Have you ever had a steady increase in rental income from your properties?
Each year, your occupancy rates grow, and with it, your revenue. Business is great.
But what happens when you start to see the opposite — a steady uptick in vacancies and decreased income?
Likely, you begin to wonder where you went wrong.
But rather than allowing situations like this to hinder your PM business, you need to become proactive. With forecasting, you can anticipate issues like this or even stop them from reoccurring.
If you’re not already using forecasting in your property management business, then it’s time to start.
Let’s take a look at how you can do so.
First, Why Should PMs Regular Forecast Revenue?
When you first come up with a business idea, what do you do?
You create a business plan filled with all sorts of research and data you gathered for your industry. With a business plan, you have a keen look into what it’ll take to build and grow your startup.
But what about after years of being in operation? Do you stop future planning?
Not at all.
With property management forecasting, you can stop being reactive and start being proactive. While we can’t always control how the market behaves (something COVID-19 has taught us), you can plan weather storms when they arise.
The beauty of forecasting is it enables you to understand how to improve future performance by looking back at historical data. For example, you can see what made certain years more profitable than other years, so you can duplicate that success.
What Components Are Needed for Proper Forecasting?
Forecasting isn’t magic — you can’t pull numbers out of thin air and expect to garner those results. The whole philosophy behind forecasting is pure data — and lots of it.
So let’s take a look at the necessary components for building a forecast (the right way).
Accuracy is Everything
Again, it all comes back to your data. Without data, it’s impossible to accurately forecast anything (vacancies, revenue, etc.).
So you need to be tracking all of this information, so you can go back and analyze each year under a microscope.
Use this information to determine seasonality and patterns that (negatively and positively) affect your income throughout the year.
Complete Outlook for Your Business
You know your property management company better than anyone else. Use this knowledge to paint an outlook that pertains to the specifics of your market.
For instance, a PM business with Airbnb rentals will look much different than an agency that hosts residents all-year-round. Those in the vacation rental industry will see more seasonality and may have larger disruptions when events like COVID-19 occur.
Use what you’ve learned over the years to depict what’s likely to happen in the near future.
Flexibility is Vital to Being Prepared
It doesn’t matter how much data you have — you may still get your forecasting wrong. There are many ways your year can change, so it’s critical to be flexible with your projections.
Be ready to shift your forecasts based on news and events that can impact your industry.
Realistic Isn’t Anti-Hope
Being realistic with your forecast numbers is vital to your success. While it’s good to have high hopes for your PM business’s performance, you don’t want to make your goals unachievable.
This will only set you up for failure, and when it happens, it’ll hurt your business ego.
So be sure your forecasts are realistically promising (based on past performance).
Use Multiple Scenarios
It’d be great if each year could go one way and one way only. But the pandemic has shown things can get ugly and fast at the drop of a hat.
And while it’s impossible to predict everything, you can put contingencies in place to ensure you’re prepared. For instance, your forecast should consist of multiple scenarios.
These scenarios will depict possible performance outcomes, which will prep you for good and hard times. One way to do this is to create forecasts based on past performance, alongside what’s happening currently.
Be Ready for (Almost) Whatever Comes Your Way
It’s not easy being a property manager. Fluctuations in occupancy rates and revenue can occur at any time.
But this is why it’s essential to collect data so you can pick up on trends and mistakes you can possibly avoid (or take advantage of) in the future.
If you need expert assistance with developing forecasts for your PM business, then get in touch with our financial experts today!