How do you really know if you had a successful year in 2018? When you’re running a small business, staying on top of finances can be time-consuming and confusing. After all, you’re an expert in property management, not data analysis. But business owners have to keep tabs on the overall health of the company in order to grow sustainably.
That’s why we put together a quick guide to help you check up on the overall health of your business. We’ll go beyond just looking at the typical ratios and dig into the questions that help you stay in control and avoid financial problems. Ready for your check up? Here are four ways to find out how your property management business is really doing.
Prepare a Cash Flow Statement
Your small business health check starts with one question: how’s your cash flow? Cash flow lets you know how well your company generates cash to operate the business and pay off debt obligations. When you look at your cash flow statement alongside your income statement and balance sheet, you’ll have a full picture of how the company is running, where your money comes from, and where it’s going.
If your cash flow statement has some red flags, use that to plan for next quarter and any borrowing you might need. Maybe your cash flow is uneven throughout the year—how can you cover expenses during slower months? What reserves will you need to cover overhead? Your cash flow statement is a powerful tool for setting informed goals for the year ahead.
Track Your Expenses
Keeping tabs on your expenses regularly helps you capture record all the deductions you should claim and gets you looking for ways to save money throughout the year.
Pro tip: track your expenses consistently and use technology to stay organized. Consider using an app to track your finances, especially when you are out meeting with potential clients and racking up mileage and entertainment expenses.
Take a look at your expenses and see if you’re putting too much energy into non-revenue generating tasks that could be automated. Would it make good business sense to outsource certain functions? Is it time to invest in new technology to make tenant communications more efficient? Weigh your options and make the smart moves to grow your business.
Look Between the Numbers
There are several key performance metrics that property managers should have in their toolkit, from tenant turnover to rent-ready costs. Plus, having those KPIs handy helps you look between the numbers of ratios and understand what’s really going on. For example, if your revenue is down, uncover the root cause by digging into your data. Maybe it’s because you’ve lost properties when owners decide to sell—what does that tell you about how real estate industry trends are affecting your business?
You also should consider any changes that your business underwent during the past year to evaluate their effectiveness. For example, did you hire any new staff focused on a specific piece of your business? Did you start using a new tenant screening service? Did you make any changes to your move-in process that could positively or negatively impact resident satisfaction? All of these factors have the potential to impact your bottom line. Most importantly, you need to find the stories inside the data—otherwise there won’t be actionable insights.
Set SMART Goals
Once the data analysis is over (you’re almost done!), it’s time to set goals for the future. Knowledge is power, and the performance metrics from your business health check are your best defense against financial problems. SMART goals (goals that are specific, measurable, achievable, results-focused, and time-bound) are a great way to set informed goals to grow your business in the year ahead.
Write your SMART goals by identifying specific, measurable achievements you’d like to see happen in the near future. What will your cash flow look like by Q3 2019? How many properties have you gained by the end of next year? Document your goals and share them with your team so that everyone is aligned and working together to move the company in the right direction. If you’re really feeling inspired, take fifteen minutes to write a company vision. When everyone has a clear picture of what success looks like for the company, it’s that much more likely to come true.
Which numbers mean the most to your property management business? To learn more, watch a recording of our popular webinar, Demystify Your Data!Read more on Accounting & Taxes