Let me first say the direction of this content you would think is for my property management friends, however, most of the principles I discuss are boilerplate for any general business or organization where you are in a leadership role or preparing a budget for someone else. We discussed in general how we can make budgets less intimidating with my last blog. So, much easier said than done! Actually it is not all that difficult to sell a budget if you've done your homework, checked and double checked your calculations, provide a professional presentation, and supported your theories and projections with solid and relevant data. Encourage them to prepare throughout the entire year for the next budget. Budgeting should not be an event; it should be a process. I recommend setting up a 2017 budget file right after the posting of the 2016 budget. There are usually things you may have not gotten approved, however, you know will be necessary in the coming year. Having a copy of scopes and RFP's, taking pictures as the months go by of capital project ideas for the coming year, and anything that could help when the next budget period is upon them. Part of the intimidation process we have conditioned our managers to face is we all of a sudden give them this crunch period (usually a couple...maybe three weeks), or in some cases coral everyone into a hotel conference room with eight managers over a two day period to produce budgets. As they graze (sorry that's feast) on the customary chips and high sugar energy drinks, dozens of cookies, and over rated sub sandwiches that are a "one size fits all," you expect them to miracurasouly turn from a property manager into a financial genious, construction estimator, and part gypsy who can fortell the future overnight. We need to set them up for success, and your ultimate success.
I remember a manager who attached a copy of an email related to a project disallowed in the preceding budget. The email was from ownership saying they understood the importance, and would approve in the next budget year. Having that in the package made it very challenging for the owners to disallow. She was also able to show the archive photos submitted in her budget package from the previous year, and how the condition had gotten worsened in just one year. Even though it was a very large financial investment, the information and details "sold" the project. You have to understand, in this case ownership prior to starting the next budgeting cycle communicated with their regional (yes that's me) their intent to wait another year, and defer the project again. I simply guided the manager in a teachable moment to focus on putting her sales cap and selling the project and not just presenting it, Trust me there is a difference between the two aforementioned approaches. She provided comments from an apartment rating site where on five postings, a former resident mentioned the condition of the drive areas playing a factor on whether they would renew or not. Her icing on the cake was showing an Excel spreadsheet on how just the turnover costs (with 4 of the 5 requiring carpet replacement, customary turn costs including paint, marketing costs, lost rent, and ancillary costs) totaled $18,175. When she put that in terms of a capitalization rate and how it impacts the net worth of the property by $279,000, their hearts and minds began to follow. The last thing she said and simply left as a closing question; How many residents or customers did we lose for this same reason, who simply left because it was the final issue. If it was even ten residents that would give you a property decrease in value of almost a million dollars. The project by the way, was going to cost around $300K.
I previously mentioned their need to understand the goal, as it is impossible to hit a target if they can't see it. If the goal is 5% revenue growth while maintaining controllable expenses, managers and those preparing the budgets need to know that. I found if this was communicated, the chances of getting a budget at or near that goal has a better chance of being achieved. Another key point is making sure we provide the guidance and confidence through direction and education, and letting the team know you are there to support. Nothing I enjoy more than to secretly fist-bump the manager under the table at a budget meeting after hearing the owner say as he looked up her, "You had me at the net worth." He then turned to me and said, "Are all your budgets and managers like this? If they are I may be in trouble!" I think there might have also been an, "OH YAH!" under my breath, but I could be mistaken.
We train our managers how to stay within fair housing, how to do reports, how to be safe, how to read a financial, and a whole host of other topics. I believe there are two courses of importance outside the norm most management companies and associations offer we are missing the boat in providing. Those courses (not just classes) being leadership and budgets/fiscal responsibility, two areas which build confidence, make them better employees, and provide for our next generation of leaders. Now go lead and create leaders!
PS: Don't forget my novel is just about to be released. We'll keep you posted.
PS: Don't forget my novel is just about to be released. We'll keep you posted.
