The Value of Data on Comparables in Revenue Budgeting

Budget Slow Season

Budgeting for revenue in 2017 could be a tricky task, as the market forecast is a bit murkier than in the past few years.

Some have expressed concerns that the apartment market will turn in 2017 and rent growth will stall. Others believe rent growth will continue to break industry records. No matter what actually happens, having data on your competitors could help you set a better revenue budget.

Most companies have no data or bad data on their competitors. So, they often turn to internal year-over-year numbers, ignoring how their competitors are performing.

Using year-over-year numbers for your own community provides a solid measure to assess your own growth. But that measure alone ignores how you stack up against others in your market. By only analyzing your own data, you’ll never know when a comparable is outperforming everyone in the market. You also might be doing better than you projected. Your growth, which you thought was weak, could have actually been one of the strongest in the submarket.

Either way, you might believe your 2016 performance was indicative of the market as a whole with nothing to compare it to. That could cause you to under- or over-forecast revenue for next year.

Other advantages to having data on your comparables for budgeting include:

  • Elimination of excuses about market conditions. If your closest comparables are achieving a certain revenue or occupancy, you should be able to achieve it as well. And your revenue budget should reflect that. Managers won’t be able to blame a soft market if their comparables are succeeding.
  • Managers won’t be held to impossible standards. On the flip side, if the comps aren’t reaching a certain revenue or occupancy target, expecting your managers to hit numbers that are significantly better is unrealistic. With data on comparables you can set a more realistic revenue budget.
  • Creation of a competitive spirit that drives improved results. Not only will your managers try to beat the revenue budget goals you set, but they’ll also strive to outperform their comparables. The worry that their comparables will surpass them will always be in the back of their minds.

But just having data isn’t good enough. It has to be accurate and complete. Bad data based on poor survey techniques – or having managers call their comps for information – results in a bad budget. Garbage in, garbage out as the data hounds like to say.

The more accurate data you have on your comparables, the better your forecasting will be. And in a potentially fluctuating market, having that data is more important than ever.

Learn more by downloading our free eBook, Leveraging Strategy to Drive Your Budget Planning Process. Click here to download today!