Stop Leaving Money On the Table

Stop Losing Money

What if I told you that the average property management firm leaves around 30% of their procurement budget on the table?

What if I followed up with the fact that only 8-12% of that is typically from not getting the best price they could on the products they buy?

Well, it’s true.  Most of the money left on the table comes from 2 things;

Hard Costs

  1. Excessive hard costs (other than the price of the product itself)
    1. Choosing the wrong products to use.
      1. This could be any number of things, but the losses overall come from the products being purchased not lasting long enough to meet their cap improvement budget timeline, forcing them to buy early due to premature failure – which is almost always out of warranty.. All refrigerators are not created equal. You need a supplier performance scorecard and a warranty tracking process.
      2. Choosing products that increase the install labor required to get it installed and working, despite being the cheaper product
  • Choosing products that increase product or labor demands down the road that are predictable – like using high volume toilets with flappers, smoke detectors with replaceable 9v and AA batteries, LED Integrated fixtures, or one-off orders of product from china that you can’t duplicate when you need parts or to replace 1 of 1,000 units.

Now any property management firm that’s taken over a new construction property or a property that’s been renovated by a large GC firm will run into these issues and it’s a conversation for another time.

Soft Costs

2. Excessive overhead & soft costs

    1. This comes from three places, typically.
      1. Missing out on synergies, discounts and rebates from reducing the number of vendors you deal with to a few key vendors and working on a vendor development program to leverage buying power into better terms and pricing. This also includes office labor from having to keep track of purchases, bills, and  invoices as well as warranty/service issues – all of this becomes easier dealing with 10-15 suppliers vs 50-400+ (for some of the multistate companies we’ve worked with we’ve seen upwards of 800+) (opportunity cost)
      2. Lost cashflow from excessive inventory of repair parts and components on ground in properties, as well as bulk purchase storage – which never seems to work out as managing loss from theft, damage, cost of storage in containers or warehouse space and then having to move product from point a to point b…all cost money.
      3. Lost labor from windshield time, effective labor hours lost from meeting and checking in multiple delivery trucks, lost money from the vehicles being driven offsite, etc etc.

Most of these issues can be worked around, mitigated and avoided with the right strategy and process, but most firms don’t have the time, labor, market intelligence or the skillset to make it happen.  That’s where we come in.

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