the entrances to attics and basements makes them a favorite place for visiting drug addicts, petty criminals and homeless people.
All these problems are quite solvable and the money transferred for housing and communal services is constantly growing. However, the level of service provided by management companies is usually disgusting. Even if the water supply is broken, a team of plumbers leaves with a great delay and the damage from the accident comes out much more than the repairmen arrive promptly. And if the electrical wiring is burnt out, you can even wait for the electricians for several days. And the point here is not so much the carelessness, negligence or laziness of the ZhEK employees, but the numerous problems of the very structure of the public administration system of the industry.
Modern management companies
A long-term absence of healthy competition, monopoly on the part of state housing and communal services offices has led to ineffective management and distribution of funds. As a result, a lot of money in the industry is being spent patching holes. Poor repair of the heating system during the cold season, freezing pipes in the entrances due to broken windows and doors. With huge heat losses, residents, in fact, pay for heating the streets, and not their houses. House management systems that were formed back in Soviet times continue to operate ineffectively in most Russian cities. And in the absence of competition, they realize their advantageous position. After all, why work better if money pays anyway.
Currently, private management companies are correcting the situation a little, they are replacing the old ZhEKs and DEZs. Competition is emerging, contributing to the overall improvement of the service. Homeowners' associations are offered a choice. Unfortunately, this process is just beginning, why are entrepreneurs in no hurry to master this business? After all, this is a multi-billion dollar turnover.
Marketing agencies carried out an analytical study of the Moscow housing and communal services market. On average, this sector is estimated at one billion euros per year. The market is really huge and more than two and a half thousand enterprises are in favor of the right to service public utilities, more than two thirds of which are small private organizations. But, despite the improved resource management due to the worn-out network of communications and facilities that has been transferred to the management, the profit of such companies is minimal. Most of the funds are spent on replacement or expensive repairs. The situation is better in new buildings, where homeowners' associations are immediately organized.
Indeed, it is inexpedient to open a business for servicing public utilities on the basis of "Khrushchevs" built in the 70s, with their worn out communications. The payback of the enterprise in this case can reach 5 or more years. But even in neglected cases, the housing and communal services market can be highly profitable. According to marketers, the situation can be changed by changing the direction of the business, making it profile. Attraction of development companies.
The development company's profit from housing and communal services management is incomparably lower than from the implementation of its own projects and investments. However, the developer seeks to organize his own management office at the facilities being built. Thus, attracting customers with a ready-made solution. In addition, it is easier for a company to eliminate its own mistakes and shortcomings in construction.
Search for clients and selection of suitable objects
Almost everyone who lives in an apartment building is familiar with the activities of management companies in the field of housing and communal services (hereinafter - the Criminal Code). Many associate them with "GBU Zhilischnik", that is, a state or municipal budgetary enterprise, which still continues the traditions of Soviet ZhEKov, with a service of appropriate quality. However, the market for private management companies has matured in the country. It has all the prerequisites for consolidation.
The market is ripe
The market for asset management companies is quite large. According to our estimates, the owners of apartment buildings only in Moscow and St. Petersburg with regions, as well as in cities with a population of over one million pay management companies about 400 billion rubles a year (hereinafter, all estimates for the management company market are the results of our analysis of the database of the Fund for Reform Assistance Housing and communal services). And this is only for the maintenance and repair of residential premises, without taking into account the actual utilities (heat, water, gas, and so on). If we extrapolate these figures to the whole of Russia, we get more than 1 trillion rubles. And half of them are from private companies.
The most striking example of the arrival of large private investors in the field of management companies is PIK-Comfort, a member of the PIK group, by Sergei Gordeev. Having appeared in 2021 and began to grow actively in 2021, it is now the largest private management company in the country (and the largest management company in general), with more than 50 million m2 under management. And in recent years, more and more private investors are starting to follow her example.
The UK market is now similar to the grocery retail market 10-15 years ago. The first similarity is that this business scales quite easily "in width". Today the market is not consolidated, there are no restrictions for extensive growth, including through the purchase of other players.
Continuing the retail analogy, let's remember the typical landscape of a residential area 20 years ago: in almost every yard there was a small grocery store owned by a local entrepreneur. Now almost all of these stores have disappeared, and their place has been taken by Pyaterochka, Magnets or Dixie. In 2021, the Pyaterochka chain had 100 stores, now there are 15 350 of them - the chain has grown 150 times.
The same is about to happen with the UK market. There are almost 900 management companies in Moscow and the Moscow region, while 90% of the players are small and manage housing stock of less than 600,000 m2 each. However, in aggregate, such small companies account for more than 55% of the total housing stock in the region. Today there is only one really large private player on the market - the PIK group of companies. The closest competitors lag behind it in terms of the area of houses under management by at least an order of magnitude.
Future consolidation, albeit in an implicit form, is facilitated by the state. Formally, government regulation in this area is not very significant: each management company is issued a license and can cancel it if there are significant violations in the activities.
In practice, the Housing and Chemical Combine is a very politically sensitive area. Therefore, local authorities often and actively intervene in the work of the Criminal Code. Mayors, governors and their deputies for housing and communal services hold regular meetings with owners of the management companies to discuss pressing issues. Naturally, it will be easier for them to discuss the agenda with 5-10 large players than with hundreds of small ones.
Finally, assets in this market can be bought quite cheaply, and sometimes even "taken away for free." One of the key problems of many management companies is the chronic non-payment of residents. The situation is even more aggravated if the company acts as a "transit link" for paying utility bills between residents and resource supplying organizations (RSO). In this case, the Criminal Code itself is responsible for paying for the services of the RNO, and it has nothing to pay with if it cannot receive money from the tenants. This requires effective work with debtors, which is not always available to small players.
But this is not the only factor in the investment attractiveness of the management company. In addition to growing in breadth, this business is also scalable in depth.
Residents of apartment buildings know very well how important it is to choose a reliable management company, because they pay a lot of money so that their house is constantly monitored and timely necessary repairs are made. But, unfortunately, most often people remain unhappy, they do not understand where their money is going and who will be responsible for it. Therefore, today many houses generally refuse the services of management companies and form the so-called HOA. But even here not everything is so smooth, because most often people are only ready to be indignant, but in reality no one wants to do anything himself. It is very difficult to find activists in every apartment building, so the existence of management companies continues.
Today our guest is Lyudmila Vladimirovna from Voronezh. Reconomica magazine asked her to tell how the management company works, because she, like no one else, knows all the nuances of this case. Lyudmila Vasilievna in the distant 2021 was able to open her own company for the management of residential buildings and very competently did business, until she still had to close her business. Read all the details of her story below.
Creation of the Management Company
Hello! My name is Lyudmila Vladimirovna Merkulova. I live in Voronezh. When I started my residential building management business in September 2021, I was 56 years old. The management company (MC), created by me, worked until the end of 2021.
Transfer of houses to management
In the early 2021s, I worked in the capital construction department of one of the Voronezh factories. We built multi-storey residential buildings. Half of the apartments in them were sold at a reduced cost to those on the waiting list of the plant, the rest were bought by everyone at a commercial price.
At the enterprise, the business was moving by leaps and bounds towards bankruptcy and the termination of housing construction. It was necessary to look for a new job. On the balance sheets of many enterprises were the dwelling houses they built, which they tried to get rid of. Transferred to the jurisdiction of the newly formed Criminal Code.
In 2021 I established an LLC, the Charter of which provided for one type of activity - real estate management. An agreement was reached with the management of the enterprise to transfer to the management company two residential buildings with a total area of 13,862 sq. ...
One of the houses served by our management company.
I didn't have any initial capital. As a financial “safety cushion,” the factory management agreed for the first three months of the formation of my company to continue to serve the transferred houses on their own. The money transfers from the population for these months should have been credited to my account.
Management Company - management companies in housing and communal services have become an integral part of the communal structure, fulfilling obligations to residents of apartment buildings for improvement and provision of basic everyday needs.
Any legal entity that has no problems with the law can become a manager. This niche for businessmen remains relatively free, as it is considered not very profitable. But there is practically no competition in it and you don't need to put too much effort into finding clients. It is enough to take control of several high-rise buildings - and the base for work is ready.
It cannot be said that it will be very easy to open a management company, since recently the government's requirements for these structures have become much tougher than before. Nevertheless, in the absence of a large start-up capital, but with a strong desire to start your own business, you can take a risk by stepping over fear and uncertainty.
Managing organization and its types
Russian legislation places strict control over commercial management structures that maintain optimal amenities for apartment building residents and provide home renovations, uninterrupted supply of basic energy resources such as electricity, gas, water, and heating. This is the main purpose of the Criminal Code, which should be carried out most efficiently. Residents should experience maximum comfort in return for regular monthly installments. The activities of the Criminal Code (the correct name is "managing organization") is controlled by the following legal acts:
- Civil and Housing Codes of the Russian Federation.
- The changed requirements for the organization, prescribed in the Federal Law No. 255-FZ (dated 21. 7. 014).
- The established methods of regulation of heating tariffs by Government Decree N 1075 (dated 22. 0. 012).
- Regulation of relations in the field of water supply and wastewater disposal in the Federal Law N 416-FZ (dated 07. 2. 011).
- And other laws on amending energy efficiency, on helping housing and communal services in carrying out reforms, approving new rules and regulations for the operation of the housing stock, etc.
Understanding how to open a management company in the field of housing and communal services will help knowing its correct organization and methods of project implementation. Residents are given a choice of home management in one of three options:
- Hybrid - for large multi-storey buildings, where residents solve all management, operational and organizational issues for maintaining the house on their own, without the help of third-party companies.
- Immediate - for small houses with 40 apartments or less. In this case, the tenants select a representative from the house, who enters into contracts with contractors to carry out the necessary repairs on behalf of the public.
- Operational - for MKD or several, tied to one communication. The case when a meeting of tenants by a majority vote decides on the choice of the most suitable management company for them - the managing organization.
On the basis of the meeting, an agreement is drawn up between the tenants and the managers, which is sealed by an agreement, where the obligations of both parties are spelled out. Several high-rise buildings united by a single centralized system can simultaneously participate in the contract.
Requirements for the managing organization in the field of housing and communal services
These data, along with information about the work carried out, the list of services, as well as their cost and other information, are entered into the unified Federal Information System - GIS Housing and Communal Services - where any tenant can contact to clarify the questions that have arisen. The lack of information on this resource gives the apartment owners the right to file a complaint with the housing and communal inspection or even the prosecutor's office.