In today’s installment of our business planning series, we’re diving deeper into the strategic outlook for our company. Yesterday, we discussed the importance of our company mission and how it guides our annual planning process. Today, we’ll explore how we set long-term goals and position ourselves for success.
At the heart of our long-range planning is our vision for the future, encompassing both three-year and ten-year horizons. While our current ten-year plan may have seven years remaining, it serves as a blueprint for our company’s growth trajectory, covering revenue, profitability, cash flow, assets under management, and net worth. These projections form the foundation of our strategic decision-making process.
One question I’m frequently asked is how we identify investment opportunities. Contrary to popular belief, we don’t actively hunt for deals—they come to us. Instead, we focus on positioning ourselves as market leaders, attracting opportunities through our reputation and business structure.
When planning for the long term, we consider the three primary sources of income: earned income, residual income, and capital gains. Earned income, derived from consulting and development fees, provides consistency and sustains our core operations. Residual income, generated from rental properties, offers predictability once projects are stabilized. However, it’s subject to fluctuations based on market conditions and operational factors. Finally, capital gains from transactions provide substantial windfalls but are less predictable in timing.
While capital gains can be lucrative, they often involve delays beyond our control, posing challenges for maintaining regular cash flow. To ensure stability, we prioritize building a robust foundation of earned and residual income streams, allowing us to weather fluctuations in the market and navigate transactional uncertainties.
While earned and residual income form the backbone of our financial stability, we also recognize the importance of transactional income derived from capital gains. These windfalls, though less predictable, play a significant role in our company’s overall financial performance and contribute to our long-term success.
When crafting our long-term plans, we consider the needs of our investors, employees, and partners. Our goal is to identify projects that align with our business objectives and provide meaningful returns for all stakeholders involved. To this end, we establish minimum project size criteria to ensure that our efforts yield substantial results without compromising our resources.
However, we’ve occasionally deviated from this criterion, allowing smaller projects to infiltrate our workload. Each time, we’ve learned that these endeavors demand excessive time and resources, ultimately hindering our progress. As a result, we’ve reaffirmed our commitment to prioritizing projects that offer significant value and align with our long-term goals.
Another crucial aspect of our planning process is managing the flow of projects to maintain a steady pipeline. By strategically adding projects each year, we ensure steady growth and progress towards our long-term targets. This requires careful staffing planning to ensure we have the necessary skills and resources to execute each project effectively.
We recognize the importance of maintaining a balanced skill set within our organization to avoid critical skill gaps. Bench depth is also essential, providing resilience and continuity in the event of unforeseen circumstances such as vacations or illnesses. Our growth strategy isn’t driven solely by expansion for its sake but rather by the need to deepen our expertise and enhance our operational capabilities.
Now, let’s address the question of where we find deals. While it may seem counterintuitive for a development company to offer consulting services to other developers, this approach has proven fruitful for us. By collaborating with other developers and offering our expertise, we’ve built valuable relationships and gained insights into potential opportunities. These consulting engagements often lead to project partnerships, allowing us to leverage our skills and resources to drive mutual success.
Looking ahead, we’ll delve into our one-year planning process, a critical step in our strategic roadmap. We invite you to join us on this journey as we explore the intricacies of real estate development and share valuable insights to inform your own planning efforts.
As we wrap up today’s discussion, we invite you to reflect on the significance of strategic planning in achieving sustainable growth and success in real estate investing. By aligning our objectives with our long-term vision and leveraging our expertise, we’re well-positioned to navigate the complexities of the market and capitalize on emerging opportunities.
Until next time, continue to envision your goals and take deliberate steps towards realizing them. Wishing you a productive day ahead, and we look forward to reconnecting for our next exploration into the world of real estate investing.
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