Effective management is a crucial factor leading to a company’s success. Managers help maintain the job satisfaction and productivity of each employee. So, regardless of the size of an income-generating organization, it needs systematic management and a professional who will efficiently run the operations. While some enterprises’ operational control is internal, others seek a separate business and vest upon them the managerial functions. For this arrangement, a written management contract or management agreement is in need. Learn more about it in this guide.
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What Is a Management Agreement?
In some cases, the limited resources call for the need of a third-party manager. This type of service provider aids in maximizing the profitability of a company in return for a payment. This specific arrangement needs to have a document that will outline the responsibilities of both parties and establishes a clear relationship between them. We refer to it as the management agreement.
In simpler terms, a management agreement is a written document involving two parties: a business owner and the one who will manage the said business. Under this agreement, the third-party manager agrees to handle managerial functions within the corporate entity. It means that they will provide the methodology for operations and be involved during the actual process. There are several types of management agreements, such as property management agreement, sample HOA management agreements, restaurant management agreement, contractor management agreement, and artist management agreement.
How to Write a Management Agreement
If you found a management agreement template or business management contract template that would best suit your need, it would be best to use it to write the document. Utilizing a management contract sample would help too! But if you don’t have such resources yet, here are the steps to help you draft a management agreement for your business.
1. Specify the Scope of Service
The management agreement should detail the management company’s control over the business operations of the other party. Some of the responsibilities managers handle are the following: maintaining the entity’s operating condition, planning, and leading. For this section, make sure to provide a comprehensive explanation of the scope of services to establish boundaries. Thus, protecting the privacy of the company.
2. Determine the Term of the Agreement
In this section, determine how long will the management entity render their service to the company. Mostly, such arrangements last for a year, but it gives business owners the chance to renew or extend the deal.
3. Discuss the Management Fees
Whether the management company will provide services for property management or project management, see to it that you discuss the management fees in the document. Specify the amount of compensation the company will give to the manager and how often he or she receives the payment.
5. Add a Termination Clause
One of the basic elements of an agreement is the termination clause. Determine the acceptable causes for termination if either party wants to end the deal before the expiry of its term. After writing the document, both parties should discuss the arrangement and make changes when necessary.
What is the difference between a franchise and a management contract?
The difference between a management contract and a franchise is the ownership granted to the third party. While the role of the management company only encompasses the control (but not total) of the business operations, the franchisee has the license and owns the business. However, binding into a franchise contract would mean that the franchisee will pay a portion of their profit to the franchisor.
What is in a property management agreement?
A property management agreement has the following elements:
- Specification of the Services and Fees
- Responsibilities of the Property Owner
- Duration of the Contract
What are the three types of contracts?
The three types of contracts are fixed-price contracts, cost reimbursable contracts, and time and material contracts.
According to the data published on Statista, the United States’ market size for property management was over 88 billion dollars as of 2020. This figure means that several property owners are now employing property managers to help them run their business. Bear in mind that no matter what type of management services you need as a business owner, make sure to have a management agreement to make this clear before the rendering of the services commences.
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