The 99:1 Dilemma – How Difficult Could It Be?
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Nearly 99% of a business’s overall real estate project budget (in both time and money resource) is spent upon identifying a preferred location, negotiating a lease or purchase transaction, construction costs, and furniture expenses.
Business leaders know that time, money, and the time value of money matter, and accordingly they tend to put their best and brightest resources upon negotiating financially critical leases, or, buy/sell transactions. Heck, why not? These are big dollars with big consequences and if you don’t have your best team of Attorneys, Bankers, Brokers, and advisors ready at the helm, you can cripple your business or business units for years to come. Aside from payroll and benefits, rents and mortgage expenses continue to present a growing dominance in overhead expense ratios – the numbers certainly matter.
But what about that other 1%? Where does that piece of the budget and attention go? This area of 1% falls into the 99:1 vs 1:99 dilemma and where to reduce your risk and expenses.
If it’s not consumed by unexpected cost overages along the way, then unfortunately what’s left to handle, perhaps the greatest point of risk upon the business after all, is the occupancy phase: relocation management of people, IT, equipment, records, and resources.
During lease negotiations and construction buildout, 99% of the project budget is at risk, while only about 1% of the overall business itself is exposed to risk. On the flip side, during the final phases of a project (the relocation and occupancy phase), 99% of the business is truly at risk, while only 1% of the projected overall budget rides the line. How do we mean? Simple – lease negotiations and construction activities have large dollars attached, but they can take several months if not year(s) to arrange and complete. The business remains in motion, serving its customers, managing orders and delivery of products, goods, and services, and protecting its brand and position in the market along the way.
When it comes time to ready the team and the company to relocate, do not dismiss the level of risk in this phase. You are fully exposing the business, your employees, your customers, and your brand to risk. If your internet circuit is not up in time, you can lose all inbound/outbound communications. If your construction schedule blows up and the certificate of occupancy is delayed, this can domino into your relocation vendors; they may not have the availability or capacity to make such adjustments at the last minute. Most commercial relocations involve 8-10 different external vendors to coordinate, and anywhere from 15-50 internal vendors to communicate and coordinate with regarding the change of service location. The occupancy phase and relocation management is critically dependent upon a multitude of things lining up just right, in the right order, at just the right time.
So what happens – you spend more money? Actually, No. There are ways to keep this from happening. First and foremost, do not underestimate the gravity of the tasks ahead of you. If you’re thinking or asking yourself “How Difficult Could It Be?” A commercial relocation is poised to show you that answer.
Regardless of whether you employ professional relocation management services, or attempt to take this on internally, you must dedicate capable people; and most importantly, those persons must have the time capacity to remain committed to the deliverables and outcomes. This specific phase becomes a challenge to most businesses, since its tough to predict one’s capacity, availability, or priorities as the relocation approaches. Some further points that will help reduce your risk exposure include:
- Start planning much earlier than you think necessary – Do not put off the relocation planning until you know when you’ll achieve a certificate of occupancy
- Contact your internet service provider at least 6 months out from projected relocation dates. Confirm the ISP provides (not can/ or may be able to provide) service for you at your new location. If new service installation is required, this can take an additional 3-6 months to establish along with their current 6 month wait period. Then, watch your updates like a hawk (sorry to say, but this one requires acute attention). Maintain continual update on status with your ISP provider on ‘turn up’, and have the service turned on at your new location at least a week ahead of your relocation. The time will still be crunched.
- Evaluate your existing vendor relationships. Some existing vendors (IT, MSP, or ‘handyman’ services, by example) may not have the skillset or team capacity to properly address your needs during this critical event. During the relocation is not the time to ‘figure this out’.
- Internal communications about the upcoming relocation and plan is critical (it prevents fear, damaging rumors, speculation, and ‘rogue’ plans), and limit the communication to only the critical points, dates, and responsibilities.
- Relocation management is not a democracy. This sounds a bit rough, but trying to bring a democratic or ‘manage by consensus’ process to a commercial relocation is a recipe for disaster.
We think it goes without saying that every Business and Client would like a seamless and painless commercial transaction. Whether that be a lease renewal, an expansion, a brand new lease, a buy/sell transaction, or some combination thereof. Finish that experience on a high note, don’t let a commercial relocation sour a great new start!
If you would like to review your plan with us, or, you would like more info specific to your relocation, feel free to contact us. Our team is happy to discuss with no obligation.
Have a Client headed for a relocation? Give us 15 minutes of your time and we’ll make sure you’ve got them pointed in the right direction and paying attention to the critical risks. We want your Client to finish your deal on a high note. www.pivotalstrength.com