First Place: Property Solutions
Fortune Small Business
October 30 2003
What it does: Makes web-based software that lets apartment managers accept rent payments and repair requests online
Founder: David Bateman
Date founded: August 2002
Startup capital: $160,000 in profits from Bateman's previous startup
Goal: Getting acquired
David Bateman came up with the idea for his business by listening to his wife. A property manager for four off-campus complexes that house Brigham Young University students in Provo, Utah, "she would come home at night and tell me everything that was driving her nuts," says Bateman. Her chief gripe was the way residential units were managed, using antiquated paper ledgers.
Bateman -- who was majoring in business administration at Brigham Young but had taken courses in web design -- set out to create a computer program for her. If he could do that, he suspected he'd have the basis for a profitable company. In August 2002 he began sketching out plans for a web-based software system that would let management companies accept and automatically record online rent payments and maintenance requests. Starting his company, Property Solutions, in January 2003, he hired a trio of programmers to help him and launched his Vantage XP software by June. Bateman's idea took off almost immediately. Although other online payment systems and property-management software already existed, no one had linked the two. Within ten days of its software launch, Property Solutions had seven clients, and sales reached $100,000 in the first three months. In April 2003, Property Solutions won first prize and $25,000 in Brigham Young's business-plan competition with a team of five undergraduates, besting 96 teams made up mostly of the school's top MBA students. Bateman told avid venture capitalists to keep their cash.
An off-and-on student who attends Brigham Young part-time, Bateman, 25, had already built a successful business. Serving as a Mormon missionary in Honduras from 1997 to 1999, he quickly discovered a disadvantage to living in a developing nation: The mail service, too, was developing. Letters might take three weeks to arrive. Bateman decided to speed the process. In November 2000 he launched DearElder.com, a for-profit site on which people could communicate with Mormon missionaries overseas. Customers type letters into the site, and the letters are then routed to Third World countries, where they are printed and delivered in a day or two. Last year, DearElder.com, which is still in business, generated $250,000 in sales with a 76% profit margin.
Using $160,000 in profits from DearElder.com, Bateman developed Vantage XP. That investment is paying off. Today, Property Solutions has nearly 40 clients. The biggest is Utah-based Triton Investments, which manages some 3,000 units. Bateman says he's now in discussions with BH Management in Dallas, which has more than 30,000 units, and three similar companies.
His biggest challenge will probably be persuading tech-averse property managers to spring for his system. In a survey of 420 property-management companies, Property Solutions found that 66% used outdated DOS-based software systems or paper ledgers to manage units. But to upgrade to Vantage XP software, companies would have to pay $5,500 per apartment complex (regardless of size) and another $2,499 to set up a website. In addition, Property Solutions hosts all the web-based systems, like rent payments, on its own infrastructure, covering the costs by charging clients $1 a month for each apartment. The key will be to show clients a return on their investment almost immediately, says Blanche Evans, editor of Realty News, a Dallas-based online news service: "You have to provide the software at an attractive enough price that the customers feel that they make their costs back in improved efficiencies." That's easy, says Bateman, projecting that Vantage XP could save a company that manages 1,000 units $20,000 to $25,000 a year. The savings would come through reductions in administrative staff, quicker processing of rent payments, savings on building a website, and other efficiencies. As for another hurdle -- persuading tenants to pay rent online -- Bateman believes a small rent break is a good incentive. Yet his goal isn't to win over every property manager. He simply wants to attract enough customers to make the company an appealing acquisition target in four to five years. After that he says he'd like to finish school: "I've got to get that MBA sometime, don't I?"