Critical Metrics to Consider for Your Budget Prep
It’s budget season and Units Magazine has a well-timed article about which metrics are important to focus on during your budget prep:
To be a successful operator, one must often focus attention on organizational data beyond the traditional metrics of physical occupancy, exposure and revenue growth. “By the Numbers: Calculating Critical Metrics” session panelists at NAA’s Apartmentalize discussed big data in property management operations and how operators should leverage data to be proactive instead of reactive.
Jared Miller, COO at property management company Red Peak, stressed using data to look forward and to use the market to define the KPIs that matter to your organization.
“When you do your budgets, you look at numbers through July, so you’re comparing to that data,” Miller says. “But we need to focus and shift our mindset to a year-over-year perspective. Focus on what will really move the needle. The market impacts what KPIs you should look at. If the market is strong, you might not look at occupancy. The critical thing is to measure what matters and what is actionable.”
Panelists agreed that operators should redefine the metrics they use to make decisions. Instead of focusing on physical occupancy, operators should focus on closing ratio, revenue per unit and year-over-year metrics. If operators can look at their performance over an extended period and set a goal based on improving performance over the same period during the next year, they will make impactful improvements.
Richard George, NOI Coach, says the “Measure, React, Measure” concept should be a recurring theme. “Do something different tomorrow based on what you measured today,” he says.
Operators should use data to track unexpected revenue drivers such as customer retention as well as employee engagement. While this data isn’t readily stored in a property management system, Clio Barker, President and CFO for The Associated Management Company, says operators should pull these metrics from third-party sources such as Yelp, Apartment Ratings and Google Reviews.
“[It costs] between $1,000 and $5,000 to turn a unit,” Barker says. “We know that the resident makes the decision to renew on the day they move in. So, the process of transferring that prospect to the resident and the handoff from the leasing team to the maintenance team is critical. We can learn how we did by checking third-party review sites.”