Estate Living Magazine Estate Living Issue 28 April - Page 30

Highland Gate Golf and Trout Estate Estate and Facilities Cost Reduction Market conditions have pushed cost control to the top of most savings is complicated and needs meeting agendas. How do we survive in tough economic times careful planning. without reducing the level of service or quality? The best way to do this is by reducing the costs associated with delivering the facilities or services related thereto. By moving from old habit to industry best practice, any organisation can improve value for money and still reduce their facilities costs by up to 15–20%. In the property management industry, cost reduction depends on addressing both demand for continuous upgrades and the ongoing routine maintenance of existing infrastructure. Properly targeted cost cutting can also support the achievement of sustainability through reducing the effect on levy requirements from shareholders. Cost reduction can be riddled with legal and operational Substantial savings can be gained by carefully managing expectation Economy of scale Once an organisation is clear about what real estate and facilities services it requires or envisages, the associated services can be built into the operational model with better sensitivity to the ongoing facilities costs. Often this has been neglected at the outset, or not managed continuously, and a proper scrutiny is the only thing standing in the way of real savings on an ongoing basis. It is not unusual to find many smaller contracts for commodity services such as cleaning or maintenance as Manage expectations and future well as non-commodity areas like professional services. maintenance costs Consolidation of such contracts with fewer suppliers and retendering will normally result in savings. Substantial savings can be gained by carefully managing expectation In summary, an investigation into the key cost centres and demand for upgrades. This can and their deliverables is required. To reduce facilities be done by educating shareholders on the ongoing costs associated Steyn City with these so-called upgrades and improvements. services partners. Supply markets have developed significantly over the past years, and a much wider range of outsourcing options is now available from increasingly capable suppliers second guess your management structures, operating models with competitive costs. The operating model must be scrutinised to ensure that there Leasing, financing or transferring costs often implemented by oneself or one’s predecessors in order each line item in one’s operating budget. is no duplication of functions delegated to service providers, and policies. Objectivity is required when revisiting structures to protect the integrity of a company while prudently evaluating difficulty, often owing to past operational and contractual management staff or stock stores. Often several service commitments or actions. This lays the foundation for some providers have functions entrenched in retainers that are reviewing. With a strong balance sheet, you can unlock capital pitfalls that any management team or board with an aim on duplicated on other SLA agreements. Management of service from certain portfolios. There are various options enabling cost reduction must be aware of. We can often be lured into providers or maintenance teams must be streamlined to ensure you to do this, ranging from structured sale and leasebacks, short-term solutions or savings – ‘quick gains’ – without fully that the managers are not only ‘reporters’ of maintenance but through to transactions where a single service provider will take understanding the potential impact on the level of support actively push for best practices, fair costs and well-managed ownership of the moveable and fixed assets and provide fully provided to the associated facilities or services. Conversely, fear preventative measures. serviced space or service in return for a monthly or quarterly in key service providers, operating procedures or policies can the relevant industry or facilities. Savings are achievable; they can, however, only be achieved by taking the steps to Scrutinise the status quo The financing of improvements and facilities is also worth of change can lead you down a path where the fear of change costs it is imperative to understand the cost drivers of Outsource vs. in-house Avoiding short-term savings and emotional decisions is difficult, and I would advise a process that incorporates external professionals. François Schoeman – CEO Pecanwood Golf and Country Estate fee. In some examples, an area of a facility can be leased, with all maintenance included, to a service provider such as a leave you entrenched in outdated practices and escalating As part of any cost reduction exercise, the opportunity should restaurateur or retailer for possible income by means of a fixed costs. Experience shows that although some costs can be also be taken to achieve the appropriate balance between rental or percentage of turnover. reduced in the short term, achieving significant, sustainable internal service delivery and outsourced delivery by external 30 | | 31 Bankenveld Golf Estate