As with any professional business, everything revolves around the aspect of the money. Before anyone can make or manage the money, you have to figure out how to spend it. Whether we like it or not, budgets are a key component of good management practices at your properties.
Most multifamily professionals feel that the main responsibility of their company is catering to residents. True, but we need to remember that it still IS, in fact, a business. And we need to have a solid roadmap to accomplish our business goals.
Making a profit should be foremost in our minds…daily. It’s that delicate balance of dealing with two sides of the equation: the “human side” and the “financial side”, both paramount in the success of your performance. Every decision has a price tag attached to it: if it’s a $5.00 decision…make it! But if it is a $5,000.00 decision …better get some council and do your homework!
It all comes down to your ability to make a profit without jeopardizing the integrity of the operation. Yet at the same time, you have to maintain a good reputation for residents and prospective residents.
With that in mind, here are some words of wisdom before you embark on your budgeting journey.
Control the Controllables!
Prepare yourself for the budgeting process mentally, emotionally, and physically. Set aside specific times when you devote yourself to working on the budget. If you can, delegate some of the tasks to your staff. And help yourself be on top of your game by getting enough sleep at night and eating right.
Do your homework before you start
If you can’t measure it, you can’t manage it! Dig up old research, previous budgets, market/sub-market conditions, and variance explanations before you get started. This will be crucial information in preparation for your budgeting process.
Income Effectiveness: Achieving the most dollars for your property
If you can’t cut back on expenses, the only way to increase the bottom line is to add to the income side. Review your ancillary income for more creative ways to gain money. Brainstorm with your team for additional fee ideas and monitor what the competition is doing too. You might survey your residents to see what they might be willing to pay extra for. By this I mean things like cooking classes, laundry services, shopping, etc. You don’t know unless you ask!
Find creative ways to reduce your costs and increase cash flow
First off, know where you are today on your current expenses. What categories are in the “red”? Do a thorough review of basic categories that are in your control, including personnel costs, administrative, marketing, repairs & maintenance, cleaning & re-decorating, contract services, utilities, and capital & extraordinary expenses. Analyze each category and keep good records throughout the year. This will help immensely for understanding and articulating your stand when your company asks.
Now more than ever the development, implementation, and execution of a good budget not only means the operation of the business is running well, it gives YOU and your reputation, credibility and value as an industry professional.
So always remember… “It’s Not The Money…It’s The MONEY!!!”
For more details and tips about budgeting season, please watch our recorded webinar and download valuable templates and checklists.