Which Ancillary Services Actually Add Value to HOA Management Companies?

Ancillary services are a common feature of many HOA management companies. From maintenance and construction to insurance-related services and landscaping, owners often explore additional offerings as a way to deepen relationships with boards and diversify revenue.

The real question is not whether ancillary services are inherently good or bad, but whether they generate meaningful business value. Some ancillary services strengthen the core management platform and improve overall economics. Others add complexity without delivering durable benefits.

Not all ancillary services are created equal, and not all of them increase the total value of a management company. Additional revenue alone is not enough. What matters is how those services integrate into the existing platform and whether they strengthen the economics of the core business without creating hidden operational drag.

In our view, ancillary services add value when they pass two simple but important tests.

Test One: Is the Service Margin-Accretive in Dollar Terms?

Margin accretive does not mean higher margin percentages. Many ancillary services naturally carry lower percentage margins than recurring HOA management services, and that is acceptable.

What matters is whether the service contributes incremental margin dollars after fully accounting for the real costs required to deliver it. Those costs should include not only direct labor and overhead, but also the personnel time required to manage, supervise, and support the ancillary service line.

In practice, this means explicitly allocating management and staff time to the ancillary business, even when those individuals already sit within the core organization. If an ancillary service only appears profitable because executive or senior management time is treated as free, its true economics are being overstated.

Ancillary services that remain meaningfully margin-accretive after allocating personnel and time costs can strengthen the overall economics of the business, even if their margin percentage is lower than that of management services.

Test Two: Does the Service Penetrate the Existing HOA Client Base?

The strongest ancillary businesses are built by serving communities already under management, rather than relying primarily on external customers. Relative to externally sourced work, ancillary services that penetrate the managed portfolio tend to benefit from lower customer acquisition costs and improved revenue visibility, given their linkage to existing management relationships.

Appropriate penetration levels vary by service type, pricing model, and community profile. That said, for most ancillary services, penetration of greater than 40 percent of the existing managed client base is generally considered excellent.

Ancillary services that rely mostly on external customers often begin to resemble standalone operating businesses. In those cases, they may be profitable on their own, but they do not necessarily enhance the value of the management platform itself.

Ancillary Services and Management Fee Competitiveness

Well-designed ancillary services can influence how competitive a management company is on core management fee pricing. When owners assume that revenue will be generated across a range of services, rather than solely through management fees, they may have greater flexibility in how they price management contracts.

In some cases, this allows a company to offer more competitive management fees while still increasing total margin dollars at the enterprise level. This dynamic only works when ancillary services are consistently profitable in dollar terms, widely adopted across the managed client base, and operationally disciplined. If ancillary margin dollars are inconsistent or thinly penetrated, aggressive management fee pricing can quickly become a risk rather than a competitive advantage.

How Ancillary Services Contribute to Enterprise Value

It is important to be realistic about valuation. Ancillary businesses generally do not receive the same EBITDA multiple as recurring HOA management services. That does not mean they are not valuable.

When ancillary services are profitable on a standalone basis, operationally integrated, and clearly tied to the managed client base, they still increase total enterprise value. A dollar of ancillary EBITDA may be valued differently, but it remains a dollar of economic value.

What Owners Should Be Tracking Internally

Owners who successfully operate ancillary services tend to be disciplined about measurement and disclosure. Owners should understand the penetration of each ancillary service across the managed portfolio, the portion of ancillary revenue generated internally versus externally, and whether each ancillary division generates positive margin dollars after allocating appropriate personnel and time costs. Clear delineation of revenues and expenses in the financial statements is critical to understanding which services truly add value and which may require restructuring.

A Brief Note on Disclosure and Structure

Ancillary services can be beneficial, but lack of disclosure can create mistrust with HOA boards. Even-well run ancillary businesses can undermine relationships if boards feel information is being withheld.

It is generally best to be upfront and disclose as much as is feasible. Owners should also work with legal counsel to confirm where ancillary businesses sit within the broader entity structure in order to mitigate legal and regulatory risk.

The Bottom Line

When services are margin-accretive in dollar terms after fully accounting for personnel and time costs, penetrate the existing client base, and are transparently reported, properly disclosed, and thoughtfully structured, they can strengthen the underlying business and increase total enterprise value. They may also allow owners to be more competitive on management fee pricing, even when those services carry lower margin percentages than core management operations.

The key is intentional design, not opportunistic expansion. At CAM Advisors, we work with HOA and condo management company owners to think through these decisions with a long-term lens. That includes evaluating which ancillary services truly add value, how they affect pricing and margins, and how they fit into the broader structure of the business. If you are thinking about expanding services or reassessing existing ancillary lines, we are always happy to be a sounding board.