Is there an ROI in Analytics?
Within five minutes of meeting a prospective RentViewer customer, I can tell if they are going to see an ROI in analytics or not. Many companies reach out to me because they are tired of compiling data in Excel, or want to view data visually.
They pay for custom dashboards and use them for a while, but eventually go back to the original status quo. The money they invested in the analytics doesn’t produce much ROI.
Other companies I work with get so much value from analytics that they keep asking for more. More dashboards, more data, more metrics. And every dollar they spend on analytics returns a multiple ROI.
Don’t Invest in Analytics Unless You Need to Forecast Future Performance
The companies that get lasting value from analytics are the ones that have a culture of forecasting. Not only do they close their books each month, they also update the guidance on metrics such as NOI, occupancy, delinquency etc. for the upcoming months and quarters. They use this guidance to adjust rents, adjust marketing spend, and plan ahead for unit turnovers and more.
So, if you don’t plan to ask your management team to regularly update forecasts, there’s a strong chance your investment in analytics will not return the benefits and value that are possible.
The Companies That Get Value from Analytics
The habit of monthly forecasting separates the real estate operators who get value from analytics vs those who will find little use for analytics.
Forecasting forces two important behaviors that result in better decisions:
a) Department leaders have to think ahead about what’s likely to happen next month and quarter
b) Department leaders have to explain why there is a variance between what they forecasted and the actual outcome.
Forecasting and the need to find opportunities to perform even better is what drives the need for analytics. As well the likelihood that you’ll use the analytics tools and data, and therefore, see an ROI.
Conversations in such companies go like this:
CEO: “What is our multifamily occupancy forecasted to be in Q3?”
VP of Asset Management: “92%”
CEO: “What can we do to drive it up to 95%? And how will that impact our P&L?”
VP of Asset Management: “Let me fire up RentViewer and get back to you.”
Yes, There is an ROI in Analytics
This brings me back to RentViewer and data analytics. Leaders who have to explain variances need good data and tools that can pinpoint problem areas. RentViewer is designed to deliver tremendous value to real estate operators such as you. But only if you make forward-looking projections and explain variances. Otherwise there’s no ROI in analytics because there’s little need for it.
If you are thinking of spending a few thousand dollars on dashboards and data analytics, ask yourself if you’ll actually use the tools. If you don’t intend to make forecasting a regular expectation of your executive team, then there isn’t going to be much of an ROI in analytics for you.
But What About Analytics for Deal Analysis?
Your company is probably looking to acquire more assets and analyze more deals. So, your finance and asset managers need analytics to evaluate opportunities. You can continue using Excel and create folders full of spreadsheet models. Or, you can give your finance and asset management teams access to a data warehouse and analytical tools like Tableau. But there’s a catch! Your deal team will get lasting value from RentViewer when you also look at Actual vs Proforma after the assets have been stabilized.