Steve Jobs had an affinity for Zen. One of the concepts he deployed in business from this perspective was “the beginners mind”. In its most basic form “the beginners mind” allows us to believe that in any circumstance there are many possibilities. Interesting. Can we apply this to the annual budgeting process for our assets?
The over-simplified budgeting process: take last year’s budget, compare it with actual, split the differences and add 3% to revenue categories and 2% to expense categories. Done. Next! So much for thoughtfulness, professionalism or being connected to reality. Budgeting can be a “value add” proposition, assisted by the beginners mind perspective.
In Any Circumstance there are Many Possibilities
Annual budgeting must take into account the realities of each asset; the physical asset and its market. A picture perfect asset with 300 newly built units across the street in a market with slow absorption has to factor in the impact of the new competition. These factors should be reflected in the budget.
Tony Golsby-Smith wrote a blog for Harvard Business Review entitled “Is Your Budgeting Process Killing Your Strategy” (http://blogs.hbr.org/cs/2011/01/is_your_budgeting_process_kill.html). This thought shines an entirely different light on the budgeting process. While it is important to work through the minutia of asset-specific budgeting, this process must also take into account effects on the larger organization.
How do we accomplish this? With the beginners mind; by believing that in any circumstance there are many possibilities. Static number crunching that entails moving last year’s actuals into next years column precludes original thought. The originality necessary in this process is taking current market dynamics into consideration during the budgeting process.
This view may require utilizing additional facets of your existing “suites” software, or re-deploying marketing savings into customer premiums to gain retention. Or, taking savings from utility usage reductions and deploying these dollars into staff training with measurable results.
Consider the annual budgeting process as more than a perfunctory, number crunching, exercise. There is more to this than making assumptions and passing them up the food chain. Thinking of budgeting as a “value add” process makes the entire endeavor much more exciting, and potentially profitable.
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Multifamily Insight is dedicated to assisting current and future multifamily property owners, operators and investors in executing specific tasks that allow multifamily assets to operate at their highest level of efficiency. We discuss real world issues in multifamily property management and acquisitions. This blog is intended to be informational only and does not provide legal, financial or accounting advice. Seek professional counsel. For more information, visit: http://www.MultifamilyInsight.com